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Updated: 39 min 46 sec ago

Wage growth in the U.S. is stuck in the 70s

Mon, 2014-09-01 11:21

When Jamaad Reed started his job as a cashier at a Walmart near Cincinnati, he made $8.15 an hour. That was two years ago.  Since then, he has seen a couple of raises, which have meant his wage has kept up with inflation — but just barely. As of March of this year, Reed was making $9.05 an hour.

“I'm stuck,” he told me recently. “You know what I'm saying? I feel like I'm stuck in the same spot.”

"Stuck" is a pretty good word to describe wages for most American workers over the last few decades. Not just in the case of lower-wage workers like Reed, but all along most of the income spectrum, except for those at the very very top.

In fact, most American workers have seen little to no growth since the late 1970s, if you adjust for inflation, according to Elise Gould. She's an economist with the Economic Policy Institute and author of a new study that analyzes wage data from census surveys over the last several decades.

That's not to say that individual workers haven't seen gains. But, says Gould, “as productivity has continued to rise, typical workers’ wages simply have not.” 

That’s a very different economic picture from a half century ago. In the first few decades after World War II, as the nation's productivity grew, so did wages. So what happened?

“This is one of the questions that people are arguing about right now,” says Linda Barrington, the executive director of the Institute of Compensation Studies at Cornell University.

Barrington says some economists point to a loss of worker bargaining power, meaning workers are less able to claim growing productivity gains in the way they could when labor unions were stronger.

Others blame a shift in business strategy over the years to one that focuses more on shareholder returns, “as opposed to sharing the returns and the gains to all of the employee base,” says Barrington.

Meanwhile, technological advances and globalization have meant there are fewer middle-wage jobs to be had in the U.S. Now, workers who in a previous era might have had relatively well-paying manufacturing or clerical jobs, have to settle for lower-paying jobs in the service sector instead.

Even as economists debate the reasons behind American workers’ stagnating wages—one thing is certain. They don’t just affect individual wallets, but the economy as a whole.

As Barrington points out, “every worker is also a consumer.” And consumers are what drive the modern American economy.

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