what are two factors that have led the wage rate for women to increase over the last two decades?

Introduction and executive summary

There is at present widespread agreement beyond the political spectrum that wage stagnation is the land'southward primal economical claiming. As EPI has documented for nearly three decades, wages for the vast majority of American workers have stagnated or declined since 1979 (Bivens et al. 2014). This is despite real Gdp growth of 149 percentage and net productivity growth of 64 per centum over this menstruation. In brusque, the potential has existed for adequate, widespread wage growth over the last three-and-a-one-half decades, but these economic gains have not trickled downwardly to the vast majority.

The Agenda to Raise America's Pay

Because wage suppression stems from intentional policy choices, it can be reversed by making different policy choices. To boost Americans' wages, policymakers must intentionally tilt bargaining power back toward low- and moderate-wage workers.

As this paper explains, wage stagnation is not inevitable. It is the direct upshot of public policy choices on behalf of those with the most power and wealth that have suppressed wage growth for the vast bulk in contempo decades. Thus, because wage stagnation was caused by policy, it tin can be alleviated by policy. In particular, policymakers must address two distinct sets of policies:

One set of policies that have stifled wage growth are amass factors that have led to excessive unemployment over much of the last four decades, and others that have driven the financialization of the economy and excessive executive pay growth.
- Policymakers can help to deliver broadly shared wage growth through monetary and budgetary policy that prioritizes full employment—thereby tightening the labor market so that employers take to offer pay increases to become and go along the workers they need—and revenue enhancement and other policies that help ensure economic gains do not accrue mainly to the top ane percent.
  - Policies that will assistance create jobs and reach full employment include keeping interest rates unchanged until wage growth reaches three.5 to four percent; enacting employment programs targeted toward hard-hit communities; increasing public investment in transportation, broadband, R&D, and education; and reducing the U.South. trade deficit.
  - Policies that will not assistance create jobs or reach full employment include corporate taxation reform, lowering taxation rates on individuals or corporations, raising interest rates, and pursuing merchandise deals harmful to U.S. workers.
Some other set of policies concerns the concern practices, eroded labor standards, and weakened labor market institutions that accept reduced workers' individual and collective power to bargain for higher wages.
- Policymakers tin help to grow wages by raising the minimum wage; updating overtime rules; strengthening rights to commonage bargaining; regularizing undocumented workers; ending forced mediation; securing workers' access to sick leave and paid family exit; closing race and gender inequities; awarding regime contracts only to firms that adhere to wage, health, and safe laws; and tackling workplace abuses such every bit misclassification and wage theft.
- Policies that will not assistance to raise wages include individual or corporate tax cuts, austerity, increasing college or community higher completion, deregulation, and policies aimed at increasing long-term growth.

Creating jobs and reaching full employment

The good news is that 246,000 jobs were created on average each month in 2014, faster than any yr in the last recovery and since 2000. This job growth lowered unemployment to 5.vi percent in December. Unfortunately, we still take far to go earlier we recover from the financial crisis of 2008 and the recession that started subsequently Dec 2007. Specifically, the Swell Recession and its aftermath have left united states of america with a jobs shortfall of 5.half-dozen one thousand thousand—that'south the number of jobs needed to keep up with growth in the potential labor forcefulness since 2007—and current job cosmos rates will become united states of america to pre-recession labor market health in August 2016 (Gould 2015). And even attaining this pre–Groovy Recession labor market wellness is an insufficiently ambitious goal. Instead, we should strive to reach 18-carat full employment with roughly 4 percent unemployment. Much is at stake (Katz 2014). If we do not attain robust full employment, many communities, particularly those of color, will exist left out of the recovery. Moreover, under current policy weather, meaning wage growth for the vast majority may just occur when we reach much lower unemployment than we at present take. The reason for this is simple: Employers do not demand to offer significant wage increases to attract and retain employees because the number of willing workers is far greater than the number of available jobs.

Policies that volition assist to attain full employment are the post-obit:

one. Monetary policy that targets full employment, with wage growth matching productivity gains

The almost important economical policy decisions beingness made nigh task growth in the next few years are those of the Federal Reserve Board every bit it determines the scale and pace at which it raises interest rates. The decision to enhance interest rates is essentially a conclusion to slow the economy and weaken chore and wage growth. At that place are many false concerns nearly accelerating wage growth and exploding inflation based on the mistaken sense that we are at or near full employment. Policymakers should non seek to boring the economy until wage growth is comfortably running at a 3.5 to 4.0 percent charge per unit—wage growth consistent with a ii percent inflation target (since trend productivity is ane.5 to two.0 percent, wage growth 2 pct points faster than this yields ascent unit labor costs, and therefore aggrandizement, of ii percentage). Thereafter, the Fed should pursue monetary policy conducive to assuasive wage growth to friction match productivity gains. In brusk, the key danger is slowing the economic system too soon rather than besides late.

two. Targeted employment programs

Even at four percent unemployment, there will be many communities that will still suffer substantial unemployment, especially low-wage workers and many blackness and Hispanic workers. To obtain full employment for all, nosotros volition need to undertake policies that tin can direct jobs to areas of loftier unemployment. The tool for this is the public and non-profit employment programs that several members of Congress take introduced in the last several years that create jobs by meeting unmet needs.ane

3. Public investment and infrastructure

There is widespread agreement that nosotros confront a substantial shortfall of public investment in transportation, broadband, R&D, and education. Undertaking a sustained (for at least a decade) programme of public investment can create jobs and enhance our productivity and growth. In the early on years this program would most effectively create jobs if nosotros borrowed to finance it, but as we approach full employment we tin raise revenues to embrace its costs. In this way budget policy can be a tool to permit united states to raise productivity and bring united states of america closer to full employment.

iv. Reducing our trade deficit

The annual U.Southward. trade arrears in goods and services increased from $476.4 billion in 2013 to $505.0 billion in 2014, an increment of $28.6 billion, or half dozen.0 percent (U.S. Census Bureau 2015). That deficit represents a huge reduction in U.Due south. GDP and employment. Past making imports cheaper and U.S. exports more expensive, currency manipulation inflates the trade deficit and leads to huge chore losses. Eliminating currency manipulation could reduce the U.S. global trade deficit past between $200 billion and $500 billion each yr, which could increase overall U.Southward. Gross domestic product by between $288 billion and $720 billion and create between 2.3 1000000 and 5.viii 1000000 U.S. jobs (Scott 2015).

Policies that do not help united states of america attain full employment include:

1. Corporate taxation reform

In that location are many faux claims that corporate tax reform is needed to make us competitive and bring us growth. Start off, the evidence is that the corporate tax rates U.S. firms actually pay (their "constructive rates") are not college than those of other avant-garde countries (Hungerford 2014). 2nd, the revenue enhancement reform that is being discussed is "revenue neutral," necessarily meaning that tax rates on average are actually not existence reduced; for every firm or sector that will see a lower taxation rate, another will see a higher revenue enhancement rate. It is hard to run into how such taxation reform sparks growth.

ii. Cut taxes

There will surely exist many efforts in this Congress to cutting corporate taxes and reduce taxes on uppercase income (e.1000., capital gains, dividends) and private marginal taxation rates, especially on those with the highest incomes. It'south easy to see how those strategies volition not work. Await atFigure A, which shows that these taxes take been reduced over the terminal 35 years since 1980. Yet, economic growth was slower since 1980 than in the preceding 30 years, when tax rates were much college. Another useful comparison is to the concluding recovery following the Bush-league-era revenue enhancement cuts, which had slower job growth than the current recovery.

Top federal marginal tax rates, 1952–2009

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The data underlying the figure.

Source: Saez, Slemrod, and Giertz (2009)

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3. Raising interest rates

Those worried almost inflation are calling on the Federal Reserve Lath to raise interest rates before long and steadily thereafter. Their fears are unfounded. But we should be articulate that those seeking college involvement rates are request our monetary policymakers to slow economic growth and job creation and reflect a far-too-pessimistic assumption of how far we tin lower unemployment, seemingly aiming for unemployment at electric current levels or between 5.0 and 5.5 percent. We can do better than that, and the failure to seek significantly lower unemployment would stifle opportunities for wage growth and employment for many who otherwise would not benefit from this recovery.

4. More bad trade deals

NAFTA cost U.S. workers nearly 700,000 jobs (Scott 2011). Additionally, since the United states signed a free-merchandise agreement with Korea, the U.S. trade arrears with that land has nearly doubled, rising from $14.7 billion in 2011 to $26.6 billion in 2014—an increment of $11.8 billion, or lxxx.four percentage (USITC 2015). The Obama administration promised that "tariff cuts lone in the U.S.-Korea trade understanding will increase exports of American appurtenances by $10 billion to $11 billion" (White House n.d.). To appointment, increased exports have achieved less than 8 percent of this goal, dwarfed by the growth of Korean imports and the growing bilateral trade deficit, which has displaced virtually 60,000 U.Southward. jobs (USITC 2015; Scott 2014). Furthermore, Prc's admission to the WTO has been a disaster for U.Due south. manufacturing workers: The U.Due south. goods trade deficit with China increased by $23.9 billion (7.5 percentage) in 2014, to $342.6 billion (U.S. Census Bureau 2015).

Conspicuously, farther merchandise deals that follow the NAFTA and KORUS pattern should be avoided. Their failure to address currency manipulation or to effectively address labor standards, while exalting the interests of multinational corporate investors, has been a disaster that should not be repeated. These trade treaties are not fifty-fifty about trade, given that tariffs are already very depression; they are most backroom deals to protect corporate profits and plant new rights. Giving the president fast-rail authority to negotiate the Trans-Pacific Partnership (TPP) would be a mistake.

Wage growth

It is a welcome development that policymakers and presidential candidates in both parties accept now best-selling that stagnant wages are a critical economic challenge. This will generate an important fence on the best way to lift wages for the vast majority, which is necessary to raise households into the middle course and fuel middle-course incomes. That wage trends lay at the heart of income stagnation is simply mutual sense. After all, middle-class families rely near completely on what they earn from their jobs to support their consumer spending. These families practise not own many fiscal avails that produce income; at best they have a little stock (but 1-third of households have more $5,000 of stock), and their home accounts for most of their wealth. This is also true for depression-income households, who obtain seventy percent of their income from wages (including the Earned Income Tax Credit).

It is useful to establish some of the basic facts on wage stagnation.Effigy B illustrates the tremendous gap betwixt the 138 percent wage growth enjoyed by the top 1 percent since 1979, and wages for the bottom ninety percent, which grew just 15 percent, with about of that growth occurring in the late 1990s.

Cumulative change in real annual wages, by wage grouping, 1979–2013

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The data underlying the figure.

Source:EPI analysis of data from "Earnings Inequality and Mobility in the Us: Prove from Social Security Data Since 1937," past Wojciech Kopczuk, Emmanuel Saez, and Jae Vocal,The Quarterly Periodical of Economics, February 2010; updated through 2013 with data from the Social Security AssistantsWage Statistics database

Reproduced from Effigy F inRaising America's Pay: Why It'due south Our Central Economic Policy Challenge, by Josh Bivens, Elise Gould, Lawrence Mishel, and Heidi Shierholz, Economic Policy Institute, 2014

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Figure C presents the divergence betwixt productivity—the growth of the output of goods and services per hour worked—and the pay of a typical worker. Over the 40 years since 1973, in that location has been productivity growth of 73.0 percent, yet the compensation (wages and benefits) of a typical worker grew far less, merely viii.9 per centum (again, mostly in the latter 1990s).

Disconnect between productivity and typical worker'due south compensation, 1948–2013

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The information underlying the effigy.

Note: Information are for compensation (wages and benefits) of production/nonsupervisory workers in the private sector and net productivity of the total economy. "Net productivity" is the growth of output of goods and services less depreciation per hour worked.

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Thus, wage and benefit stagnation is a long-term trend (Figure D) and i that is not due to bereft economic growth, since the economic growth over the concluding four decades did trivial to produce rising pay for the vast bulk. Last, it is important to note that at that place has been widespread wage stagnation for the last 10 years or so, affecting both blue-collar and white-neckband workers and both loftier school and college graduates. Wage stagnation occurred over the last recovery from 2002–2003 until 2007, too every bit during the Cracking Recession and its backwash.

Cumulative modify in existent hourly wages of all workers, past wage group, 1979–2013

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The information underlying the effigy.

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata from the CPS survey conducted by the Bureau of the Census for the Bureau of Labor Statistics [automobile-readable microdata file]. Washington, D.C.: U.S. Demography Bureau

Reproduced from Figure F inWhy America's Workers Need Faster Wage Growth—And What Nosotros Can Do Nigh It, by Elise Gould, Economical Policy Institute, 2014

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Wage stagnation is conventionally described as being nigh globalization and technological alter, explanations offered in the spirit of proverb it is acquired past trends we neither tin nor want to restrain. In fact, technological modify has had very picayune to do with wage stagnation. Such an explanation is grounded in the notion that workers take bereft skills then employers are paying them less, while those with higher wages and skills (say, college graduates) are highly demanded so that employers are bidding upwardly their wages. We know that these trends take not been in play over the last 15 years. Many studies (including Levy and Murnane 2013; Autor 2013; Beaudry, Green, and Sand 2013; and Mishel, Schmitt, and Shierholz 2013) have shown that the best-paying occupations accept non expanded their share of employment since 1999–2000, and that job growth has been centered among low-wage occupations. The and so-called job polarization (eroded jobs in middle-wage occupations simply expanded jobs at the tiptop and lesser) that has been much discussed has not been present in the United States since the 1990s. And then, employers are not creating jobs at the "high stop," nonetheless we run across wages grow far faster for those at the tiptop (the superlative 1 percent as well as the top 10 percent) than in the center or bottom of the wage scale.

It is besides important to note that the aggrandizement-adapted wages of college graduates have been stagnant since 2002–2003, the wages and benefits earned past recent higher graduates have been plummeting for every new accomplice since 2000, and the Federal Reserve Bank of New York has documented that an increasing share of recent college graduates work in jobs that practice not require a college caste (Abel, Deitz, and Su 2014). Last, at that place are hundreds of thousands of college students and recent college graduates working in internships that provide no wage. A number of these unpaid internships in the individual sector are likely illegal, only that is another thing. The presence of college graduates in a broad multifariousness of fields working for costless indicates that there is not a generalized excessive unmet demand for their skills. In other words, there is no skill shortage that is generating wage inequalities.

As for globalization, information technology has, in fact, served to suppress wage growth for non-college-educated workers (Bivens 2013), who found roughly ii-thirds of the workforce. However, such trends as import competition from depression-wage countries did not naturally develop; they were pushed by merchandise agreements and the tolerance of misaligned and manipulated exchange rates that undercut U.S. producers.

In short, wage stagnation is non inevitable; it is a direct upshot of policy decisions. As such, information technology tin exist remedied by policy. There are ii sets of policies that have greatly contributed to wage stagnation that receive far too little attention. One set is amass factors, which include factors that pb to excessive unemployment and others that have driven the financialization of the economy and excessive executive pay growth (which fueled the doubling of the pinnacle 1 percentage's wage and income growth). The other set up of factors are the concern practices, eroded labor standards, and weakened labor market institutions that have suppressed wage growth. These are examined in turn.

Aggregate factors

Unemployment essentially to a higher place full employment and speedily escalating pay for finance professionals and executives are directly related to wage stagnation for the vast majority.

1. Excessive unemployment

Unemployment has remained substantially above full employment for much of the last twoscore years, especially relative to the post-war menstruum earlier then. Since high unemployment depresses wages more than for low-wage than center-wage workers and more than for heart-wage than high-wage workers, these slack conditions generate wage inequality. This reinforces the need to achieve full employment, equally delineated in a higher place.

The excessive unemployment in recent decades reflects a budgetary policy overly concerned nigh inflation relative to unemployment and hostile to any signs of wage growth (Palley 2015). Upkeep policy has sometimes exacerbated our unemployment trouble, equally it has in the last few years at the state level, where upkeep cuts led to hundreds of thousands of public employee layoffs, and at the federal level, where deficit hysteria acquired a failure to fairly focus on job cosmos to counter the recession and a weak recovery.

2. Unleashing the meridian 1 percent: finance and executive pay

The major forces behind the extraordinary income growth and the doubling of the top one percent's income share since 1979 were the expansion of the finance sector (and escalating pay in that sector) and the remarkable growth of executive pay. Notably, CEO pay grew more than twice every bit fast as profits and three times faster than the pay of other very high-wage earners—the height 0.1 percent of wage earners (Mishel and Davis 2014). The increased incomes in finance and for executives do not reverberate a corresponding increment in national output. Thus, restraining the growth of such income will not adversely bear upon the size of our economy. Moreover, the failure to restrain these incomes leaves less income available to the vast majority, the 90 pct of wage earners who accept seen niggling wage growth since 1979. For these reasons—and non because of green-eyed—we cannot ignore the peak one per centum as nosotros seek to increment wages for the vast majority. What the top 1 per centum has taken in income growth largely has come up at the expense of other income groups.

There are diverse policies that tin help to reach this. Tax preferences for executive pay tin can be eliminated or their employ tied to the executive's firm giving wage increases equal to productivity growth. Others have recommended tying corporate tax rates to the ratio of executive-to-median worker pay. Imposing a financial transactions tax can steer investments toward productive uses and away from speculation and restrain unproductive financial activity.

Labor standards, labor market place institutions, and business practices

In that location are a multifariousness of policies related to labor standards, labor marketplace institutions, and business practices that tin greatly help to lift wage growth.

1. Raising the minimum wage

The primary reason wages at the lowest levels lag those at the middle has been the erosion of the value of the minimum wage, a policy undertaken in the 1980s that has never fully been reversed. The aggrandizement-adjusted minimum wage is now almost 25 percent below its 1968 level (Cooper 2013), despite the fact that productivity has doubled and the teaching and skills of those in the bottom 5th accept greatly improved. Moving the minimum wage to $12.00 by 2020 would benefit almost a third of the workforce directly and indirectly.

two. Updating overtime rules

The share of salaried workers eligible for overtime has fallen from 65 percent in 1975 to but 11 percent today (Eisenbrey and Donald 2014). Someone who spends a small share of her time supervising others can spend the bulk of her time doing piece of work that hourly workers practise (eastward.g., unloading trucks, filling shelves with products) and piece of work far in excess of forty hours and receive no overtime pay. This is because the salary threshold (the salary level beneath which you are guaranteed overtime pay) has eroded such that simply those earning less than $23,660 (a poverty-level wage) are covered by the Fair Labor Standards Act. Fortunately, President Obama has instructed the Department of Labor to revise the bacon threshold. Moving that threshold to the value it held in 1975—roughly $51,000 today—would provide overtime protections to half-dozen.1 million workers, providing them higher pay, more leisure, and more than time with their families (Eisenbrey 2014).

3. Strengthening rights to collective bargaining

The single largest factor suppressing wage growth for centre-wage workers over the last few decades has been the erosion of collective bargaining, which tin can explain one-third of the rise of wage inequality amongst men, and i-fifth amidst women (Mishel et al. 2012). One of the greatest impacts of the decline of commonage bargaining has been that nonunion workers in industries or occupations that previously had extensive collective bargaining no longer receive the higher pay that their employers used to provide (given concerns that their all-time workers might leave for a union job or for fear their workers would cull commonage bargaining). Thus, the erosion of commonage bargaining has affected both union and nonunion workers akin. We know that many more than workers want collective bargaining than are able to do good from information technology: If all who wanted to pursue collective bargaining could in fact practise and then, the The states would accept as much commonage bargaining as Germany (Freeman 2007). There are a broad variety of proposals to strengthen and rebuild our collective bargaining system.

four. Regularizing undocumented workers

Undocumented workers are vulnerable to exploitation. Consequently, they earn lower wages than workers who have greater admission to legal protections and are able to switch jobs more readily. Executive actions, such as those the administration is pursuing, or comprehensive clearing reform that provides a path to citizenship, are polices that will elevator wages. Regularizing undocumented workers volition non only lift their wages only will likewise lift wages of those in the same fields of work.

5. Ending forced arbitration

One way for employees to challenge discriminatory or unfair personnel practices and wages is to go to courtroom or a regime agency that oversees such discrimination. Withal, many large firms strength their workers to give up their access to court and government agency remedies and agree to settle such disputes over wages and bigotry only in arbitration systems gear up up and overseen by the employers themselves. These systems can impose unaffordable costs on workers and limit their use of class actions. Such practices limit workers' options and facilitate bigotry and violations of wage and hour laws.

half dozen. Modernizing labor standards: providing earned sick get out and paid family unit leave

We have non but seen the erosion of protections in the labor standards prepare in the New Bargain, nosotros have also seen the U.s.a. fail to adopt new labor standards that respond to emerging needs. In particular, we need updated standards to assist workers and their families to achieve a better residual betwixt work and family. The about prominent examples are standards relating to earned sick leave and paid family unit go out. More support for child care is also necessary to aid workers and their families, particularly low- and moderate-wage workers whose kid intendance choices are limited and of uneven quality.

7. Endmost race and gender inequities

Generating broader-based wage growth must besides include efforts to close race and gender inequities that have been ever nowadays in our labor markets. Many of the policies already mentioned—raising the minimum wage, updating overtime rules, pursuing total employment, legalizing undocumented workers, and increasing workers' bargaining power—though not overtly race- or gender-based, would disproportionately raise wages for women and people of color who are more probable to piece of work the kinds of jobs impacted by such policies. Beyond these broader efforts, we need consistently strong enforcement of antidiscrimination laws in the hiring, promotion, and pay of women and minority workers. This includes greater transparency in the ways these decisions are fabricated (including improved collection of pay information past race, ethnicity, and gender) and ensuring that the processes bachelor for workers to pursue whatever violation of their rights are effective. Finally, nosotros must tackle social issues like mass incarceration that limit employment opportunities and pay for countless ex-offenders, peculiarly African American men. Improving adult education opportunities can help better integrate immigrant workers into our economy and our communities.

eight. Ensuring off-white contracting

Concluding summertime, the president signed The Off-white Pay and Condom Workplaces Executive Society, setting a new framework governing the awarding of federal contracts that the Department of Labor estimates volition apply to 24,000 businesses employing 28 million workers. These new rules "will require prospective federal contractors to disclose labor police force violations and will give agencies more than guidance on how to consider labor violations when awarding federal contracts." The framework "also ensures that workers are given the necessary information each pay period to verify the accuracy of their paycheck and workers who may have been sexually assaulted or had their civil rights violated get their day in court past putting an end to mandatory arbitration agreements at corporations with large federal contracts" (Office of the White House Press Secretary 2014). These new contracting rules tin can help reduce wage theft, obtain greater racial and gender equity, and generally support wage growth.

According to a 2010 Regime Accountability Role report, "almost two-thirds of the 50 largest wage-and-hr violations and almost 40 percent of the 50 largest workplace health-and-safety penalties issued betwixt FY 2005 and FY 2009 were at companies that went on to receive new government contracts" (Office of the White Business firm Printing Secretarial assistant 2014). There are adept reasons, therefore, to go farther than the new executive order and bar violators from federal contracts, as amendments to the defense and transportation appropriations bills in the House final yr required.

9. Tackling misclassification, wage theft, and prevailing wages, and supporting enforcement of labor standards

There are a diverseness of other policies that tin can support wage growth. Too many workers are deemed independent contractors by their employers when they are really employees. This is called "misclassification," though Secretarial assistant of Labor Perez rightly labels this "wage fraud." The upshot is less revenue nerveless by state and federal governments equally well as workers lacking the important protections of the unemployment insurance and worker bounty systems. These practices are particularly astringent in structure. Rampant misclassification also undercuts the ability of employers who follow the police to win bidded contracts, thereby lowering the wages of workers in their firms. Misclassification is maybe best seen as part of the larger phenomenon of "wage theft" where workers are not paid for the work they accept done or are cheated out of overtime pay. We estimate that workers are cheated out of as much every bit $fifty billion each year in wages to which they were entitled (Meixell and Eisenbrey 2014). Efforts to increase and meliorate labor standards enforcement, terminate misclassification (the Section of Labor has a multi-state initiative on this), and protect and strengthen prevailing wage laws can reduce wage theft and support wage growth.

Policies that will not facilitate broad-based wage growth

Unfortunately, many of the economic policies under give-and-take volition do nothing to spur widespread wage growth—and may even exacerbate wage stagnation.

1. Revenue enhancement cuts: individual or corporate

The failure of wages to grow cannot exist cured through tax cuts. Claims are sometimes made that revenue enhancement cuts propel long-run task gains and economical growth just in fact, tax cuts are not effective tools to promote growth. Even if they did create growth, information technology is clear that growth by itself will not lift wages of the typical worker. Later all, we accept seen plenty of productivity and Gdp growth since 1973, only very niggling wage growth for the vast majority of workers. That is, revenue enhancement cuts are a tried and failed policy that does not change the dynamics of the labor market place and so that workers will gain from productivity. Corporate tax reform, every bit discussed in a higher place, holds little promise of promoting economic growth, let alone generating wage growth. 1 should be mindful that while workers' pay has been stagnant, corporate profits are reaching the highest levels in over four decades. In brusk, there is no basis for believing that expanded corporate profitability will necessarily benefit the typical worker.

Personal income taxation cuts are sometimes advocated equally a manner to provide some cash to ease the fiscal struggles of families. This is understandable, every bit such policies seem readily doable to congressional policymakers. The problem is that wage stagnation is an ongoing challenge, and one-fourth dimension tax cuts are, at best, a short-term Band-aid. Moreover, taxation cuts erode revenues needed for instruction, national defense, law enforcement, wellness enquiry, and other unmet needs.

2. Austerity

The deficit reduction that began in 2011 torpedoed the recovery and is responsible for much of the indelible slack in the labor marketplace. Measuring from the previous business organization cycle height—so fully accounting for the Recovery Act and the post-obit advertising hoc stimulus measures—overall government spending today remains 10 pct below what it would have been had it followed its trajectory over the 2001 business concern bike. This is about $500 billion, enough to cost the economy more than five million jobs (Bivens 2014).two

3. Increasing college or community college completion

Facilitating more people attending and completing higher levels of education, or other types of grooming (e.g., apprenticeships) is very good policy. It can help fuel economic growth in the future, and it can expand admission to better jobs for low- and middle-income children who would non otherwise have those opportunities. That is, improving education quality and attainment is critically important to promoting upwardly mobility, assuring today's children have the opportunity to rise farther up the income ladder than have their parents. The issue is not whether completing more education is "worth information technology" for sure individuals, just whether rapidly increasing the share of workers with greater didactics is an of import tool to generate broad-based wage growth.

But advancing pedagogy completion is non an constructive overall policy to generate higher wages. Some who attain higher credentials will earn more than. Recall that the wages of college graduates take been stagnant for over 10 years. Furthermore, the wages (and benefits) accepted by contempo college graduates have been lower than those graduating in earlier years. Let'south assume these trends persist for the adjacent ten years. This ways that increasing college completion to whatsoever great degree volition hateful that the wages of college graduates will be falling, especially among men and newer graduates. This will pb to less inequality, simply it is non a generalized recipe for wage growth. There is no reason to believe that anybody who completes a college degree will be able to obtain a job that requires such an education. If not, higher graduates volition increasingly be used in jobs that those with less teaching now perform.

The same assay is true for community college completion. Providing access volition help many attain the opportunities for jobs previously unavailable to low- and moderate-income students, facilitating intergenerational mobility. Co-ordinate to an EPI analysis of Current Population Survey Outgoing Rotation Grouping data, customs college graduates now earn 7.5 per centum less than they did in 2004 and earn comparable wages to those in 1992, the primeval year for which we have information. The share of the workforce with community college degrees has expanded from vii.3 percent in 1992 to 10.8 percent in 2014, so the economy has absorbed substantially more of them. At the same fourth dimension, the fact that the wages of customs college graduates relative to loftier school graduates (i.due east., the wage premium) has fallen, and that the wage levels of customs college graduates have fallen, indicates that there is not a swelling unmet need for such graduates. This is an avenue to help some workers, but not a generalized arroyo to raising wages. What is needed are policies that lift wages of high school graduates, community higher graduates, and college graduates, not simply a policy that changes the amount of workers in each category.

4. Deregulation

In that location is no solid footing for believing that deregulation volition pb to greater productivity growth or to wage growth. According to the Office of Management and Upkeep (2014), the estimated annual benefits of major federal regulations exceeded their cost past at least $160 billion and as much as $779 billion during the decade from 2003 to 2013. The economy and the American people are better off because of the federal government'due south regulatory efforts.

5. Policies to promote long-term growth

Policies that tin can substantially help reduce unemployment in the adjacent two years are welcomed and can serve to raise wage growth. Policies aimed at raising longer-term GDP growth prospects may be beneficial but will not help wages soon or necessarily atomic number 82 to wage growth in future years. This can be seen in the decoupling of wage growth from productivity over the final twoscore years. Simply increasing investments and productivity will not necessarily improve the wages of a typical worker. What is missing are mechanisms that relink productivity and wage growth. Without such policies, an agenda of "growth" is playing "pretend" when it comes to wages.

About the authors

Lawrence Mishel, a nationally recognized economist, has been president of the Economic Policy Institute since 2002. Prior to that he was EPI'southward commencement research manager (starting in 1987) and subsequently became vice president. He is the co-author of all 12 editions of The State of Working America. He holds a Ph.D. in economics from the University of Wisconsin at Madison, and his articles have appeared in a multifariousness of academic and non-academic journals. His areas of research are labor economics, wage and income distribution, industrial relations, productivity growth, and the economics of teaching.

Ross Eisenbrey has been vice president of EPI since 2003. He is a lawyer and erstwhile commissioner of the U.S. Occupational Safety and Health Review Commission. Prior to joining EPI, Eisenbrey worked for many years as a staff attorney and legislative director in the U.S. Business firm of Representatives, and every bit a commission counsel in the U.Due south. Senate. He served as policy manager of the Occupational Safety and Wellness Administration from 1999 until 2001. Eisenbrey has testified numerous times in the House of Representatives and the Senate, and has written scores of articles, outcome briefs, and policy memos on a broad range of labor issues. He holds a J.D. from the Academy of Michigan.

Endnotes

i. Meet H.R. 2889, Local Jobs for America Act, sponsored past Rep. George Miller; and H.R. 1617, Emergency Jobs to Restore the American Dream Act, sponsored by Rep. Jan Schakowsky.

2. The data presented hither are updated numbers based on Bivens (2014).

References

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Source: https://www.epi.org/publication/how-to-raise-wages-policies-that-work-and-policies-that-dont/