Is weak pay growth the new normal?
Executive Summary
Is wage stagnation over? Recent upticks in median household income suggest the problem might be lessening. But at a time when the U.S. labor market is healthy and adding jobs at a steady clip, wages for many workers remain flat. Some economists assert that changes in income distribution have distorted the picture: Average income is rising, but more is going to those at the top, so many in the middle are suffering. Others dismiss stagnation as overblown, a negative effect of the Great Recession that is now history. As the economists debate, many Americans are asking why it seems they can’t get ahead, and politicians are responding to their angst. Among the key takeaways:
Tepid wage growth has been implicated as one cause of the U.S. economy’s inability to grow at a more robust rate.
Productivity, historically a driver of higher pay, has flattened out—and has ceased moving in tandem with wages in any case.
The debate over wage stagnation has intersected with calls for lower U.S. corporate tax rates as a possible engine for pay increases.
Resources
Bibliography
Books
Acemoglu, Daron, and James Robinson, “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” Crown Business, 2012. Two economists—Acemoglu from the Massachusetts Institute of Technology and Harvard University’s James Robinson—analyze 15 years of research on why some nations are rich and some are poor.
Ford, Martin, “The Rise of the Robots: Technology and the Threat of a Jobless Future,” Basic Books, 2015. A technology entrepreneur and artificial intelligence expert warns about the growing number of skilled workers whose jobs will be replaced by machines.
Gordon, Robert J., “The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War,” Princeton University Press, 2016. A Northwestern University social scientist offers a riveting history of America’s economic transformation between 1870 and 1970 and explains why we’re unlikely to see this kind of growth again.
Milanovic, Branko, “The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality,” Basic Books, 2011. A World Bank economist provides an entertaining history of inequality in the world.
Oliver, Melvin L., and Thomas M. Shapiro, “Black Wealth/White Wealth: A New Perspective on Racial Inequality,” Routledge, 2006. A classic exploration of wealth, race and income; the authors offer suggestions on how to close the racial gap.
Piketty, Thomas, “Capital in the 21st Century,” Harvard University Press, 2014. A French economist writes a sweeping best-seller about rising inequality and demonstrates what’s happened to average income for most workers.
Stiglitz, Joseph E., “The Price of Inequality: How Today’s Divided Society Endangers Our Future,” W.W. Norton & Company, 2012. A Nobel Prize-winning economist argues that the United States is in peril if it doesn’t deal with inequality and offers policy suggestions.
Articles
Blasi, Joseph, “Profit sharing was supposed to be a silver bullet for middle-class success. What happened?” Salon, Sept. 7, 2015, http://tinyurl.com/
Cassidy, John, “The Great Productivity Puzzle,” The New Yorker, Aug. 10, 2016, http://tinyurl.com/
Feldstein, Martin, “Are U.S. Middle-Class Incomes Really Stagnating?” Project Syndicate, July 30, 2015, http://tinyurl.com/
Greenhouse, Steven, “The Mystery of the Vanishing Pay Raise,” The New York Times, Oct. 31, 2015, http://tinyurl.com/
Hassett, Kevin A., and Aparna Mathur, “The Cure for Wage Stagnation,” The Wall Street Journal, Aug. 14, 2016, http://tinyurl.com/
Reports and Studies
Autor, David H., et al., “Trade Adjustment, Worker Level Evidence,” Quarterly Journal of Economics, December 2014, http://tinyurl.com/
Bier, David, “Immigrants and Wages: Americans Face Less Competition Since 1980,” Niskanen Center, Feb. 23, 2015, http://tinyurl.com/
Bosworth, Barry B., “Sources of Real Wage Stagnation,” The Brookings Institution, Dec. 22, 2014, http://tinyurl.com/
Goldin, Claudia, and Lawrence Katz, “Long-Run Changes in the U.S. Wage Structure: Narrowing, Widening, Polarizing,” National Bureau of Economic Research, November 2007, http://tinyurl.com/
Gould, Elise, “Wage inequality continued its 35-year rise in 2015,” Economic Policy Institute, March 10, 2016, http://tinyurl.com/
Katz, Lawrence, and Alan Krueger, “The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015,” National Bureau of Economic Research, September 2016, http://tinyurl.com/
Katz, Lawrence, and Robert Margo, “Technical Change and Relative Demand for Skilled Labor: The United States in Historical Perspective,” National Bureau of Economic Research, February 2013, http://www.nber.org/
Naidu, Suresh, and Noam Yuchtman, “Labor Market Institutions in the Gilded Age of America,” Economic History, Working Paper, National Bureau of Economic Research, March 2016, http://tinyurl.com/
Rose, Stephen, “Beyond the Wage Stagnation Story: Better Measures Show America’s Workers Doing Better Than Previously Reported,” Urban Institute, August 2015, http://tinyurl.com/
Wilson, Valerie, and William M. Rodgers III, “Black-white wage gaps expand with rising wage inequality,” Economic Policy Institute, Sept. 20, 2016, http://tinyurl.com/
The Next Step
Closing the Pay Gap
“Gender pay gap report: Women won’t earn as much as men for 170 years,” Chicago Tribune, Oct. 26, 2016, http://tinyurl.com/
Swanson, Ana, “There’s a devastatingly simple explanation for America’s economic mess,” The Washington Post, Oct. 7, 2016, http://tinyurl.com/
Zumbrun, Josh, “In Advanced Economies, Two-Thirds of Population Have Seen Incomes Stagnate, Study Shows,” The Wall Street Journal, July 13, 2016, http://tinyurl.com/
Global Economies
“Middle 60% India can help GDP growth to 10%: Study,” Economic Times, Oct. 7, 2016, http://tinyurl.com/
Grant, Will, “Indians paid 10 times more than Cuban counterparts,” BBC, Nov. 1, 2016, http://tinyurl.com/
Zhang, Maggie, “Competition for white-collar jobs eases in China and wages continue to rise in third quarter,” South China Morning Post, Oct. 27, 2016, http://tinyurl.com/
Policy Fixes
Hall, Gina, “Why fast food chains have raised pay even before minimum wage votes,” Chicago Business Journal, Oct. 31, 2016, http://tinyurl.com/
Levine, Marianne, “White House details sweeping measure to raise wages,” Politico, May 17, 2016, http://tinyurl.com/
White, Gillian B., “Immigrants or Executives: Who’s to Blame for Wage Stagnation?” The Atlantic, Jan. 13, 2016, http://tinyurl.com/
Racial Inequality
Nguyen, Minh, “Wage Gap Between Races, Genders Persist as Asian Men Top Average Earnings: Report,” NBC News, July 1, 2016, http://tinyurl.com/
Surowiecki, James, “The Widening Racial Wealth Divide,” The New Yorker, Oct. 10, 2016, http://tinyurl.com/
Wingfield, Adia Harvey, “About Those 79 Cents,” The Atlantic, Oct. 17, 2016, http://tinyurl.com/
Organizations
AFL-CIO
815 16th St., N.W., Washington, DC 20006
202-637-5000
www.aflcio.org
Umbrella federation for 56 U.S. unions that monitors corporate governance.
Brookings Institution
1775 Massachusetts Ave., N.W., Washington, DC 20036
202-797-6000
www.brookings.edu
Think tank that analyzes and researches public policy issues, including those related to the economy and wages.
Cato Institute
1000 Massachusetts Ave., N.W., Washington, DC 20001
202-842-0200
www.cato.org
Libertarian think tank that runs HumanProgress.org, an organization that measures changes in the U.S. standard of living.
Congressional Budget Office
Ford House Office Building, Fourth Floor, Second and D streets, S.W., Washington, DC 20515
202-226-2602
www.cbo.gov/
The federal agency that regularly analyzes the distribution of household income before and after government transfers and federal taxes.
Economic Policy Institute
1333 H St., N.W., Suite 300, East Tower, Washington, DC 20005
202-775-8810
www.epi.org
Liberal think tank that researches wages and incomes.
The Heritage Foundation
214 Massachusetts Ave., N.E., Washington, DC 20002
202-546-4400
www.heritage.org
Conservative think tank that studies policy on a variety of economic issues.
Institute for Compensation Studies
Cornell University, ILR School, 216 Ives Hall, Ithaca, NY 14853
607-255-2222
www.ilr.cornell.edu/
Research center at Cornell University that studies wages and other rewards.
U.S. Bureau of Labor Statistics
Postal Square Building, 2 Massachusetts Ave., N.E., Washington, DC 20212
202-691-5200
www.bls.gov
Collects and tabulates wage data including the Employment Cost Index, which is a principal economic indicator for the U.S.
U.S. Census Bureau
4600 Silver Hill Road, Suitland, MD 20746
301-763-4636
www.census.gov/
The Census Bureau’s Current Population Survey is a key source of information on U.S. incomes.
DOI: 10.1177/237455680222.n1