The majority of Americans share in economic growth through the wages they receive for their labor, rather than through investment income. Unfortunately, many of these workers have fared poorly in recent decades. Since the early 1970s, the hourly inflation-adjusted wages received by the typical worker have barely risen, growing only 0.2% per year. In other words, though the economy has been growing, the primary way most people benefit from that growth has almost completely stalled.
Why Wages Aren’t Growing in America
Since the early 1970s, hourly inflation-adjusted wages received by the typical worker have barely risen, growing only 0.2% per year. Assigning relative responsibility to the policies and economic forces that underlie rising inequality or declining labor share is a challenge. International trade and technological progress have played significant roles, putting downward pressure on the wages of low-skilled workers. We also know that educated workers have fared better; the wages received by those who finished their education with a four-year college degree grew from 134% of high school graduates’ wages to 168%. Domestic policy choices have mattered too, especially because they have affected workers’ bargaining power and the allocation of wages across different workers. The wage stagnation of the past 40 years is also linked to some developments that may have suppressed productivity growth, which has slowed since 1973. Business dynamism also fell. It will take many incremental reforms and new policies to reestablish the conditions that support robust, broadly shared wage growth.