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News from EPI An improving economy led to rising wages for most in 2016, but overall inequality persists

In The State of American Wages: 2016, EPI Senior Economist Elise Gould finds that an improving economy in 2016 brought broad-based wage growth for most workers. Notably, wages at the bottom rose more in states that raised their minimum wages. However, there are still large gaps in wages by gender and race and between wage levels.

“There’s good evidence that two clear mechanisms boosted wages for low- and middle-wage workers in 2016,” said Gould. “The first is state-level increases in the minimum wage and the second is lower unemployment overall.”

The report details the most up-to-date hourly wage trends through 2016 across the wage distribution and education categories, highlighting important differences by race and gender. Key findings include:

  • Between 2000 and 2016, wage growth was consistently stronger for high-wage workers, continuing the trend of rising wage inequality. In 2016, however, wage growth was more evenly distributed, with median wages growing 3.1 percent.
  • Wages of the lowest-wage workers—particularly women—grew faster in states that increased their minimum wage. In states without minimum wage increases in 2016, the 10th percentile wage rose 2.5 percent, while comparable workers in states with minimum wage increases saw their wages rise by 5.2 percent.
  • At every education level, women are paid consistently less than their male counterparts, and the gap is worse at the highest levels of education.
  • The college wage premium (the percent by which hourly wages of college graduates exceed those of comparable high school graduates) has increased since 2000, but has not grown fast enough to explain the much faster growth in wage inequality.
  • At every level, wage growth since 2000 was faster for white and Hispanic workers than for black workers, and black-white wage gaps are larger today than in 2000. However, in the last year, those gaps became slightly smaller at the middle and top.
  • Among black workers, only college and advanced degree holders have higher wages than they did in 2007, but their wage growth was considerably slower than comparable white or Hispanic workers.
  • Hispanic workers experienced more broadly-based wage growth than other groups in 2016. The Hispanic-white wage gap shrank at the middle and top of the wage distribution.

“As the economy improved and the labor market tightened, wages grew for most workers,” said Gould. “This is a promising trend, but there is still a lot of lost ground to make up. As such, policymakers should look for ways to strengthen labor standards and the Fed should keep its foot off the brakes until we reach full employment.”

The data in this paper are also available in the EPI Data Library, which can be sorted by new criteria such as annual wages and work hours, union coverage, health and retirement benefits, and an inequality wage decomposition.

Additionally, EPI’s interactive wages calculator, which shows workers what their wages would be if wages had grown alongside productivity, has been updated with 2016 data.