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News from EPI Raising America’s Pay is Our Central Economic Policy Challenge

At an event today, the Economic Policy Institute is launching Raising America’s Pay, multi-year research and public education initiative to make wage growth an urgent national policy. The initiative’s first study, Raising America’s Pay: Why It’s Our Central Economic Policy Challenge, by EPI President Lawrence Mishel and economists Josh Bivens, Elise Gould, and Heidi Shierholz, provides a broad overview of wage trends, links wage stagnation and wage inequality to income inequality, poverty and social mobility, and explains how these trends are the consequence of policy decisions and inaction.

Key findings include:

  • Hourly wages of the vast majority of American workers have either stagnated or declined since 1979, with the exception of a period of strong across-the-board wage growth in the late 1990s. Slow income growth for most American households is mainly due to this weak wage growth.
  • Between 1979 and 2013, economy-wide productivity grew eight times faster than typical worker compensation. Productivity grew 64.9 percent, while hourly compensation of production and nonsupervisory workers grew just 8.2 percent.
  • Weak wage growth extends even to those with a four-year college degree. The vast majority of college graduates have seen only small wage gains since 2000.
  • Wage growth is essential to poverty reduction. The bottom fifth of American households relied on work-related income for more than two-thirds of their total incomes in 2010.

The paper makes the case that weak wage growth is the result of specific well-studied policy changes, such as allowing the real value of the minimum wage to erode over time and failing to improve the laws so workers’ have the ability to bargain collectively. However, there are additional under-researched labor market policies and practices that the paper—and the Raising America’s Pay project—seek to explore. These include the inappropriate classification of employees as independent contractors, and increasing incidences of “wage theft” that occurs when workers—particularly low-wage and immigrant workers—are not paid for the work they have performed.

“Once you realize that wage growth has been hampered by specific policy actions we have or have not taken, it becomes easier to find solutions,” said EPI President Lawrence Mishel. “This is the first step in identifying ways that we can jumpstart Americans’ stagnant wages.”

As the premier research institute tracking trends in income, wages, and job quality, EPI is uniquely positioned to play a leading role in shifting the debate on this critical topic. Raising America’s Pay will rely not only on EPI staff but will also incorporate the work of researchers and policy analysts at other research organizations, and will commission work by university-based economists, lawyers, sociologists, and other social scientists.