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News from EPI Wages Stagnated or Fell for Workers Across the Board in 2014

Inflation-adjusted hourly wages were stagnant or fell across the board in 2014, except for a 1.3 percent increase among workers at the bottom of the wage distribution, according to a new analysis from EPI senior economist Elise Gould. 2014 Continues a 35-Year Trend of Broad-Based Wage Stagnation contains in depth and up-to-date analysis of wage trends—a topic EPI has documented for nearly three decades—through 2014, including breakdowns by decile, race and ethnicity, gender, and education level.

“What this analysis shows us is that wage stagnation is a broad-based problem,” said Gould. “It’s not limited to low-wage workers or workers without a college degree. In other words, it’s not being caused by a skills gap or by technological advancements. Wage stagnation is the result of specific policy choices made over the past 30 years, and it can be reversed by policy decisions going forward.”

Wages grew by 1.3 percent among low wage workers at the 10th percentile, because of minimum-wage increases in 18 states, where 57 percent of U.S. workers reside. Gould points to this fact as evidence that public policies can be an important tool for raising wages.

Looking at the top of the wage distribution, real wages fell by 0.7 percent for workers at the 90th percentile and 1.0 for workers at the 95th percentile. Meanwhile, wages also fell for workers with a 4-year college degree—a drop of 1.3 percent—and even more for those workers with an advanced degree—a decline of 2.2 percent.

“If even highly educated workers, facing the lowest rates of unemployment, are seeing outright wage declines, there is clearly a good amount of slack left in the labor market, and policymakers—particularly the Federal Reserve—should not be worried about slowing the recovery down in an effort to keep wage and price inflation in check,” said Gould.

With real wage growth stagnant and nominal wage growth far below what would be consistent with the Federal Reserve Board’s 2 percent inflation target, there is no evidence that the Federal Reserve Board should worry about incipient inflation and raise interest rates in an effort to slow the economy.

This paper is part of EPI’s Raising America’s Pay project, a multiyear research and public education initiative to make wage growth an urgent national policy priority. Raising America’s Pay seeks to explain wage and benefit patterns—and the role of labor market policies and practices in suppressing pay—and identify policies that will generate broad-based wage growth.