As Donald Trump and Republicans continue to tout the economy, most Americans are actually seeing little to no benefit from the economy. The reason: wage growth is stagnant.
Aside from employment data, the Bureau of Labor Statistics also compiles the Consumer Price Index (CPI), our primary inflation gauge.
In the same period in which average hourly earnings rose 2.8%, the CPI rose 2.7%. That’s how much the cost of living went up, on average.
Your personal inflation depends on how you spent your money. But unless you had no housing or transportation expenses in the last year, your cost of living probably rose at least 2.7%, and possibly much more.
So, a 2.8% wage gain is essentially no gain at all. Inflation-adjusted wages are flat since last year.
Because the tax cuts that were passed by the GOP went primarily to corporations, who used their tax cut benefits to mostly buy back their own stock instead of increasing wages, almost all of the benefit from the tax cuts have gone to corporate shareholders and/or corporate executives, people who were already rich. The tax cut has also increased the deficit, which has helped lead to increased inflation, which has eaten away at the meager gains in wages. In other words, the tax cut has done absolutely nothing for the average American. It has instead been a giant giveaway to the already rich.
There are means by which wage growth could be boosted, one of which has been highlighted for discussion here:
Policymakers can help to grow wages by raising the minimum wage; updating overtime rules; strengthening rights to collective bargaining; regularizing undocumented workers; ending forced arbitration; securing workers’ access to sick leave and paid family leave; closing race and gender inequities; awarding government contracts only to firms that adhere to wage, health, and safety laws; and tackling workplace abuses such as misclassification and wage theft.
Minimum wages have been raised in some states and cities, and has been shown to have a very large influence on overall wages in those areas.
“While unemployment is low, we’re seeing pretty stagnant wages,” says Fairness Project director Jonathan Scheifer. “And the only places we’ve seen wage increases is where there’s been an increase in the minimum wage.”
Raising the minimum wage does not just effect those who earn minimum wage, either. There is a ripple effect, which leads to higher wages for most low income and many middle class wage earners.
When New Jersey increased its minimum wage this year, Dolores Riley gave raises to all 16 employees at her childcare center. But it wasn’t because they were all making $7.25 an hour.
In fact, only five staff members at Gramma’s School House were affected when New Jersey upped its minimum wage to $8.25. But Riley didn’t want to increase the pay of the least experienced employees without also rewarding those who had been there the longest. So she increased everyone’s pay by $.25 an hour.
That’s what economists call a ripple effect, meaning an increase in the minimum wage spills over to higher wage brackets.
Income inequality has been growing in the United States at rates not seen since the 1920s and one of the reasons has been that the minimum wage has only been raised in some local areas, but not on a national level:
Between the years 2009 to 2015, the incomes of those in the top 1 percent grew faster than the incomes of the bottom 99 percent in 43 states and the District of Columbia. In nine states, the income growth of the top 1 percent was half or more of all income growth in that time period.
This trend is a reversal of what happened in the United States in the years during and after the Great Depression. From 1928 until 1973, the share of income held by the top 1 percent declined in nearly every state.
The report from the EPI attributes that growth to a different atmosphere for workers, where the minimum wage generally was steadily rising and they were able to join unions and bargain for rights.
Today, while unemployment remains low and the economy is doing exceptionally well, wage growth has remained stagnant.
Income inequality is approaching crisis levels, yet the U.S Congress continues to let the value of minimum wage erode.
Yet for decades, lawmakers have let the value of the minimum wage erode, allowing inflation to gradually reduce the buying power of a minimum wage income. When the minimum wage has been raised, the increases have been too small to undo the decline in value that has occurred since the 1960s. In 2016, the federal minimum wage of $7.25 was worth 10 percent less than when it was last raised in 2009, after adjusting for inflation, and 25 percent below its peak value in 1968.
This decline in purchasing power means low-wage workers have to work longer hours just to achieve the standard of living that was considered the bare minimum almost half a century ago. Over that time, the United States has achieved tremendous improvements in labor productivity that could have allowed workers at all pay levels to enjoy a significantly improved quality of life (Bivens et al. 2014). Instead, because of policymakers’ failure to preserve this basic labor standard, a parent earning the minimum wage does not earn enough through full-time work to be above the federal poverty line.
The minimum wage was last raised in 2009, as part of a bill that was passed in 2007 with bipartisan support, but it has languished at the same level for the last nine years. The reason why it has languished is because the Republican party has decided to block any votes to raise the minimum wage.
In 2014, Democrats sponsored a bill in the Senate to raise the minimum wage from $7.25/hour to $10.10/hour over a 2 1/2 year time period. The bill was filibustered by Republican Senators. Only one Republican Senator, Bob Corker, voted to allow the bill to go forward. Among the Senators who voted on this bill were several Senators who are up for re-election in 2018.
On the Democratic side, these Senators who are up for re-election in 2018 voted in favor of raising the minimum wage in 2014: Tammy Baldwin from Wisconsin, Bob Casey from Pennsylvania, Sherrod Brown from Ohio, Maria Cantwell from Washington, Ben Cardin from Maryland, Tom Carper from Delaware, Joe Donnelly from Indiana, Dianne Feinstein from California, Kirsten Gillibrand from New York, Martin Heinrich from New Mexico, Heidi Heitkamp from North Dakota, Mazie Hirono from Hawaii, Tim Kaine from Virginia, Amy Klobuchar from Minnesota, Joe Manchin from West Virginia, Claire McCaskill from Missouri, Bob Menendez from New Jersey, Chris Murphy from Connecticut, Bill Nelson from Florida, Debbie Stabenow from Michigan, Jon Tester from Montana, Elizabeth Warren from Massachusetts, and Sheldon Whitehouse from Rhode Island.
On the Republican side, these Senators who are up for re-election in 2018 voted against raising the minimum wage in 2014: John Barrasso from Wyoming, Ted Cruz from Texas, Deb Fischer from Nebraska, and Dean Heller from Nevada.
Why was the vote scuttled by the Republicans? Because raising the minimum wage benefits workers, however, corporations see wages as an expense, so fight to keep them low. There is one party that takes the side of workers: the Democratic party. There is one party that takes the side of corporations: the Republican party.