Economic Policy InstituteJanuary 6, 2015

WAGE STAGNATION IN NINECHARTS

B Y L A W R E N C E M I S H E L , E L I S E G O U L D , A N D J O S H B I V E N S

O

ur country has suffered from rising income inequality and chronically slow growth in the living standards of

low- and moderate-income Americans. This disappointing living-standards growth—which was in fact

caused by rising income inequality—preceded the Great Recession and continues to this day. Fortunately,

income inequality and middle-class living standards are now squarely on the political agenda. But despite their increas-

ing salience, these issues are too often discussed in abstract terms. Ignored is the easy-to-understand root of rising

income inequality, slow living-standards growth, and a host of other key economic challenges: the near stagnation of

hourly wage growth for the vast majority of American workers over the past generation. Countering that by generating

broad-based wage growth is our core economic policy challenge.

With a group of simple charts, this paper brings the challenge we face into sharp focus, and lends clarity to the steps we

must take to meet it.

It should not be surprising that trends in hourly wage growth have profound consequences for American living stan-

dards. After all, the vast majority of Americans rely on their paychecks to make ends meet. For these families, the bulk

of income comes from wages and employer-provided benefits, followed by other income sources linked to jobs, such

as wage-based tax credits, pensions, and social insurance. Wage-related income also accounts for the majority of total

income among the bottom fifth of households.

Wage stagnation for the vast majority was not created by abstract economic trends. Rather, wages were suppressed by

policy choices made on behalf of those with the most income, wealth, and power. In the past few decades, the Ameri-

can economy generated lots of income and wealth that would have allowed substantial living standards gains for every

ECONOMIC POLICY INSTITUTE • 1333 H STREET, NW • SUITE 300, EAST TOWER • WASHINGTON, DC 20005 • 202.775.8810 • WWW.EPI.ORG

family. The same is true looking forward: Overall income and wealth will continue to grow. The key economic policy

question is whether we will adopt policies that enable everyone to participate in a shared prosperity, or whether the

growth of income and wealth will continue to accrue excessively and disproportionately to the best-off 1 percent.

The first policy choice should be to quickly restore full employment. The Federal Reserve Board can do this by not

raising interest rates and slowing the recovery in the name of fighting inflationary pressures until wage growth is much,

much stronger. Congress and the president can pursue the return to full employment by making public investments

that can create both jobs and future productivity growth. After this, policymakers should support those labor standards

that can restore some bargaining power to low- and moderate-wage workers in coming years. That means policy actions

such as passing a higher minimum wage, expanding rights to overtime pay, providing paid sick leave, protecting the

labor rights of undocumented workers, and restoring the right to collective bargaining. Policymakers should reject trade

treaties that provide corporations greater rights and sap our manufacturing job base.

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 2

1. The cost of inequality to middle-class households

The cost of unequal growth to middle-income households

This figure shows that the stakes of rising inequality for the broad American middle class are enormous. The figure

compares the income growth of the middle three-fifths of American households since 1979 to their income growth had

there been no growth in inequality. In 2007, the last year before the Great Recession, the average income of the middle

60 percent of American households was $76,443. It would have been $94,310, roughly 23 percent (nearly $18,000)

higher had inequality not widened (i.e., had their incomes grown at the overall average rate—an overall average buoyed

by stratospheric growth at the very top). The temporary dip in top incomes during the Great Recession did little to

shrink that inequality tax, which stood at 16 percent (nearly $12,000) in 2011.

FIGURE 1

The U.S. middle class had $17,867 less income in 2007 because of the growth ofinequality since 1979

Household income of the broad middle class, actual and projected assuming no growth in inequality,1979–2011

Note: Data show average income of households in the middle three-fifths.

Source: EPI analysis of Congressional Budget Office data

Reproduced from Figure I in Raising America’s Pay: Why It’s Our Central Economic Policy Challenge

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 3

2. Wage trends of the last three decades

The gap between the growth of productivity and that of a typical worker’s pay

Slow and unequal wage growth in recent decades stems from a growing wedge between overall productivity—the

improvements in the amount of goods and services produced per hour worked—and the pay (wages and benefits)

received by a typical worker.

The figure shows that in the three decades following World War II, hourly compensation of the vast majority of workers

rose 91 percent, roughly in line with productivity growth of 97 percent. But for most of the past generation (except for

a brief period in the late 1990s), pay for the vast majority lagged further and further behind overall productivity. From

1973 to 2013, hourly compensation of a typical (production/nonsupervisory) worker rose just 9 percent while produc-

tivity increased 74 percent. This breakdown of pay growth has been especially evident in the last decade, affecting both

college- and non-college-educated workers as well as blue- and white-collar workers. This means that workers have been

producing far more than they receive in their paychecks and benefit packages from their employers.

FIGURE 2

Workers produced much more, but typical workers’ pay lagged far behind

Disconnect between productivity and typical worker’s compensation, 1948–2013

Note: Data are for compensation (wages and benefits) of production/nonsupervisory workers in the private sector and net productivity of the totaleconomy. "Net productivity" is the growth of output of goods and services less depreciation per hour worked.

Source: EPI analysis of unpublished Total Economy Productivity data from Bureau of Labor Statistics (BLS) Labor Productivity and Costs program,wage data from the BLS Current Employment Statistics, BLS Employment Cost Trends, BLS Consumer Price Index, and Bureau of Economic AnalysisNational Income and Product Accounts

Updated from Figure A in Raising America’s Pay: Why It’s Our Central Economic Policy Challenge

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 4

Wage growth of the top 1%

The ability of those at the very top to claim an ever-larger share of overall wages is evident in this figure. Two things

stand out. First is the extraordinarily rapid growth of annual wages for the top 1 percent compared with everybody else:

Top 1 percent wages grew 138 percent, while wages of the bottom 90 percent grew just 15 percent. If the wages of

the bottom 90 percent had grown at the average pace over this period—meaning that wages grew equally across-the-

board—then the bottom 90 percent’s wages would have grown by 32 percent, more than double the actual growth.

FIGURE 3 VIEW INTERACTIVE on epi.org

When it comes to the pace of annual pay increases, the top 1% wagegrew 138% since 1979, while wages for the bottom 90% grew 15%

Cumulative change in real annual wages, by wage group, 1979–2013

Source: EPI analysis of data from Kopczuk, Saez, and Song (2010) and Social Security Administration wage statistics

Reproduced from Figure F in Raising America’s Pay: Why It’s Our Central Economic Policy Challenge

Top1%

Bottom90%

1979 0.0% 0.0%

1980 3.4% -2.2%

1981 3.1% -2.6%

1982 9.5% -3.9%

1983 13.6% -3.7%

1984 20.7% -1.8%

1985 23.0% -1.0%

1986 32.6% 1.1%

1987 53.5% 2.1%

1988 68.7% 2.2%

1989 63.3% 1.8%

1990 64.8% 1.1%

1991 53.6% 0.0%

1992 74.3% 1.5%

1993 67.9% 0.9%

1994 63.4% 2.0%

1995 70.2% 2.8%

1996 79.0% 4.1%

1997 100.6% 7.0%

1998 113.1% 11.0%

1999 129.7% 13.2%

2000 144.8% 15.3%

2001 130.4% 15.7%

2002 109.3% 15.6%

2003 113.9% 15.7%

2004 127.2% 15.6%

2005 135.4% 15.0%

2006 143.4% 15.7%

2007 156.2% 16.7%

2008 137.5% 16.0%

2009 116.2% 16.0%

2010 130.9% 15.2%

2011 134.1% 14.6%

2012 148.4% 14.7%

2013 137.7% 15.2%

Cum

ulat

ive

grow

th in

ann

ual w

age

sinc

e 19

79

Top 1% 138%

Bottom 90%15%

1980 1985 1990 1995 2000 2005 2010-50

0

50

100

150

200%

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 5

Stagnant wages for middle-wage workers, declining wages for low-wage workers

Over the entire 34-year period between 1979 and 2013, the hourly wages of middle-wage workers (median-wage work-

ers who earned more than half the workforce but less than the other half ) were stagnant, rising just 6 percent—less than

0.2 percent per year. This wage growth, in fact, occurred only because wages grew in the late 1990s when labor markets

got tight enough—unemployment, for instance, fell to 4 percent in 1999 and 2000—to finally deliver across-the-board

hourly wage growth. The wages of middle-wage workers were totally flat or in decline over the 1980s, 1990s and 2000s,

except for the late 1990s. The wages of low-wage workers fared even worse, falling 5 percent from 1979 to 2013. In

contrast, the hourly wages of high-wage workers rose 41 percent.

FIGURE 4 VIEW INTERACTIVE on epi.org

Middle-class wages are stagnant—Middle-wage workers’ hourly wageis up 6% since 1979, low-wage workers’ wages are down 5%, whilethose with very high wages saw a 41% increase

Cumulative change in real hourly wages of all workers, by wage percentile,*1979–2013

* Low wage is 10th percentile, middle wage is 50th percentile, very high wage is 95th percentile.

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata

Reproduced from Figure F in Why America’s Workers Need Faster Wage Growth—And What We Can Do About It

YEAR

Veryhighwage

Middlewage

Lowwage

1979/01/01 0.00% 0.00% 0.00%

1980/01/01 -1.90% -1.00% -5.50%

1981/01/01 -1.70% -3.60% -4.00%

1982/01/01 0.20% -2.20% -7.70%

1983/01/01 3.40% -2.70% -10.50%

1984/01/01 4.20% -2.20% -12.70%

1985/01/01 6.00% -1.30% -14.10%

1986/01/01 7.60% 0.50% -14.30%

1987/01/01 7.40% 0.60% -14.50%

1988/01/01 10.10% 0.00% -14.50%

1989/01/01 7.50% -0.60% -14.60%

1990/01/01 9.60% -0.60% -13.10%

1991/01/01 10.30% 0.00% -11.50%

1992/01/01 8.50% 0.80% -11.70%

1993/01/01 7.60% 0.10% -12.00%

1994/01/01 13.10% -1.60% -12.90%

1995/01/01 13.20% -2.40% -13.10%

1996/01/01 13.80% -2.80% -13.50%

1997/01/01 15.20% -0.50% -10.60%

1998/01/01 18.00% 2.30% -5.70%

1999/01/01 21.50% 5.40% -4.30%

2000/01/01 25.20% 5.10% -3.40%

2001/01/01 27.70% 7.40% -0.40%

2002/01/01 32.00% 8.30% 0.70%

2003/01/01 30.30% 9.60% 0.30%

2004/01/01 31.60% 9.60% -1.10%

2005/01/01 32.50% 8.30% -2.80%

2006/01/01 33.20% 8.70% -2.20%

2007/01/01 36.10% 7.80% -1.00%

2008/01/01 37.60% 8.30% -1.90%

2009/01/01 39.00% 10.10% -1.10%

2010/01/01 38.70% 8.60% -1.90%

2011/01/01 37.10% 5.70% -4.30%

2012/01/01 39.00% 5.00% -5.90%

2013/01/01 40.60% 6.10% -5.30%

Very high wage 41%

Middle wage

6%

Low wage-5%

1980 1985 1990 1995 2000 2005 2010-20

0

20

40

60%

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 6

The wage and benefit plight of recent college graduates

The widespread problem of stagnant hourly wages is not a problem of insufficiently skilled or educated workers. As

this figure shows, a four-year college degree has been no guarantee of decent wage growth. In 2013, inflation-adjusted

hourly wages of young college graduates were lower than they were in the late 1990s, a trend that held for both young

male and female college graduates. Thus, wage stagnation and erosion afflict even the one-third of workers who have

earned a four-year college degree.

FIGURE 5 VIEW INTERACTIVE on epi.org

Wages of young college grads have been falling since 2000

Real average hourly wages of young college graduates, 1989–2014

Note: Data are for college graduates age 21–24 who do not have an advanced degree and are not enrolled in further schooling. Data for2014 represent 12-month average from April 2013–March 2014. Shaded areas denote recessions.

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata

Adapted from Figure N in The Class of 2014: The Weak Economy Is Idling Too Many Young Graduates

Year All Men Women

1989 $16.59 $17.24 $16.12

1990 $17.10 $18.12 $16.37

1991 $16.39 $17.34 $15.67

1992 $15.82 $16.39 $15.39

1993 $15.89 $16.63 $15.34

1994 $15.88 $16.95 $15.08

1995 $15.45 $16.21 $14.91

1996 $15.59 $15.94 $15.34

1997 $16.19 $17.32 $15.36

1998 $17.96 $20.12 $16.34

1999 $18.07 $18.82 $17.58

2000 $18.41 $19.24 $17.82

2001 $18.55 $20.00 $17.51

2002 $18.33 $19.78 $17.36

2003 $17.68 $18.42 $17.13

2004 $17.97 $18.79 $17.38

2005 $17.67 $19.13 $16.66

2006 $17.85 $18.80 $17.20

2007 $18.24 $19.95 $17.00

2008 $17.87 $18.55 $17.39

2009 $18.33 $20.48 $16.85

2010 $17.29 $18.87 $16.21

2011 $17.41 $18.96 $16.30

2012 $16.85 $18.07 $15.87

2013 $17.04 $18.92 $15.54

2013-04-01 $16.99 $19.15 $15.29

Aver

age

hour

ly w

ages

in 2

013

dolla

rs Men

$19.15All

$16.99Women

$15.29

1990 1995 2000 2005 201014

16

18

20

22%

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 7

Recent college graduates have been less and less able to find jobs that provide health insurance. The share of young

college graduates who have employer-sponsored health insurance coverage fell from 61 percent in 1989 to 31 percent

by 2012. Most of this health-benefit erosion occurred since 2000, when just over half (53 percent) of recent college

graduates had employer-provided health insurance. For high-school graduates, the decline was even steeper, from 24

percent in 1989 to just 7 percent in 2012.

FIGURE 6 VIEW INTERACTIVE on epi.org

Employers are cutting health care for young workers, both college andhigh school graduates

Share of employed recent high school and college graduates with health insuranceprovided by their own employer, 1989–2012

Note: Coverage is defined as being included in an employer-provided plan where the employer paid for at least some of the coverage. Dataare for college graduates age 21–24 who do not have an advanced degree and are not enrolled in further schooling, and high school grad-uates age 17–20 who are not enrolled in further schooling. Shaded areas denote recessions.

Source: EPI analysis of Current Population Annual Social and Economic Supplement microdata

Reproduced from Figure O in The Class of 2014: The Weak Economy Is Idling Too Many Young Graduates

Highschool

graduatesCollege

graduates

1989/01/01 23.5% 60.7%

1990/01/01 21.9% 53.8%

1991/01/01 18.7% 56.2%

1992/01/01 14.3% 46.8%

1993/01/01 14.7% 48.4%

1994/01/01 17.1% 49.8%

1995/01/01 17.4% 51.5%

1996/01/01 15.0% 51.1%

1997/01/01 16.8% 48.0%

1998/01/01 16.6% 49.4%

1999/01/01 18.0% 49.4%

2000/01/01 20.1% 53.1%

2001/01/01 18.5% 49.2%

2002/01/01 14.8% 46.6%

2003/01/01 13.4% 41.0%

2004/01/01 12.3% 47.4%

2005/01/01 11.8% 44.8%

2006/01/01 13.2% 52.4%

2007/01/01 12.4% 51.4%

2008/01/01 9.8% 46.3%

2009/01/01 8.6% 40.5%

2010/01/01 5.3% 36.2%

2011/01/01 7.1% 31.1%

2012/01/01 6.6% 30.9%

Shar

e w

ith e

mpl

oyer

-pro

vide

d he

alth

insu

ranc

e

Collegegraduates

Down 22%since 2000

31%

High schoolgraduates

Down 14%since 2000

7%

1990 1995 2000 2005 20100

20

40

60

80%

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 8

3. Factors driving wage stagnation and inequality

CEO pay grabs a larger share of wages

In a nation of increasing inequality, the most extreme wage disparities are between the heads of large American corpora-

tions and typical workers. This figure tracks the ratio of pay of CEOs at the 350 largest public U.S. firms to the pay of

typical workers in those firms’ industries. In 1965, these CEOs made 20 times what typical workers made. As of 2013,

they make just under 300 times typical workers’ pay. This higher pay for CEOs does not reflect any increased contri-

bution to corporate output: Other data show that CEO pay grew three times faster than the pay of the top 0.1 percent

of wage earners and twice as fast as corporate profits. Moreover, the rising pay of executives was the largest factor in the

doubling of the top 0.1 percent and top 1.0 percent share of overall household income growth. CEO pay gains help

explain the growing divergence between pay and productivity.

FIGURE 7 VIEW INTERACTIVE on epi.org

CEOs now make 296 times what a typical worker earns

CEO-to-worker compensation ratio, 1965–2013

Note: CEO annual compensation is computed using the "options realized" compensation series for CEOs at the top 350 U.S. firms rankedby sales. Typical worker compensation is average compensation of production/nonsupervisory workers in the key industries of the firmsincluded in the sample.

Source: EPI analysis of data from Compustat’s ExecuComp database, Bureau of Labor Statistics Current Employment Statistics, and Bureauof Economic Analysis NIPA tables

Reproduced from Figure C in CEO Pay Continues to Rise as Typical Workers Are Paid Less

YearInterpolated

values

1965/01/01 20.0

1966/01/01 20.0

1967/01/01 20.0

1968/01/01 23.7

1969/01/01 23.7

1970/01/01 23.7

1971/01/01 23.7

1972/01/01 23.7

1973/01/01 22.3

1974/01/01 22.3

1975/01/01 22.3

1976/01/01 22.4

1977/01/01 22.4

1978/01/01 29.9

1979/01/01 29.9

1980/01/01 29.9

1981/01/01 29.9

1982/01/01 29.9

1983/01/01 29.9

1984/01/01 29.9

1985/01/01 29.9

1986/01/01 29.9

1987/01/01 29.9

1988/01/01 29.9

1989/01/01 58.7

1990/01/01 58.8

1991/01/01 58.8

1992/01/01 104.4

1993/01/01 111.8

1994/01/01 87.3

1995/01/01 122.6

1996/01/01 153.8

1997/01/01 233.0

1998/01/01 321.8

1999/01/01 286.7

2000/01/01 383.4

2001/01/01 214.2

2002/01/01 188.5

2003/01/01 227.5

2004/01/01 256.6

2005/01/01 308.0

2006/01/01 341.4

2007/01/01 351.3

2008/01/01 234.3

2009/01/01 193.2

2010/01/01 227.9

2011/01/01 231.8

2012/01/01 278.2

2013/01/01 295.9

2030

5987

383

189

351

228

296

1970 1980 1990 2000 20100

100

200

300

400

500%

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 9

Policy choices regarding the minimum wage fuel wage inequality

While pay at the top of the labor market has outpaced nearly every labor market indicator for decades, pay at the bot-

tom—the federal minimum wage—has severely lagged. This figure shows the decline in the real (inflation-adjusted)

value of the minimum wage since its high in 1968 as well as what the federal minimum wage would be today if it had

kept pace with the growth of real hourly wages of production and nonsupervisory workers (who make up 80 percent of

the workforce) or economy-wide productivity. Had the federal minimum wage kept pace with productivity it would be

over $18 today. Though not shown in the figure, the federal minimum wage did keep pace with productivity in the 30

years before 1968.

The minimum wage essentially establishes the wage levels of the bottom fifth of wage earners. These low-wage workers

are far more educated and are older than low-wage workers in 1968. Yet, despite being more skilled and productive,

the wages they earn are lower than wages earned in 1968. The failure to raise the minimum wage had especially adverse

effects on women and minority workers.

FIGURE 8 VIEW INTERACTIVE on epi.org

The minimum wage would be over $18 had it risen along withproductivity

Real value of the federal minimum wage compared with its value had it grown atthe rate of productivity and average hourly wages, 1968–2014

Note: Real average hourly wages are of production/nonsupervisory workers in the private sector, and productivity is net productivity of thetotal economy.

Source: EPI analysis of data from the U.S. Department of Labor’s Bureau of Labor Statistics and Labor Wage and Hour Division

Year

Realminimum

wageReal hourly

wage Productivity

1968$

9.58$

9.58$

9.58

1969$

9.17$

9.78$

9.62

1970$

8.75$

9.85$

9.76

1971$

8.38$

10.07$

10.12

1972$

8.14$

10.51$

10.39

1973$

7.65$

10.49$

10.64

1974$

8.70$

10.21$

10.47

1975$

8.44$

10.07$

10.70

1976$

8.74$

10.19$

11.00

1977$

8.22$

10.30$

11.13

1978$

8.86$

10.42$

11.24

1979$

8.85$

10.25$

11.26

1980$

8.52$

9.97$

11.17

1981$

8.40$

9.89$

11.41

1982$

7.93$

9.86$

11.24

1983$

7.60$

9.86$

11.58

1984$

7.30$

9.80$

11.88

1985$

7.06$

9.76$

12.08

1986$

6.93$

9.79$

12.33

1987$

6.71$

9.70$

12.39

1988$

6.47$

9.66$

12.54

1989$

6.20$

9.61$

12.64

1990$

6.70$

9.53$

12.82

1991$

7.24$

9.48$

12.92

1992$

7.06$

9.47$

13.39

1993$

6.89$

9.49$

13.43

1994$

6.74$

9.53$

13.56

1995$

6.58$

9.56$

13.57

1996$

7.17$

9.63$

13.90

1997$

7.61$

9.79$

14.09

1998$

7.50$

10.04$

14.37

1999$

7.35$

10.20$

14.72

2000$

7.11$

10.26$

15.07

2001$

6.92$

10.35$

15.30

2002$

6.81$

10.48$

15.73

2003$

6.66$

10.53$

16.24

2004$

6.48$

10.46$

16.68

2005$

6.27$

10.40$

16.97

2006$

6.07$

10.47$

17.07

2007$

6.71$

10.58$

17.19

2008$

7.23$

10.57$

17.22

2009$

8.04$

10.93$

17.58

2010$

7.91$

11.01$

18.09

2011$

7.66$

10.89$

18.12

2012$

7.51$

10.83$

18.26

2013$

7.40$

10.89$

18.43

2014$

7.25$

10.89$

18.42

2014

dol

lars

Productivity

$18.42

Real hourly wageof typical worker

$10.891968:$9.58

Real minimum wage$7.25

1970 1980 1990 2000 20105

7.5

10

12.5

15

17.5

20%

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 10

The erosion of collective bargaining hurts all workers

One of the main causes of stagnant wages and rising wage inequality is the decline of collective bargaining which has

lowered the wages of both union and nonunion workers. The figure shows that the drop in the share of workers under

collective bargaining contracts is the mirror image of the rise of incomes of the top 10 percent. This occurs because

collective bargaining not only raises wages for organized workers but also leads other employers to raise the wages and

benefits of nonunion workers to come closer to union wage standards. This phenomenon occurs when collective bar-

gaining achieves even modest penetration. The erosion of collective bargaining can explain from one-fourth to one-third

of the growth of wage inequality between 1973 and 2007 and had a greater impact on men than women. This erosion

of collective bargaining occurred despite large numbers of workers indicating they would prefer collective bargaining if

they had a choice. But the political power of those with the most income, wealth, and power prevented the adoption of

laws to modernize our labor–management system and enable workers to pursue collective bargaining.

FIGURE 9 VIEW INTERACTIVE on epi.org

Decline in union membership mirrors income gains of top 10%

Union membership and share of income going to the top 10%, 1917–2012

Source: Data on union density follow the composite series found in Historical Statistics of the United States, updated to 2012 from union-stats.com. Income inequality (share of income to top 10%) from Piketty and Saez, “Income Inequality in the United States, 1913-1998," Quar-terly Journal of Economics, 118(1), 2003, 1–39. Updated and downloadable data, for this series and other countries, are available at TheWorld’s Top Income Database. Updated September 2013.

YearUnion

membership

Shareof

incomegoingto thetop 10

percent

1917 11.0% 40.3%

1918 12.1% 39.9%

1919 14.3% 39.5%

1920 17.5% 38.1%

1921 17.6% 42.9%

1922 14.0% 43.0%

1923 11.7% 40.6%

1924 11.3% 43.3%

1925 11.0% 44.2%

1926 10.7% 44.1%

1927 10.6% 44.7%

1928 10.4% 46.1%

1929 10.1% 43.8%

1930 10.7% 43.1%

1931 11.2% 44.4%

1932 11.3% 46.3%

1933 9.5% 45.0%

1934 9.8% 45.2%

1935 10.8% 43.4%

1936 11.1% 44.8%

1937 18.6% 43.4%

1938 23.9% 43.0%

1939 24.8% 44.6%

1940 23.5% 44.4%

1941 25.4% 41.0%

1942 24.2% 35.5%

1943 30.1% 32.7%

1944 32.5% 31.6%

1945 33.4% 32.6%

1946 31.9% 34.6%

1947 31.1% 33.0%

1948 30.5% 33.7%

1949 29.6% 33.8%

1950 30.0% 33.9%

1951 32.4% 32.8%

1952 31.5% 32.1%

1953 33.2% 31.4%

1954 32.7% 32.1%

1955 32.9% 31.8%

1956 33.2% 31.8%

1957 32.0% 31.7%

1958 31.1% 32.1%

1959 31.6% 32.0%

1960 30.7% 31.7%

1961 28.7% 31.9%

1962 29.1% 32.0%

1963 28.5% 32.0%

1964 28.5% 31.6%

1965 28.6% 31.5%

1966 28.7% 32.0%

1967 28.6% 32.1%

1968 28.7% 32.0%

1969 28.3% 31.8%

1970 27.9% 31.5%

1971 27.4% 31.8%

1972 27.5% 31.6%

1973 27.1% 31.9%

1974 26.5% 32.4%

1975 25.7% 32.6%

1976 25.7% 32.4%

1977 25.2% 32.4%

1978 24.7% 32.4%

1979 25.4% 32.4%

1980 23.6% 32.9%

1981 22.3% 32.7%

1982 21.6% 33.2%

1983 21.4% 33.7%

1984 20.5% 34.0%

1985 19.0% 34.3%

1986 18.5% 34.6%

1987 17.9% 36.5%

1988 17.6% 38.6%

1989 17.2% 38.5%

1990 16.7% 38.8%

1991 16.2% 38.4%

1992 16.2% 39.8%

1993 16.2% 39.5%

1994 16.1% 39.6%

1995 15.3% 40.5%

1996 14.9% 41.2%

1997 14.7% 41.7%

1998 14.2% 42.1%

1999 14.2% 42.7%

2000 13.6% 43.1%

2001 13.7% 42.2%

2002 13.5% 42.4%

2003 13.0% 42.8%

2004 12.6% 43.6%

2005 12.5% 44.9%

2006 12.0% 45.5%

2007 12.1% 45.7%

2008 12.5% 46.0%

2009 12.4% 45.5%

2010 11.9% 46.4%

2011 11.8% 46.6%

2012 11.3% 48.2%

Share of income going to the top 10 percent

Union membership share

1920 1940 1960 1980 20000

10

20

30

40

50

60%

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 11

Other factors behind stagnating American wages

This paper provides a brief overview of some of the causes of wage stagnation and inequality. Sources in the references

section provide a more complete analysis. Excessive unemployment, not only during and after the Great Recession but

over most years since 1979, has suppressed wage growth, adversely affecting low-wage workers more than middle-wage

workers but having little impact on high-wage workers. Global integration with low-wage countries, accelerated by par-

ticular trade policies (e.g., admission of China to the World Trade Organization in the late 1990s) has adversely affected

wages of non–college educated workers. The erosion of labor standards (beyond the decline in the real value of the

minimum wage) and weak enforcement have also put downward pressure on wages. Extensive wage theft, worker mis-

classification, weakened prevailing wage laws and overtime protections, and the failure to modernize our labor standards

to provide sick leave, family leave, or minimum vacation schedules all hurt wage growth. The increased presence of

undocumented workers who are vulnerable to employer exploitation also undercuts not only the wages of these workers

but also those in similar fields.

— The authors thank EPI research assistants Tanyell Cooke, Alyssa Davis, and Will Kimball for their valuable assistance

in preparing the charts in this report.

About the authors

Lawrence Mishel, a nationally recognized economist, has been president of the Economic Policy Institute since 2002.

Prior to that he was EPI’s first research director (starting in 1987) and later became vice president. He is the coauthor

of all 12 editions of The State of Working America. He holds a Ph.D. in economics from the University of Wisconsin at

Madison, and his articles have appeared in a variety of academic and non-academic journals. His areas of research are

labor economics, wage and income distribution, industrial relations, productivity growth, and the economics of educa-

tion.

Elise Gould joined EPI as an economist in 2003 and is the institute’s director of health policy research. Her research

areas include employer-sponsored health insurance, inequality and health, poverty, economic mobility, and the

employer tax exclusion. She is a coauthor of The State of Working America, 12th Edition. In the past, she has authored a

chapter on health in The State of Working America 2008/09; coauthored a book on health insurance coverage in retire-

ment; published in venues such as The Chronicle of Higher Education, Challenge Magazine, and Tax Notes; and written

for academic journals including Health Economics, Health Affairs, Journal of Aging and Social Policy, Risk Management &

Insurance Review, Environmental Health Perspectives, and International Journal of Health Services. She holds a master’s in

public affairs from the University of Texas at Austin and a Ph.D. in economics from the University of Wisconsin at

Madison.

Josh Bivens joined the Economic Policy Institute in 2002 and is currently the director of research and policy. His pri-

mary areas of research include macroeconomics, social insurance, and globalization. He has authored or coauthored

three books (including The State of Working America, 12th Edition) while working at EPI, edited another, and has writ-

ten numerous research papers, including for academic journals. He appears often in media outlets to offer economic

commentary and has testified several times before the U.S. Congress. He earned his Ph.D. from The New School for

Social Research.

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 12

ReferencesCEO Pay Continues to Rise as Typical Workers Are Paid Less, by Lawrence Mishel and Alyssa Davis, Economic Policy Institute, 2014

How Unions Help All Workers, by Lawrence Mishel and Matthew Walters, Economic Policy Institute, 2003

Raising America’s Pay: Why It’s Our Central Economic Policy Challenge, by Josh Bivens, Elise Gould, Lawrence Mishel, and Heidi

Shierholz, Economic Policy Institute, 2014

Raising the Federal Minimum Wage to $10.10 Would Save Safety Net Programs Billions and Help Ensure Businesses Are Doing Their

Fair Share, by David Cooper, Economic Policy Institute, 2014

The Class of 2014: The Weak Economy Is Idling Too Many Young Graduates, by Heidi Shierholz, Alyssa Davis, and Will Kimball,

Economic Policy Institute, 2014

The State of Working America, 12

th

Edition, by Lawrence Mishel, Josh Bivens, Elise Gould, and Heidi Shierholz, Economic Policy

Institute and Cornell University Press, 2012; updated online at www.stateofworkingamerica.org/

Unions, Inequality, and Faltering Middle-class Wages, by Lawrence Mishel, Economic Policy Institute, 2012

“Wage Inequality: A Story of Policy Choices,” by Heidi Shierholz, Lawrence Mishel, and John Schmitt, New Labor Forum, August

4, 2014

Why America’s Workers Need Faster Wage Growth—And What We Can Do About It, by Elise Gould, Economic Policy Institute, 2014

ECONOMIC POLICY INSTITUTE | JANUARY 6 , 2015 PAGE 13