Low-Wage Jobs Are Bad For Our Economy; Time To Raise America's Pay

Low-wage jobs are bad for America's economy. They drive a race to the bottom as people pull back, forcing more layoffs and wage cuts. But America has been replacing good-paying jobs with low-wage jobs for decades, and the wage differential goes to a few at the top. This has to change, or else 99 percent of us will "win" the race and fall to the bottom.

The Economic Policy Institute has launched a major initiative called "Raising America's Pay," saying, "Raising wages is the central economic challenge of our time—essential to addressing income inequality, boosting living standards for the broad middle-class, reducing poverty and sustaining economic growth."

EPI describes the initiative this way: "Raising America’s Pay is a multiyear research and public education initiative by the Economic Policy Institute to make wage growth an urgent national policy priority."

Accompanying the launch EPI published a report, Raising America’s Pay: Why It’s Our Central Economic Policy Challenge. In their introduction to the report EPI lays out the numbers showing just how poorly most of us are doing, even in the middle of the so-called "recovery."

Between 1979 and 2013, productivity grew 64.9 percent, while hourly compensation of production and nonsupervisory workers, who comprise 80 percent of the private-sector workforce, grew just 8.2 percent. Productivity thus grew eight times faster than typical worker compensation.

Much of this productivity growth accrued to those with the very highest wages. The top 1 percent of earners saw cumulative gains in annual wages of 153.6 percent between 1979 and 2012—far in excess of economy-wide productivity.

Median hourly wages rose just 0.2 percent annually between 1979 and 2013, compared with an annual decline of 0.2 percent for the 10th percentile worker (i.e., the worker who earns more than only 10 percent of workers) and an annual gain of 1 percent for the 95th percentile worker.

Between 2000 and 2013, hourly wages of the vast majority of workers either fell (bottom 30 percent) or were essentially flat (next 40 percent), and only the 95th percentile saw wage growth closely approaching 1 percent annually.

The late 1990s was the only period between 1979 and 2013 when wage growth was robust and broadly shared; in fact, wage growth was actually strongest for the bottom 40 percent.

It goes on like this, statistic after depressing statistic.

What Do We Do About It?

The report offers a series of recommendations. Among them:

• "Wage triage": Engineer a full recovery from the Great Recession

The first priority should be restoring the labor market to at least its pre­–Great Recession health. Since the official end of the Great Recession in mid-2009, the most glaring policy choice that is increasing wage inequality is Congress’s embrace of fiscal austerity, which has throttled prospects for a full recovery.

Of course we can "engineer a full recovery." We certainly "engineered a full recovery" for the financial sector. First and foremost we need to start repairing our infrastructure. Right there alone is literally millions of good-paying jobs from the construction work to the suppliers like the steel industry to the engineers to the equipment suppliers.

That fixes a lot of the wage problem because you soak up the "reserve army" of unemployed people that is driving down the wages of working people. As the EPI report puts it, "That there are far more jobless workers than available jobs means employers can get and retain workers without offering significant wage increases. "

• Raise the minimum wage.

"Reversing the destructive changes in labor market policy and business practices encompasses a wide variety of policies, big and small, all of which would push our economy toward more broadly based wage growth. These include things such as increasing the minimum wage, which, in inflation-adjusted terms, is currently more than 25 percent below its peak in 1968, despite a low-wage workforce that is much older and more educated.

• Stop wage theft by enforcing and strengthening pay laws.

"It could include a boost to the dramatically eroded enforcement of existing employment law to counter “wage theft,” a practice that is unfortunately rampant (particularly among vulnerable immigrant communities) in the low-wage labor market ... It could mean ending the inappropriate misclassification of employees as independent contractors when that damages their living standards."

• Fix trade.

As EPI words it, "Trade agreements reliably harmonized protections for corporate interests up to the highest standard but generally provided no protection against a race to the bottom on labor standards."

In other words, your boss can threaten to move your job out of the country if you ask for a raise or try to form a union.

• Fix currency.

"Other aspects of international economic policy—particularly the failure to maintain a competitive value of the U.S. dollar—also undercut labor demand for the vast majority," the report says.

China and others manipulate their currency, making things they make and do cost less in international markets. Our government (at the behest of Wall Street) has refused to do anything about this. This alone has cost us 5.8 million jobs.

Due to an editing error, an earlier version of this post did not blockquote the section on the minimum wage, thus attributing the text to the EPI report.