The Top 10 Charts of 2014

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This last year saw the pace of job growth pick up, a welcome development. Yet the economy remains far from healthy. In 2014 the twin issues of income inequality and stagnant wage growth for the vast majority of Americans took center stage. Better late than never.

EPI’s top charts of 2014 show why addressing inequality and spurring wage growth is so necessary–and so doable. Policy choices led to these trends, and different policy choices can reverse them.

The first policy choice should be based on the “do no harm” principle: the Federal Reserve should not try to slow recovery in the name of fighting inflationary pressures until wage growth is much, much stronger.

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, protecting the labor rights of undocumented workers, and restoring the right to collective bargaining.

1

The U.S. middle class has faced a huge ‘inequality tax’ in recent decades: Household income of the broad middle class, actual and projected assuming it grew at overall average rate, 1979–2011

Actual Projected
1979/01/01 $ 61,542.17 $ 61,542.17
1980/01/01 $ 59,460.37 $ 59,579.37
1981/01/01 $ 59,210.54 $ 59,456.53
1982/01/01 $ 58,036.98 $ 59,071.83
1983/01/01 $ 57,202.97 $ 59,479.82
1984/01/01 $ 60,446.87 $ 62,779.71
1985/01/01 $ 60,428.61 $ 63,811.15
1986/01/01 $ 62,282.04 $ 68,495.45
1987/01/01 $ 61,406.97 $ 66,243.89
1988/01/01 $ 62,294.60 $ 69,102.25
1989/01/01 $ 63,153.24 $ 69,773.54
1990/01/01 $ 63,356.58 $ 69,050.00
1991/01/01 $ 62,372.76 $ 67,405.82
1992/01/01 $ 62,736.36 $ 69,303.97
1993/01/01 $ 63,537.30 $ 69,703.89
1994/01/01 $ 63,937.79 $ 70,532.26
1995/01/01 $ 65,895.09 $ 73,271.98
1996/01/01 $ 66,618.03 $ 75,655.23
1997/01/01 $ 67,717.28 $ 78,559.19
1998/01/01 $ 70,025.47 $ 82,314.50
1999/01/01 $ 71,827.31 $ 85,754.07
2000/01/01 $ 71,685.32 $ 87,083.66
2001/01/01 $ 71,738.64 $ 82,561.12
2002/01/01 $ 70,107.92 $ 79,126.24
2003/01/01 $ 70,232.82 $ 80,397.74
2004/01/01 $ 72,563.23 $ 85,031.93
2005/01/01 $ 73,700.24 $ 89,259.28
2006/01/01 $ 74,417.13 $ 91,994.00
2007/01/01 $ 76,442.90 $ 94,310.00
2008/01/01 $ 73,539.98 $ 86,971.41
2009/01/01 $ 72,708.64 $ 82,490.43
2010/01/01 $ 72,875.68 $ 84,737.13
2011/01/01 $ 72,036.33 $ 83,665.79

 

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Note: Data show average income of households in the 20th–80th percentile.

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

Source: EPI analysis of data from The Distribution of Household Income and Federal Taxes, 2011, the Congressional Budget Office, 2014.

Reproduced from Figure I in 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.

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In 2014, rising income inequality became a front-burner political issue. This figure shows that the stakes of rising inequality for the broad American middle-class are enormous.  In 2007, the last year before the Great Recession, incomes for the middle 60 percent of American households would have been 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.

2

Since 1979, productivity has risen eight times faster than pay: Disconnect between productivity and typical worker’s compensation, 1948–2013

Year Hourly compensation Productivity
1948 0.0% 0.0%
1949 6.3% 1.5%
1950 10.5% 9.3%
1951 11.8% 12.4%
1952 15.0% 15.6%
1953 20.8% 19.5%
1954 23.5% 21.6%
1955 28.7% 26.5%
1956 33.9% 26.7%
1957 37.1% 30.1%
1958 38.2% 32.8%
1959 42.6% 37.6%
1960 45.5% 40.0%
1961 48.0% 44.4%
1962 52.5% 49.8%
1963 55.0% 55.0%
1964 58.5% 60.0%
1965 62.5% 64.9%
1966 64.9% 70.0%
1967 66.9% 72.1%
1968 70.7% 77.2%
1969 74.7% 77.9%
1970 76.6% 80.4%
1971 82.0% 87.1%
1972 91.3% 92.0%
1973 91.3% 96.7%
1974 87.0% 93.6%
1975 86.9% 97.9%
1976 89.7% 103.4%
1977 93.2% 105.8%
1978 96.0% 107.8%
1979 93.4% 108.1%
1980 88.6% 106.5%
1981 87.6% 111.0%
1982 87.8% 107.9%
1983 88.3% 114.1%
1984 87.0% 119.7%
1985 86.4% 123.4%
1986 87.3% 128.0%
1987 84.6% 129.1%
1988 83.9% 131.8%
1989 83.7% 133.7%
1990 82.2% 137.0%
1991 81.9% 138.9%
1992 83.1% 147.6%
1993 83.4% 148.4%
1994 83.8% 150.8%
1995 82.7% 150.9%
1996 82.8% 157.0%
1997 84.8% 160.6%
1998 89.2% 165.9%
1999 92.0% 172.8%
2000 93.0% 179.2%
2001 95.7% 183.5%
2002 99.6% 191.4%
2003 101.8% 200.9%
2004 101.1% 209.1%
2005 100.2% 214.5%
2006 100.3% 216.5%
2007 101.8% 218.8%
2008 101.9% 219.4%
2009 109.9% 226.0%
2010 111.8% 235.4%
2011 109.3% 236.7%
2012 107.5% 240.9%
2013 108.9% 243.1%
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Note: From 1948 to 1979, net productivity rose 108.1 percent, and hourly compensation (of production/nonsupervisory workers in the private sector) increased 93.4 percent. From 1979 to 2013, productivity rose 64.9 percent, and hourly compensation rose 8.0 percent.

Note: From 1948 to 1979, net productivity rose 108.1 percent, and hourly compensation (of production/nonsupervisory workers in the private sector) increased 93.4 percent. From 1979 to 2013, productivity rose 64.9 percent, and hourly compensation rose 8.0 percent.

Data are for compensation of production/nonsupervisory workers in the private sector (who make up over 80 percent of the private-sector workforce) and net productivity (growth of output of goods and services less depreciation per hour worked) of the total economy.

Source: EPI analysis of data from the Bureau of Labor Statistics and Bureau of Economic Analysis

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

Source: Hourly compensation is derived from inflating the average wages of production/nonsupervisory workers from Bureau of Labor Statistics (BLS) Current Employment Statistics (specifically the Employment, Hours and Earnings—National database, by a compensation-to-wage ratio. The compensation-to-wage ratio is calculated by dividing the average total compensation (wages and salaries plus benefits) by the average wage and salary accruals of all full- and part-time employees from the Bureau of Economic Analysis (BEA) National Income and Product Accounts (NIPA) interactive tables 2.3.4, 6.2, 6.3, 6.9, 6.10, and 6.11. The 2013 compensation-to-wage ratio used in the calculation of hourly compensation was estimated using the growth rate of the compensation-to-wage ratio from 2012 to 2013 from the BLS Employer Costs for Employee Compensation (ECEC) database. Wage data are adjusted for inflation using the BLS Consumer Price Indexes program's All Urban Consumers: Consumer Price Index (CPI) database. Productivity data are unpublished data from the BLS Labor Productivity and Costs program's Major Sector Productivity and Costs and Industry Productivity and Costs databases.

Updated from Figure A in 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.

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As 2014 comes to a close, there is a growing recognition that the root of rising American inequality is the failure of hourly pay for the vast majority of American workers to keep pace with economy-wide productivity (output produced in an average hour of work). When hourly pay for the vast majority tracked productivity for decades following World War II, the American income distribution was stable and growth broadly shared. Since the late 1970s, the link between typical workers’ pay and productivity has broken down and allowed capital owners (rather than workers) to claim a larger share of income and allowed those at the very top of the pay distribution to claim a larger share of overall wages. This growing “wedge” between typical workers’ pay and productivity is what needs to shrink if we’re to address rising inequality.

3

When it comes to the pace of annual pay increases, the top 1% leaves everybody else in the dust: Cumulative change in real annual wages, by wage group, 1979–2013

Top 1% 95–99% 90–95% Bottom 90% Average
1979 0.0% 0.0% 0.0% 0.0% 0.0%
1980 3.4% -0.2% -1.3% -2.2% -1.4%
1981 3.1% -0.1% -1.1% -2.6% -1.7%
1982 9.5% 2.2% -0.9% -3.9% -1.9%
1983 13.6% 3.6% 0.7% -3.7% -1.1%
1984 20.7% 6.0% 2.5% -1.8% 1.2%
1985 23.0% 8.1% 4.0% -1.0% 2.4%
1986 32.6% 12.5% 6.4% 1.1% 5.3%
1987 53.5% 15.0% 7.4% 2.1% 8.0%
1988 68.7% 18.4% 8.2% 2.2% 9.7%
1989 63.3% 18.2% 8.1% 1.8% 9.0%
1990 64.8% 16.5% 7.1% 1.1% 8.3%
1991 53.6% 15.5% 6.9% 0.0% 6.5%
1992 74.3% 19.2% 9.0% 1.5% 9.8%
1993 67.9% 20.6% 9.2% 0.9% 9.1%
1994 63.4% 21.0% 11.2% 2.0% 9.8%
1995 70.2% 24.1% 12.2% 2.8% 11.3%
1996 79.0% 27.0% 13.6% 4.1% 13.3%
1997 100.6% 32.3% 16.9% 7.0% 18.0%
1998 113.1% 38.2% 21.3% 11.0% 22.9%
1999 129.7% 42.9% 25.0% 13.2% 26.6%
2000 144.8% 48.0% 26.8% 15.3% 29.9%
2001 130.4% 46.4% 29.0% 15.7% 29.3%
2002 109.3% 43.2% 29.0% 15.6% 27.2%
2003 113.9% 44.9% 30.3% 15.7% 28.0%
2004 127.2% 47.1% 30.8% 15.6% 29.2%
2005 135.4% 48.7% 30.8% 15.0% 29.6%
2006 143.4% 52.1% 32.5% 15.7% 31.2%
2007 156.2% 55.4% 34.1% 16.7% 33.4%
2008 137.5% 53.8% 34.2% 16.0% 31.4%
2009 116.2% 53.6% 35.4% 16.0% 29.9%
2010 130.9% 55.7% 35.7% 15.2% 30.8%
2011 134.1% 56.9% 36.3% 14.6% 30.7%
2012 148.4% 58.3% 36.3% 14.7% 32.1%
2013 137.7% 59.5% 37.2% 15.2% 31.9%
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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

Source: EPI analysis of data from “Earnings Inequality and Mobility in the United States: Evidence from Social Security Data Since 1937,” by Wojciech Kopczuk, Emmanuel Saez, and Jae Song, The Quarterly Journal of Economics, February 2010; updated through 2013 with data from the Social Security Administration Wage Statistics database.

Reproduced from Figure F in 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.

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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: the extraordinarily rapid growth of annual wages for the top 1 percent compared with everybody else (and particularly the bottom 90 percent), and the fact that even workers in the 90th to 95th percentiles—a very privileged group in relative terms—only saw their wages grow in line with economy-wide average wage growth. This means that wage growth of workers in the bottom 90 percent of the wage distribution was actually below average.

4

Hourly wage growth is even worse than annual, with full-employment in the late 1990s providing only boost for most: Cumulative change in real hourly wages of all workers, by wage percentile,* 1979–2013

YEAR 95th percentile Average 70th percentile 50th percentile 30th percentile 10th percentile
1979/01/01 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1980/01/01 -1.90% -2.08% -2.50% -1.00% -2.10% -5.50%
1981/01/01 -1.70% -2.84% -3.00% -3.60% -2.70% -4.00%
1982/01/01 0.20% -2.12% -1.90% -2.20% -4.00% -7.70%
1983/01/01 3.40% -2.04% -0.90% -2.70% -5.90% -10.50%
1984/01/01 4.20% -1.58% -1.70% -2.20% -6.60% -12.70%
1985/01/01 6.00% -0.47% -2.30% -1.30% -6.00% -14.10%
1986/01/01 7.60% 1.85% 0.70% 0.50% -3.30% -14.30%
1987/01/01 7.40% 2.70% 0.50% 0.60% -2.90% -14.50%
1988/01/01 10.10% 3.35% 0.90% 0.00% -3.50% -14.50%
1989/01/01 7.50% 0.46% 0.80% -0.60% -4.70% -14.60%
1990/01/01 9.60% 0.04% -0.30% -0.60% -3.70% -13.10%
1991/01/01 10.30% 0.28% -0.70% 0.00% -3.30% -11.50%
1992/01/01 8.50% 0.29% -0.50% 0.80% -4.00% -11.70%
1993/01/01 7.60% 0.90% 0.60% 0.10% -4.00% -12.00%
1994/01/01 13.10% 2.65% 0.40% -1.60% -5.60% -12.90%
1995/01/01 13.20% 2.20% 0.50% -2.40% -5.20% -13.10%
1996/01/01 13.80% 2.23% 0.80% -2.80% -4.20% -13.50%
1997/01/01 15.20% 4.09% 1.10% -0.50% -3.00% -10.60%
1998/01/01 18.00% 7.55% 4.40% 2.30% -0.50% -5.70%
1999/01/01 21.50% 10.15% 6.50% 5.40% 3.00% -4.30%
2000/01/01 25.20% 11.57% 7.60% 5.10% 3.70% -3.40%
2001/01/01 27.70% 13.61% 9.20% 7.40% 6.90% -0.40%
2002/01/01 32.00% 15.37% 10.80% 8.30% 7.80% 0.70%
2003/01/01 30.30% 15.77% 11.20% 9.60% 7.00% 0.30%
2004/01/01 31.60% 15.72% 9.80% 9.60% 5.10% -1.10%
2005/01/01 32.50% 14.91% 9.80% 8.30% 2.90% -2.80%
2006/01/01 33.20% 15.47% 8.40% 8.70% 4.30% -2.20%
2007/01/01 36.10% 16.62% 10.80% 7.80% 4.70% -1.00%
2008/01/01 37.60% 16.87% 10.90% 8.30% 5.40% -1.90%
2009/01/01 39.00% 19.81% 14.10% 10.10% 6.70% -1.10%
2010/01/01 38.70% 19.13% 12.90% 8.60% 4.90% -1.90%
2011/01/01 37.10% 16.36% 10.30% 5.70% 2.70% -4.30%
2012/01/01 39.00% 17.17% 10.50% 5.00% 1.40% -5.90%
2013/01/01 40.60% 17.57% 10.70% 6.10% 0.90% -5.30%

 

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* The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more.

Note: Shaded areas denote recessions.

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

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata from the CPS survey con­ducted by the Bureau of the Census for the Bureau of Labor Statistics [machine-readable microdata file]. Washington, D.C.: U.S. Census Bureau.

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

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Over the entire 34-year period between 1979 and 2013, hourly wages for the bottom 70 percent of American workers grew less than 11 percent. Expressed as an annual average, this comes out to yearly wage growth of 0.3 percent or less. Furthermore, take a look at the late 1990s: Nearly all the wage growth of the bottom 70 percent of wage earners happened in that brief period when labor markets got tight enough—unemployment fell to 4 percent for a two-year spell in 1999 and 2000—to finally deliver across-the-board hourly wage growth.

5

Extreme inequality—CEOs versus the workers they manage: CEO-to-worker compensation ratio, 1965–2013

Year CEO-to-worker compensation ratio
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
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Note: CEO annual compensation is computed using the "options realized" compensation series for CEOs at the top 350 U.S. firms ranked by sales. Typical worker compensation is average compensation of production/nonsupervisory workers in the key industries of the firms included in the sample.

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

The options-realized compensation series includes salary, bonus, restricted stock grants, options exercised, and long-term incentive payouts. Facebook's CEO is excluded from the samples in 2012 and 2013 (the only years for which the firm has been public) because his compensation is such an outlier (compensation of $2.3 billion in 2012 and $3.3 billion in 2013) that including it would have dramatically altered the results.

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

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

Source: EPI analysis of data from Compustat's ExecuComp database; Bureau of Labor Statistics Current Employment Statistics, Employment, Hours and Earnings-National database; and Bureau of Economic Analysis National Income and Product Accounts tables 6.2C, 6.2D, 6.3C, and 6.3D

Reproduced from Figure C in CEO Pay Continues to Rise as Typical Workers Are Paid Less, by Lawrence Mishel and Alyssa Davis, Economic Policy Institute, 2014.

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The most extreme wage disparities are between the heads of large American corporations and typical workers. This figure tracks the ratio of pay of CEOs at the 350 largest public U.S. firms and typical workers in those firms’ industries. In 1965, these CEOs made 20 times what typical workers made. But as of 2013, they make just under 300 times typical workers’ pay.

6

The minimum wage would be over $18 had it risen along with productivity: Real value of the federal minimum wage compared with its value had it grown at the rate of productivity and average hourly wages, 1968–2014

Year Real minimum wage Real minimum wage (projected)  Real hourly wage Real average wages of production, non-supervisory workers (projected)  Productivity  U.S. total economy productivity (projected) 
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 
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Note: Real average hourly wages are of production/nonsupervisory workers  in the private sector, and productivity is net productivity of the total economy.

Note: Real average hourly wages are of production/nonsupervisory workers  in the private sector, and productivity is net productivity of the total economy. 2014 values reflect average of the first half of 2014.

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

Adapted from Figure A in Raising the Federal Minimum Wage to $10.10 Would Save Safety Net Programs Billions and Help Ensure Businesses Are Doing Their Fair Share

Source: Productivity data are unpublished data from the BLS Labor Productivity and Costs program's Major Sector Productivity and Costs and Industry Productivity and Costs databases; wage data come from the BLS Current Employment Statistics program's Employment, Hours and Earnings—National database; Current Population Survey Outgoing Rotation Group microdata from the CPS survey con­ducted by the Bureau of the Census for the Bureau of Labor Statistics;  and U.S. Department of Labor Wage and Hour Division's online chart, “History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938-2009.

Adapted from 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.

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While pay at the top of the labor market has outpaced nearly every labor market indicator for decades, pay at the bottom—the federal minimum wage—has severely lagged most. 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, the federal minimum wage did keep pace with productivity in the 30 years before 1968.

7

When it comes to wages, young college grads are stuck in 1989: Real average hourly wages of young college graduates, 1989–2014

 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
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Note: Data are for college graduates age 21–24 who do not have an advanced degree and are not enrolled in further schooling. Data for 2014 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

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata from the CPS survey con­ducted by the Bureau of the Census for the Bureau of Labor Statistics [machine-readable microdata file]. Washington, D.C.: U.S. Census Bureau.

 

Adapted from Figure N in 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

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The widespread problem of stagnant hourly wages is not simply a problem of insufficiently skilled or educated workers. As this figure shows, a four-year college degree has been no guarantee at all of decent wage growth. In 2013, average real hourly wages of young college graduates were barely higher than in 1989!

8

Wage gap shows how far from full recovery we remain: Cumulative nominal hourly earnings and wage target, January 2007–October 2014

Actual average hourly earnings of all private employees  Hypothetical, assuming 4% growth* 
Jan-2007 $20.6
Feb-2007 20.68
Mar-2007 20.77
Apr-2007 20.83
May-2007 20.88
Jun-2007 21
Jul-2007 21
Aug-2007 21.04
Sep-2007 21.07
Oct-2007 21.11
Nov-2007 21.16
Dec-2007 21.21 $21.21
Jan-2008 21.24 21.27943602
Feb-2008 21.31 21.34909936
Mar-2008 21.4 21.41899075
Apr-2008 21.42 21.48911096
May-2008 21.51 21.55946071
Jun-2008 21.56 21.63004078
Jul-2008 21.63 21.7008519
Aug-2008 21.73 21.77189484
Sep-2008 21.76 21.84317036
Oct-2008 21.81 21.91467922
Nov-2008 21.92 21.98642218
Dec-2008 21.98 22.0584
Jan-2009 21.99 22.13061346
Feb-2009 22.05 22.20306333
Mar-2009 22.08 22.27575038
Apr-2009 22.11 22.34867539
May-2009 22.12 22.42183914
Jun-2009 22.15 22.49524241
Jul-2009 22.19 22.56888598
Aug-2009 22.26 22.64277064
Sep-2009 22.26 22.71689718
Oct-2009 22.32 22.79126639
Nov-2009 22.37 22.86587906
Dec-2009 22.38 22.940736
Jan-2010 22.42 23.015838
Feb-2010 22.45 23.09118586
Mar-2010 22.47 23.1667804
Apr-2010 22.5 23.24262241
May-2010 22.54 23.31871271
Jun-2010 22.54 23.3950521
Jul-2010 22.6 23.47164142
Aug-2010 22.64 23.54848146
Sep-2010 22.68 23.62557306
Oct-2010 22.74 23.70291704
Nov-2010 22.74 23.78051422
Dec-2010 22.77 23.85836544
Jan-2011 22.86 23.93647152
Feb-2011 22.86 24.0148333
Mar-2011 22.88 24.09345161
Apr-2011 22.93 24.17232731
May-2011 23 24.25146121
Jun-2011 23.02 24.33085419
Jul-2011 23.11 24.41050707
Aug-2011 23.08 24.49042072
Sep-2011 23.12 24.57059599
Oct-2011 23.22 24.65103372
Nov-2011 23.2 24.73173479
Dec-2011 23.22 24.81270006
Jan-2012 23.25 24.89393038
Feb-2012 23.3 24.97542663
Mar-2012 23.37 25.05718968
Apr-2012 23.4 25.1392204
May-2012 23.41 25.22151966
Jun-2012 23.47 25.30408836
Jul-2012 23.52 25.38692736
Aug-2012 23.51 25.47003755
Sep-2012 23.58 25.55341983
Oct-2012 23.56 25.63707507
Nov-2012 23.64 25.72100419
Dec-2012 23.71 25.80520806
Jan-2013 23.75 25.8896876
Feb-2013 23.79 25.9744437
Mar-2013 23.81 26.05947727
Apr-2013 23.86 26.14478921
May-2013 23.89 26.23038045
Jun-2013 23.98 26.31625189
Jul-2013 23.97 26.40240445
Aug-2013 24.03 26.48883905
Sep-2013 24.06 26.57555662
Oct-2013 24.09 26.66255808
Nov-2013 24.15 26.74984435
Dec-2013 24.17 26.83741638
Jan-2014 24.22 26.9252751
Feb-2014 24.29 27.01342144
Mar-2014 24.32 27.10185636
Apr-2014 24.33 27.19058078
May-2014 24.38 27.27959567
Jun-2014 24.45 27.36890197
Jul-2014 24.46 27.45850063
Aug-2014 24.54 27.54839261
Sep-2014 24.53 27.63857888
Oct-2014 24.57 27.7290604
Nov-2014 24.66 27.8198381
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Note: The graph depicts the wage target consistent with the Federal Reserve Board's 2% inflation target and 2% labor productivity growth assumption.

Note: The nominal wage target of 4 percent is defined as nominal wage growth consistent with the Federal Reserve’s 2 percent overall price inflation target, 2 percent productivity growth, and a stable labor share of income. As an example, if trend productivity growth is 2 percent, this implies that nominal wage growth of 2 percent puts zero upward pressure on overall prices; while an hour of work has gotten 2 percent more expensive, the same hour produces 2 percent more output, so costs per unit of output are flat. Nominal wage growth of 4 percent with 2 percent trend productivity growth implies that labor costs would be rising 2 percent annually—and if labor costs were stable as a share of overall output, this implies prices overall would be rising at 2 percent, which is the Fed’s price growth target.

Source:  EPI analysis of Bureau of Labor Statistics Current Employment Statistics, public data series.

Reproduced from EPI's Nominal Wage Tracker

Source: EPI analysis of data from Bureau of Labor Statistics (U.S. Department of Labor) Current Employment Statistics program. Various years. Employment, Hours and Earnings—National [database].

Reproduced from EPI's Nominal Wage Tracker

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Despite a falling unemployment rate and a stepped-up pace of job growth in 2014, the economy remains far from fully recovered. This is illustrated by the sharp slowdown in nominal wage growth (wages unadjusted for inflation) that has persisted in the recovery from the Great Recession. Given trend productivity growth (1.5–2 percent) and the Federal Reserve’s 2 percent inflation target, hourly wage growth could be twice as fast—around 4 percent—without spurring inflation. And wages could grow significantly faster than this for an extended period of time—say, 6 percent for six years—before they hit the healthy wage target set by 4 percent growth since 2007.

9

Scars from the Great Recession and slow recovery include falling college enrollment: Share of young high school graduates enrolled in college or a university, by gender, 1989–2014

All Men Women
1989 44.1% 43.4% 44.6%
1990 45.6% 44.9% 46.2%
1991 45.7% 44.8% 46.5%
1992 46.5% 45.3% 47.6%
1993 47.1% 45.5% 48.4%
1994 48.8% 47.1% 50.4%
1995 48.2% 46.8% 49.5%
1996 49.8% 47.5% 51.9%
1997 50.5% 48.6% 52.3%
1998 52.4% 50.1% 54.6%
1999 52.2% 49.7% 54.5%
2000 51.5% 48.4% 54.1%
2001 53.0% 51.3% 54.5%
2002 53.7% 51.6% 55.6%
2003 54.2% 51.2% 56.9%
2004 56.3% 52.8% 59.6%
2005 55.6% 52.6% 58.4%
2006 54.6% 50.9% 58.2%
2007 56.5% 53.1% 59.7%
2008 56.8% 53.5% 60.1%
2009 58.4% 54.9% 61.9%
2010 59.1% 55.4% 62.7%
2011 59.7% 55.9% 63.3%
2012 59.8% 55.6% 63.8%
2013 56.7% 53.0% 60.4%
2013-04-01 56.4% 52.8% 59.9%
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Note: Data are for high school graduates age 17–20 who may have previous college experience. Data for 2014 represent 12-month average from April 2013–March 2014. Shaded areas denote recessions.

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

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

Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata from the CPS survey conducted by the Bureau of the Census for the Bureau of Labor Statistics [machine-readable microdata file]. Washington, D.C.: U.S. Census Bureau.

Reproduced from Figure J in 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

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The damage from our too-slow recovery can extend well into the future. As one example, in 2012 and especially in 2013, college enrollment rates among young adults fell sharply off trend and outright declined. If continuing economic weakness is behind this decline (and there’s plenty of reason to think that it is), this means that the scars of the Great Recession and attendant slow recovery could run deep.

10

Eroding health insurance coverage led to health reform: Share of employed recent high school and college graduates with health insurance provided by their own employer, 1989–2012

High school graduates College 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%
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Note: Coverage is defined as being included in an employer-provided plan where the employer paid for at least some of the coverage. Data are for college graduates age 21–24 who do not have an advanced degree and are not enrolled in further schooling, and high school graduates 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

Source: EPI analysis of Current Population Survey Annual Social and Economic Supplement (CPS ASEC) microdata, Survey conducted by the Bureau of the Census for the Bureau of Labor Statistics [machine-readable microdata file]. Washington, D.C.: U.S. Census Bureau.

Reproduced from Figure O in 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

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The year 2014 saw policy address one aspect of labor market dysfunction—the enormous erosion in employer-sponsored health insurance coverage. Like wage stagnation, this problem was not confined to non-college-educated workers. The share of young college graduates who have employer-sponsored health insurance coverage fell from 60.7 percent in 1989 to 30.9 percent by 2012. For high-school graduates, the decline was even steeper, from 23.5 percent in 1989 to just 6.6 percent in 2012. This rapid unraveling of employer-sponsored insurance, even for recent college graduates, was a key impetus for health reform in 2009, and 2014 was the first year that the coverage provisions went into effect.