Report

The top charts of 2016: 13 charts that show the difference between the economy we have now and the economy we could have

The election of Donald Trump alerted many to what should have been obvious long ago: the U.S. economy has failed to deliver the goods to the vast majority of American families for decades. In the context of Trump’s election, this economic failure was often characterized as being unique to white working-class voters in the upper Midwest. But this is wrong. Income growth has been sluggish, and hourly wage growth near zero, for low- and middle-income families across the board. The fact is, our economy has generated enough income in recent decades to deliver very substantial wage gains for all workers—men and women, people of color and whites. Our economy has the capacity to provide not just decent wages but labor protections that support strong families and policies that provide security in retirement. These charts show the gap between what is and what could be. (For policies to close the gaps, see EPI’s Real agenda for working people.)

The minimum wage would be much higher if it had kept up with a growing economy: The inflation-adjusted minimum wage, and hypothetical minimum wage values if it had grown with average wages and productivity since 1968

1
Actual minimum wage (2016$) Minimum wage if it had grown with average wages Minimum wage if it had grown with productivity
1938  $       3.67
1939  $       4.46
1940  $       4.43
1941  $       4.22
1942  $       3.81
1943  $       3.59
1944  $       3.53
1945  $       4.60
1946  $       4.24
1947  $       3.71
1948  $       3.46 $5.43
1949  $       3.51 $5.52
1950  $       6.49 $5.94
1951  $       6.02 $6.11
1952  $       5.91 $6.28
1953  $       5.86 $6.50
1954  $       5.82 $6.61
1955  $       5.84 $6.87
1956  $       7.67 $6.88
1957  $       7.43 $7.07
1958  $       7.22 $7.22
1959  $       7.17 $7.48
1960  $       7.05 $7.61
1961  $       8.03 $7.84
1962  $       7.95 $8.14
1963  $       8.52 $8.42
1964  $       8.41 $8.69
1965  $       8.28 $8.96
1966  $       8.05 $9.24
1967  $       8.75 $9.35
1968  $ 9.63  $                    9.63 $9.63
1969  $       9.21  $                    9.80 $9.67
1970  $       8.79  $                    9.90 $9.80
1971  $       8.42  $                 10.10 $10.17
1972  $       8.17  $                 10.55 $10.44
1973  $       7.69  $                 10.53 $10.69
1974  $       8.74  $                 10.27 $10.52
1975  $       8.48  $                 10.12 $10.76
1976  $       8.78  $                 10.25 $11.06
1977  $       8.26  $                 10.35 $11.18
1978  $       8.91  $                 10.47 $11.29
1979  $       8.90  $                 10.31 $11.31
1980  $       8.56  $                 10.01 $11.23
1981  $       8.45  $                    9.93 $11.47
1982  $       7.96  $                    9.91 $11.30
1983  $       7.64  $                    9.91 $11.64
1984  $       7.34  $                    9.85 $11.94
1985  $       7.09  $                    9.80 $12.14
1986  $       6.97  $                    9.83 $12.39
1987  $       6.74  $                    9.74 $12.45
1988  $       6.50  $                    9.70 $12.60
1989  $       6.23  $                    9.66 $12.70
1990  $       6.73  $                    9.58 $12.88
1991  $       7.27  $                    9.53 $12.98
1992  $       7.09  $                    9.52 $13.45
1993  $       6.92  $                    9.53 $13.50
1994  $       6.78  $                    9.58 $13.63
1995  $       6.62  $                    9.61 $13.63
1996  $       7.20  $                    9.67 $13.96
1997  $       7.64  $                    9.83 $14.16
1998  $       7.54  $                 10.09 $14.44
1999  $       7.38  $                 10.24 $14.79
2000  $       7.14  $                 10.29 $15.13
2001  $       6.95  $                 10.39 $15.37
2002  $       6.84  $                 10.52 $15.80
2003  $       6.69  $                 10.57 $16.31
2004  $       6.51  $                 10.51 $16.75
2005  $       6.30  $                 10.44 $17.04
2006  $       6.10  $                 10.51 $17.14
2007  $       6.74  $                 10.62 $17.27
2008  $       7.26  $                 10.62 $17.29
2009  $8.07  $                 10.97 $17.65
2010  $       7.94  $                 11.05 $18.17
2011  $       7.70  $                 10.93 $18.19
2012  $       7.54  $                 10.87 $18.29
2013  $       7.43  $                 10.94 $18.31
2014  $       7.31  $                 11.01 $18.42
2015  $       7.30  $                 11.23 $18.48
2016  $7.25  $11.35 $18.85 
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Note: Growth in average wages measures average wages of production/nonsupervisory workers in the private sector.

Inflation measured using the CPI-U-RS and the average of January-June for 2016. Productivity is measured as total economy productivity net depreciation.

Source: Adapted from David Cooper, The federal minimum wage has been eroded by decades of inaction, Economic Policy Institute Snapshot, July 25, 2016

The federal minimum wage is meant to ensure a fair wage for the nation’s lowest-paid workers. But it hasn’t done that since 1968. Since the inception of the federal minimum wage in 1938, Congress has periodically raised it, ostensibly so that its real (inflation-adjusted) value would reflect changing economic circumstances. Before 1968, the real value of the federal minimum wage grew at roughly the same pace as the growth in labor productivity—i.e., the rate at which the average worker can produce income from each hour of work. This makes sense: if the economy as a whole can produce more income per hour of work, it means there is capacity for wages across the distribution to grow at a similar rate. But after 1968, when the real value of the minimum wage in today’s dollars was $9.63, the minimum wage stopped rising at the same pace as productivity. As the top line in the graph shows, had the minimum wage kept pace with rising productivity, it would be nearly $19 per hour today. Not $7.25.

This is only one way in which policymakers have failed to ensure that the lowest-paid Americans get their fair share of economic growth and improving labor productivity. As the middle line in the figure shows, if, since 1968, the minimum wage had even just been raised at the same growth rate as average hourly wages of typical U.S. workers, the minimum wage would be $11.35 today. To sum up, minimum wage workers are falling behind not only productivity growth but typical worker pay growth and pay growth of their 1968 counterparts! And as the next chart shows, typical workers (measured here as the nonsupervisory production workers who constitute roughly 80 percent of all private-sector U.S. workers) themselves are lagging behind highly paid supervisors and executives when it comes to claiming a share of economic growth.

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CEOs make 276 times more than typical workers: CEO-to-worker compensation ratio, 1965–2015

2
Year CEO-to-worker compensation ratio
1965/01/01 20.0
1966/01/01 21.2
1967/01/01 22.4
1968/01/01 23.7
1969/01/01 23.4
1970/01/01 23.2
1971/01/01 22.9
1972/01/01 22.6
1973/01/01 22.3
1974/01/01 23.7
1975/01/01 25.1
1976/01/01 26.6
1977/01/01 28.2
1978/01/01 29.9
1979/01/01 31.8
1980/01/01 33.8
1981/01/01 35.9
1982/01/01 38.2
1983/01/01 40.6
1984/01/01 43.2
1985/01/01 45.9
1986/01/01 48.9
1987/01/01 51.9
1988/01/01 55.2
1989/01/01 58.7
1990/01/01 71.2
1991/01/01 86.2
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
2000/01/01 376.1
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
2007/01/01 345.3
2008/01/01 239.3
2009/01/01 195.8
2010/01/01 229.7
2011/01/01 235.5
2012/01/01 285.3
2013/01/01 303.1
2014/01/01 301.9
2015/01/01 275.6 

 

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Note: CEO annual compensation is computed using the “options realized” compensation series, which includes salary, bonus, restricted stock grants, options exercised, and long-term incentive payouts for CEOs at the top 350 U.S. firms ranked by sales. Typical worker compensation refers to annual compensation of the workers in the key industries of the firms in the sample.

Source: Adapted from Figure C in Lawrence Mishel and Jessica Schieder, Stock market headwinds meant less generous year for some CEOs, Economic Policy Institute Report, July 12, 2016

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

The compensation of the CEOs of the largest firms has grown much faster than stock prices, corporate profits, and the wages of the top 0.1 percent. But the most dramatic difference is between the compensation of CEOs and the compensation of typical workers. From 1978 to 2015, CEO compensation grew 941 percent compared with just 10 percent for the compensation of a typical worker (annual compensation of the workers in the key industries represented by the sample).

The figure illustrates the gap in pay between CEOs and employees by tracking the ratio of CEO compensation to that of the typical worker. CEOs of major U.S. companies earned 20 times more than a typical worker in 1965; this ratio grew to 59-to-1 by 1989, and then it surged in the 1990s, hitting 376-to-1 by the end of the 1990s recovery, in 2000. The two stock market crashes after 2000 reduced CEO stock-related pay and caused CEO compensation to tumble. But by 2014, the stock market had recouped all of the value it lost following the 2008 financial crisis and the CEO-to-worker compensation ratio was back to 302-to-1. A dip in the stock market and the value of associated stock options led to a decline in CEO compensation in 2015 and, correspondingly, the CEO-to-worker pay ratio fell to 276-to-1, similar to what happened in other stock market declines at the start of the new millennium and during the Great Recession. Though the CEO-to-worker compensation ratio remains below the peak values achieved earlier in the 2000s, it is far higher than it was in the previous four decades.

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Boosting productivity is necessary but not sufficient for wage growth: Disconnect between productivity and a typical worker’s compensation, 1948–2015

3
Year Hourly compensation Net productivity
1948  0.00% 0.00%
1949 6.25% 1.55%
1950 10.48% 9.33%
1951 11.75% 12.35%
1952 15.04% 15.63%
1953 20.84% 19.55%
1954 23.52% 21.56%
1955 28.74% 26.46%
1956 33.94% 26.66%
1957 37.14% 30.09%
1958 38.16% 32.78%
1959 42.55% 37.64%
1960 45.49% 40.05%
1961 47.99% 44.36%
1962 52.47% 49.79%
1963 55.02% 55.01%
1964 58.50% 59.99%
1965 62.46% 64.94%
1966 64.89% 70.00%
1967 66.89% 72.05%
1968 70.73% 77.16%
1969 74.66% 77.88%
1970 76.59% 80.37%
1971 82.01% 87.10%
1972 91.24% 92.05%
1973  91.29% 96.75%
1974 86.96% 93.66%
1975 86.84% 97.92%
1976 89.66% 103.44%
1977 93.13% 105.79%
1978 95.96% 107.79%
1979 93.43% 108.14%
1980 88.56% 106.57%
1981 87.59% 111.02%
1982 87.76% 107.88%
1983 88.35% 114.13%
1984 86.94% 119.73%
1985 86.31% 123.43%
1986 87.32% 127.99%
1987 84.59% 129.12%
1988 83.85%  131.78%
1989 83.70% 133.65%
1990 82.22% 136.98%
1991 81.87% 138.89%
1992 83.04% 147.56%
1993 83.38% 148.37%
1994 83.82% 150.75%
1995 82.70% 150.86%
1996 82.79% 156.92%
1997 84.80% 160.50%
1998 89.17% 165.71%
1999 91.92% 172.08%
2000 92.90% 178.50%
2001 95.56% 182.84%  
2002 99.38% 190.72%
2003 101.63% 200.17%
2004 100.84% 208.21%
2005 100.05% 213.58%
2006 100.21% 215.48%
2007 101.70% 217.70%
2008 101.71% 218.24%
2009 109.69% 224.75%
2010 111.53% 234.28%
2011 109.06% 234.67%
2012 107.27% 236.51%
2013 108.32% 237.57%
2014 109.13% 239.30%
2015 112.53% 241.08%
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Note: Data are for average hourly compensation of production/nonsupervisory workers in the private sector and net productivity of the total economy. “Net productivity” is the growth of output of goods and services minus depreciation per hour worked.

Source: Adapted from Figure K in Josh Bivens and Hunter Blair, Financing recovery and fairness by going where the money is, Economic Policy Institute Report, November 15, 2016

Source: Economic Policy Institute analysis of data from the Bureau of Economic Analysis’ National Income and Produce Accounts and the Bureau of Labor Statistics’ Consumer Price Indexes and Labor Productivity and Costs programs (see technical appendix of Understanding the Historic Divergence Between Productivity and a Typical Worker's Pay for more detailed information)

The root cause of the extraordinary rise in inequality and the near-stagnant growth of wages for typical workers over most of the past generation is the pay-productivity gap. Before the late 1970s, wages of the vast majority of workers grew in line with productivity. In the late 1970s, typical worker pay growth split from economy-wide productivity growth. Productivity is a measure of how much income is generated in an average hour of work in the economy. While productivity after 1979 grew more slowly relative to previous decades, it did grow steadily, offering the potential for broad-based wage gains. But income gains were not broad-based. In fact, average pay (wages plus benefits) for the 80 percent of the private-sector workers who are not supervisors barely budged in that time. The growing wedge between productivity and pay is the income generated by workers in the economy that has been claimed by corporate owners and managers and others at the very top of the pay scale.

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Eliminating the gender and inequality wage gaps would raise women’s wages by 69%: Median hourly wages for men and women, compared with wages for all workers had they increased in tandem with productivity, 1979–2015

4
Year Wages for all workers Men’s wages  Women’s wages Wages for all workers had they grown in tandem with productivity
1979 $16.15 $20.30 $12.66 $16.15
1980 $16.07 $19.98 $12.60 $16.03
1981 $15.66 $19.52 $12.53 $16.38
1982 $15.75 $19.30 $12.61 $16.13
1983 $15.71 $19.18 $12.76 $16.62
1984 $15.71 $19.15 $12.93 $17.05
1985 $15.80 $19.10 $12.98 $17.34
1986 $16.27 $19.70 $13.26 $17.70
1987 $16.12 $19.75 $13.64 $17.78
1988 $16.10 $19.23 $13.64 $17.99
1989 $16.06 $18.57 $13.71 $18.13
1990 $15.85 $18.12 $13.62 $18.39
1991 $15.94 $18.06 $13.68 $18.54
1992 $15.98 $18.10 $13.82 $19.21
1993 $16.06 $17.87 $14.02 $19.28
1994 $15.80 $17.67 $13.98 $19.46
1995 $15.58 $17.91 $13.85 $19.47
1996 $15.65 $17.93 $13.87 $19.94
1997 $16.04 $17.85 $14.14 $20.22
1998 $16.49 $18.65 $14.54 $20.62
1999 $16.97 $19.10 $14.73 $21.12
2000 $16.83 $19.20 $15.03 $21.61
2001 $17.27 $19.44 $15.31 $21.95
2002 $17.27 $19.64 $15.72 $22.56
2003 $17.56 $19.35 $15.61 $23.30
2004 $17.55 $19.17 $15.69 $23.92
2005 $17.40 $18.95 $15.63 $24.34
2006 $17.51 $18.91 $15.58 $24.49
2007 $17.21 $19.21 $15.70 $24.66
2008 $17.30 $19.06 $15.85 $24.70
2009 $17.65 $19.75 $16.06  $25.20
2010 $17.40 $19.09 $15.92 $25.94
2011 $16.92 $18.60 $15.74 $25.97
2012 $16.83 $18.59 $15.44 $26.12
2013 $16.95 $18.38 $15.32 $26.20
2014 $16.90 $18.41 $15.14 $26.33
2015 17.11 18.94 15.67 26.47
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Source: Adapted from Figure B in Elise Gould, “A women’s economic agenda for the 45th U.S. president: Investing in the infrastructure to support a 21st century economy,” Working Economics (Economic Policy Institute blog), October 26, 2016. See also What is the gender pay gap and is it real?, Economic Policy Institute report, October 20, 2016

EPI analysis of unpublished Total Economy Productivity data from Bureau of Labor Statistics Labor Productivity and Costs program, wage data from the Current Population Survey Outgoing Rotation Group

Closing the pay-productivity gap must be a part of an agenda to improve women’s economic security. Although the gap between what median men and median women are paid has narrowed (albeit too slowly) since 1979, the gap between typical workers’ compensation and economy-wide productivity growth has widened. Tackling both gaps would also raise the economic security of men. One example of why the pay-productivity gap needs to inform our thinking about progress in closing gender pay gaps is the fact that roughly a third of the progress made in closing the median gender wage gap since 1979 was due to the decline in men’s wages in an era of increasing inequality. Remedying unfairness of pay for women is necessary, but wage parity gained simply because male wages dropped is no cause for celebration.

The figure shows how high median wages for women could be if gender wage disparities had been closed between 1979 and today and if the economy had generated wage growth for all workers that matched economy-wide productivity growth. If the gender wage gap were closed and the economy’s gains broadly shared, women’s median hourly wages would be 69 percent higher today ($26.47 instead of $15.67). Notably, men’s median hourly wages would also be 40 percent higher. (To see how these differences compare for age and education cohorts, check out EPI’s new gender wage calculator.) These figures show that getting to gender pay equity is not a zero-sum game—if we also tackle inequality, typical men and women have much to gain.

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Though all workers’ wages have failed to rise in tandem with productivity, black men have suffered most: Hourly median wage growth by gender, race, and ethnicity, compared with economy-wide productivity growth, 1979–2014

5
Year White men White women Black men  Black women  Productivity
1979 0.0% 0.0% 0.0% 0.0% 0.0%
1980 -2.1% -0.2% -2.0% -1.9% -0.8%
1981 -3.8% -1.6% -3.3% 0.0% 1.4%
1982 -3.9% -0.6% -7.1% -0.8% -0.1%
1983 -5.1% 0.5% -6.6% -1.2% 2.9%
1984 -5.5% 1.0% -5.9% -1.2% 5.6%
1985 -2.6% 1.5% -8.2% 1.4% 7.3%
1986 -2.4% 5.4% -4.5% 3.0% 9.5%
1987 -4.1% 7.8% -5.6% 3.0% 10.1%
1988 -4.5% 8.8% -5.0% 4.0% 11.4%
1989 -5.3% 9.0% -8.9% 6.0% 12.3%
1990 -7.0% 8.9% -9.9% 4.8% 13.9%
1991 -6.6% 9.4% -11.2% 5.3% 14.8%
1992 -7.2% 10.7% -11.8% 5.8% 18.9%
1993 -8.0% 12.1% -11.6% 7.0% 19.3%
1994 -9.0% 12.0% -11.6% 5.2% 20.5%
1995 -8.8% 11.7% -11.3% 4.5% 20.5%
1996 -8.5% 13.9% -12.4% 4.5% 23.4%
1997 -6.3% 14.7% -9.8% 5.6% 25.2%
1998 -3.2% 17.7% -6.9% 11.2% 27.7%
1999 -0.8% 21.2% -3.0% 11.4% 30.7%
2000 -1.1% 21.9% -3.4% 16.1% 33.8%
2001 0.7% 25.6% -0.5% 15.1% 35.9%
2002 0.9% 28.4% -0.3% 18.0% 39.7%
2003 2.6% 29.6% -0.9% 21.4% 44.2%
2004 1.8% 29.3% 1.0% 22.9% 48.1%
2005 0.0% 30.0% -4.7% 15.4% 50.7%
2006 0.0% 30.0% -1.9% 19.6% 51.6%
2007 1.3% 30.5% -3.0% 18.2% 52.7%
2008 0.0% 29.6% -3.1% 16.0% 53.0%
2009 3.6% 31.5% 0.0% 20.8% 56.1%
2010 1.8% 31.6% -1.9% 20.2% 60.7%
2011 -1.4% 30.3% -5.5% 16.9% 60.9%
2012 -2.2% 29.2% -5.9% 14.0% 61.7%
2013 -3.1% 30.6% -4.9% 15.9% 61.9%
2014 -3.1% 30.2% -7.2% 12.8% 62.7%

 

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Note: Race/ethnicity categories are mutually exclusive (i.e., white non-Hispanic, black non-Hispanic, and Hispanic any race).

Source: Adapted from Figure A in Valerie Wilson, Black workers’ wages have been harmed by both widening racial wage gaps and the widening productivity-pay gap, Economic Policy Institute Report, October 25, 2016

In the wake of Trump’s election, some commentators have focused on the economic failures afflicting white working-class men. White working-class men are suffering, but they are not the only group suffering from the chasm between what the economy can provide and what it is providing, and their loss has not translated into gains made by typical workers of other races. In fact, wage gaps between workers of different races have widened at the same time that economy-wide productivity and wages for typical workers overall have diverged. In short, what has caused sluggish wage growth for the vast majority of all workers is the rise of inequality that has redistributed income toward the very top of the income distribution.

The figure shows that between 1979 and 2015, median hourly real wage growth fell far short of productivity growth—a measure of the potential for pay increases—for men as well as for women and for both black and white workers. And white workers are not losing income to their black counterparts. Median hourly wages of black men fell 5.7 percent, compared with a 1.0 percent decline for white men. Median hourly wages of white women grew 31.6 percent, compared with 15.2 percent for black women.

What this figure does not show is that black workers already start out with a big pay disparity. In 2015, black workers overall were paid 26.2 percent less than their white peers. What has this double penalty of overall wage stagnation and regress on racial pay disparities cost black workers? Quite a lot, according to a 2016 report by Valerie Wilson. If the 1979 racial wage gap at the median had closed by 2015 and the overall median had grown with productivity (63.9 percent) between 1979 and 2015, the median black worker would be earning an hourly wage of $26.47 instead of $14.14—an increase of $12.33. That means the hourly wage of the median black worker would be an astounding 87.2 percent higher! And under this scenario, the median white worker would also receive an hourly pay increase of $7.30—the difference between $26.47 and $19.17—boosting their wages by 38.1 percent. The vast majority of workers of all races would be better off if we addressed both class and racial inequalities, with larger gains for African Americans because of the dual penalties imposed by class and race.

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Drop in union membership has taken $14 to $52 out of nonunion workers’ weekly wages: Additional weekly wages that nonunion private-sector workers would earn, had the share of workers in a union (union density) remained the same as in 1979, 1979–2013 (2013 dollars)

6
Year Men Women
1979 0.00 0.00
1980 4.55 1.81
1981 7.34 2.50
1983 16.93 4.77
1984 22.11 6.18
1985 25.90 7.39
1986 28.29 8.14
1987 29.63 8.60
1988 31.24 9.19
1989 32.36 9.76
1990 33.57 10.07
1991 33.57 10.27
1992 33.58 10.57
1993 34.83 10.89
1995 38.96 11.74
1996 38.38 11.62
1997 40.31 12.33
1998 42.69 12.74
1999 43.50 12.84
2000 45.00 13.41
2001 46.29 13.48
2002 48.02 13.76
2003 49.62 13.91
2004 49.55 13.63
2005 50.49 13.89
2006 51.14 13.86
2007 51.98 14.09
2008 50.01 13.48
2009 50.07 12.87
2010 49.09 12.63
2011 50.08 13.48
2012 52.48 13.80
2013 $52.39 $13.80 
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Notes: Sample restricted to nonunion full-time workers in the private sector ages 16 to 64.

Source: Adapted from Figure C in Jake Rosenfeld, Patrick Denice, and Jennifer Laird, Union decline lowers wages of nonunion workers, Economic Policy Institute Report, August 30, 2016

All workers would be better off in terms of wage levels had the right of workers to associate and bargain collectively not been severely eroded in recent decades. Between 1979 and 2013, the share of private-sector workers in a union fell from about 34 percent to 10 percent among men, and from 16 percent to 6 percent among women. This decline in union density has eroded wages for nonunion workers at every level of education and experience, costing billions in lost wages. For the 32.9 million full-time nonunion women working in the private sector and the 40.2 million full-time men working in the private sector, there is a $133 billion loss in annual wages because of weakened unions. This translates to real weekly wage losses for workers. Women would be making $13.80 more a week and men would be making $52.39 more a week, had union density (the share of workers in similar industries and regions who are union members) remained the same as in 1979.

Unions keep wages high for nonunion workers for several reasons. Union agreements set wage standards that nonunion employers follow. And a strong union presence prompts managers to keep wages high to prevent workers from organizing or leaving. Unions also set industry-wide norms, influencing what is seen as a “moral economy.”

Though not shown in the graph, working-class men have felt the decline in unionization the hardest. Specifically, nonunion men lacking a college degree would have earned 8 percent, or $3,016, more in 2013 if unions had remained as strong as they were in 1979.

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Yet another data source documents the enormous surge in American inequality: Post-tax-and-transfer household income growth from the distributional national accounts data, by income percentile

7
Bottom 90 Bottom 50 Next 40 91-95th 96-99th 99-99.9th Top 0.1
1913 23.7327 33.65331 29.93943 43.27823 75.47623
1914 21.28975 30.44152 27.42943 38.72785 70.84473
1915 22.01303 31.29446 27.63197 33.98987 76.78276
1916 24.03428 35.05713 32.63794 45.75293 95.50515
1917 23.36389 37.55653 35.58478 48.98219 70.30063
1918 25.99977 37.45943 39.75538 51.13678 45.59054
1919 23.7557 29.73864 37.5025 55.97586 66.42215
1920 23.91308 30.49568 36.39877 52.00038 52.00913
1921 20.40423 33.57089 35.97857 46.24904 43.86804
1922 22.56271 35.35251 38.48873 48.60645 46.79869
1923 26.62762 36.18494 40.41201 51.57063 52.83884
1924 25.3325 37.78878 41.67534 53.30806 55.98231
1925 25.04011 35.89191 43.1564 60.36712 66.94126
1926 26.0494 35.2388 44.31057 65.07314 80.33322
1927 25.88253 35.26906 43.68758 62.20689 72.31164
1928 25.59061 36.8098 44.30285 63.26883 81.19631
1929 27.59766 36.22686 45.13929 63.97269 84.32806
1930 25.69753 36.78869 41.43329 53.91076 50.41799
1931 23.58497 37.6386 38.18021 42.38411 23.40733
1932 19.5378 33.37675 36.22934 33.874 12.42559
1933 18.8133 29.89834 35.59108 34.83715 16.7181
1934 20.12877 31.87053 41.05316 44.31979 30.83398
1935 22.40259 36.77853 41.38343 48.20434 35.22401
1936 24.67013 40.19861 42.85473 57.50882 45.48423
1937 26.43228 41.65951 44.5373 62.14962 50.66807
1938 24.79725 42.58223 43.10907 53.47296 34.3556
1939 25.55145 44.95177 46.81794 61.79799 46.51512
1940 27.62901 47.54603 48.92943 67.68232 61.10282
1941 33.88191 54.39828 53.65169 79.19836 73.09964
1942 43.29914 63.3563 55.50446 81.06559 73.31078
1943 52.80965 69.71679 58.40494 83.07906 70.12778
1944 54.60111 83.20119 61.25023 73.92529 58.40418
1945 54.2032 73.59434 58.5029 67.72197 42.88401
1946 47.1023 54.98784 55.75051 65.37271 42.55941
1947 45.61777 51.27523 52.65075 64.54918 52.81662
1948 46.27771 55.32878 56.69584 73.94818 67.30207
1949 44.85111 55.47728 53.61912 68.53701 64.51888
1950 48.95762 59.82028 58.26081 76.67206 69.6535
1951 53.13092 63.30267 61.1851 79.11648 66.05985
1952 55.543 63.20365 60.6588 75.66076 67.4788
1953 58.13027 66.00397 60.82156 74.12246 62.29707
1954 56.74598 64.72895 59.72348 73.76929 61.18403
1955 60.45715 66.59386 64.45841 81.47777 74.45941
1956 62.6146 66.07277 65.53554 78.24851 69.06196
1957 63.07287 64.54181 65.75526 77.86183 67.29979
1958 61.44245 65.657 65.02915 72.07397 56.18065
1959 65.02998 68.06952 68.14701 78.90449 69.33398
1960 66.89607 68.68847 68.1266 76.77248 69.91774
1961 67.78351 69.65426 70.63115 75.09075 67.87351
1962 70.4927 63.64325 74.46108 73.76656 75.63827 80.53871 77.82573
1963 72.34403 64.45871 76.91257 77.00796 79.27725 84.17178 83.4488
1964 74.78534 65.27417 80.29585 80.97379 83.68492 88.60585 90.01243
1965 78.97684 70.13567 84.09917 84.71663 87.38434 91.63466 93.81867
1966 83.00219 74.99717 87.64008 88.19319 90.8142 94.28764 97.31097
1967 85.64931 80.78541 88.46732 87.65472 88.85984 92.36706 88.88887
1968 89.01593 85.16668 91.24607 89.55186 89.20251 91.6852 88.51358
1969 91.25928 88.4355 92.8953 90.5163 88.4021 88.0171 83.84223
1970 89.31669 87.15028 90.57185 88.66994 86.42245 85.17894 75.69672
1971 89.55088 87.09922 90.9713 89.31088 87.57022 86.35819 76.34119
1972 92.38655 90.03742 93.74757 92.96691 92.13266 90.75359 79.82626
1973 96.11671 94.64942 96.96682 96.91853 96.75554 95.51017 81.34194
1974 94.02037 93.52424 94.30781 93.87008 92.52697 90.70497 76.23273
1975 91.01398 90.52585 91.29679 90.96083 89.50955 87.40869 74.26816
1976 94.35718 94.2051 94.44529 94.31208 92.73313 90.32411 76.67994
1977 96.81916 96.52656 96.98868 97.28635 96.48129 94.6759 82.49974
1978 99.88037 99.34863 100.1884 100.8638 100.2407 98.91114 90.22779
1979 100 100 100 100 100 100 100
1980 98.26488 97.61414 98.64191 97.76216 94.80523 93.1143 86.91483
1981 97.68509 96.23014 98.52805 98.91017 97.19851 98.64778 100.612
1982 94.07145 90.60212 96.08148 96.72842 94.56753 95.22981 101.7506
1983 94.64854 88.9539 97.94785 100.3394 97.77981 101.0831 103.9856
1984 98.68139 91.5108 102.8358 107.8385 107.5276 116.219 131.004
1985 100.8055 93.33651 105.1329 109.655 108.4626 118.0252 130.057
1986 102.7875 94.35348 107.6739 111.2332 109.3253 116.9127 110.9831
1987 104.7421 96.2283 109.6748 111.9271 112.8364 128.7529 134.6872
1988 106.8402 97.96563 111.982 115.4286 118.3864 143.0172 175.9767
1989 108.8137 100.2283 113.7879 116.895 119.2596 144.3395 165.6537
1990 108.8275 100.2639 113.789 116.7634 118.5356 144.6014 165.7722
1991 106.9756 98.14099 112.0942 115.7375 118.7417 137.8344 148.6849
1992 107.6168 97.72335 113.3488 117.3251 122.0337 147.7052 168.7361
1993 109.3271 99.80908 114.8416 119.6654 123.0398 142.693 159.3989
1994 112.7897 102.5032 118.7495 124.494 127.9362 146.7308 162.0879
1995 114.2954 103.2037 120.7217 127.2814 132.2493 154.3844 173.5347
1996 116.8251 105.3766 123.458 131.5369 138.125 162.6432 189.7594
1997 120.0619 107.7359 127.2032 136.0553 143.8332 171.3382 212.6514
1998 124.279 111.47 131.7001 140.7231 150.4667 182.4624 217.8013
1999 127.0094 113.8701 134.6219 144.6325 154.4141 192.1739 242.2452
2000 130.2871 116.1185 138.496 149.5242 160.0374 201.6449 262.2195
2001 130.563 116.4413 138.7448 149.1107 157.6435 196.2731 255.3759
2002 129.6873 115.0149 138.188 148.5807 158.6449 198.1229 258.2305
2003 130.7376 114.3935 140.2069 151.4572 159.7162 200.1824 268.4298
2004 133.1071 116.6533 142.6401 154.2173 164.2175 211.3237 298.3971
2005 135.1675 118.907 144.5884 157.2676 168.406 216.9945 327.02
2006 137.0963 120.5917 146.6586 160.8505 174.6956 230.622 345.1448
2007 136.5364 121.2232 145.4084 159.4222 171.626 221.0781 328.095
2008 134.4407 120.4954 142.5202 153.4786 163.4876 212.8995 330.0312
2009 128.613 111.9696 138.2557 148.2443 155.5828 195.6494 318.9889
2010 129.7716 114.2373 138.7717 150.9138 159.7115 205.1275 356.6267
2011 131.4316 114.5713 141.2 154.8323 165.0593 213.0578 348.0072
2012 132.2085 113.8685 142.8342 159.1319 171.7283 226.6272 380.3506
2013 134.7136 116.3695 145.3417 161.0668 174.0647 219.045 330.5724
2014 136.7039 118.4258 147.2938 164.6328 178.6594 227.4947 346.8308
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Source: Data are from a new data set compiled by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman.

A new data set confirms what we know about the enormous increase in income inequality after 1979. This data set allows us to take another cut at this issue, with all of total national income and its distribution accounted for—market-based incomes like wages and dividends, transfer incomes like Social Security and Medicare, and even the income stemming from direct government purchases. The figure charts incomes (indexed to be 100 in 1979) for the bottom 50 percent of households, bottom 90 percent of households, households between the 50th and 90th percentiles, households in subgroups of the top 10 percent, and the top 0.1 percent of households. The results are clear: households nearer the top of the income distribution have seen far more rapid growth in recent decades. And counting income in the form of government benefits does not close the gap between income growth at the top and the income growth of everybody else.

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The gap between the retirement ‘haves’ and ‘have-nots’ has grown since the recession: Retirement account savings of families age 32–61 by savings percentile, 1989–2013 (2013 dollars)

8
50th (median) 60th 70th 80th 90th
1989 $0 $5,423 $14,461 $32,536 $90,379
1992 $0 $4,874 $16,248 $39,384 $90,987
1995 $2,277 $9,866 $24,286 $47,054 $113,841
1998 $6,004 $17,440 $38,597 $73,763 $160,106
2001 $7,879 $23,638 $48,326 $92,818 $223,247
2004 $6,166 $19,730 $49,326 $102,351 $246,628
2007 $11,228 $30,315 $61,754 $123,508 $258,243
2010 $5,358 $19,291 $42,868 $96,453 $246,490
2013 $5,000 $20,100  $50,000  $116,000  $274,000 
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Note: Retirement account savings include 401(k)s, IRAs, and Keogh plans. Scale changed to accommodate larger values.

Source: Adapted from Figure 9 in Monique Morrissey, The State of American Retirement:
How 401(k)s have failed most American workers, Economic Policy Institute Report, March 3, 2016

Over the past generation of economic life, the U.S. economy undertook a grand experiment in making defined-contribution (DC) pension plans such as 401(k)s, often financed directly by workers’ savings themselves, the primary vehicle of private retirement security. This experiment has decisively failed. Overall pension coverage has not increased, and fewer Americans are in defined-benefit (DB) plans (think company pensions). The DB plans crowded out by DC plans were more secure, providing a guaranteed income for life that was not subject to the vagaries of the stock market. They were also much more equal than DC plans because they were employer-funded and participation was automatic (rather than workers bearing most of the costs and all of the risks).

Nearly half of working-age families have nothing saved in retirement accounts, and the median working-age family had only $5,000 saved in 2013. Meanwhile, families in the 90th percentile of retirement savings had $274,000 in retirement, and the top 1 percent of families had $1,080,000 or more (not shown on chart). These huge disparities reflect a growing gap between the haves and the have-nots since the Great Recession, as accounts with smaller balances have stagnated while larger ones have rebounded.

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Fiscal austerity explains why recovery has been so long in coming: Change in per capita government spending during recoveries of the last four recessions

9
1982Q4 1991Q1 2001Q4 2009Q2
-6 90.83817
-5 96.46779 91.33168
-4 96.72548 97.80345
-3 96.51523 96.35624 94.05089
-2 97.21731 98.09825 98.14218 94.4813
-1 98.26435 98.92533 97.98324 96.68474
100 100 100 100
1 100.3829 100.7468 101.5275 99.84022
2 100.9558 100.4456 102.3723 99.50632
3 101.005 100.9653 102.8023 100.7222
4 99.79553 102.3054 103.3013 101.0192
5 100.4771 102.4831 103.1351 101.1242
6 101.715 102.7714 104.3665 100.3432
7 102.037 102.2554 104.5556 98.88213
8 103.485 101.9195 104.6451 98.15822
9 104.602 101.724 105.4192 97.23836
10 106.0107 102.011 105.8382 96.86414
11 107.6073 101.868 105.804 95.9267
12 107.6288 101.2959 105.4445 95.78736
13 108.7749 101.4328 106.1767 95.40735
14 110.4932 102.1325 106.3521 94.83589
15 112.3029 101.9209 106.5289 94.21625
16 111.6476 102.6275 106.0185 93.90439
17 112.0741 102.8173 107.5423 93.62299
18 112.6221 102.3836 107.6773 93.04895
19 112.3952 101.1486  107.8776 93.22292
20 113.0807 101.9359 108.2144 93.60604
21 113.3476 103.2437 109.1187  94.245
22 113.3408 102.7047 109.0787 94.14226
23 113.108  102.7598 109.5846 95.09063
24 114.405 103.1194 109.8789 95.43504
25 114.9973 103.4402 95.722
26 116.1049 103.3562 95.86387
27 116.8758 103.2392 96.35498

 

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Note: For total government spending, government consumption and investment expenditures are deflated with the NIPA price deflator. Government transfer payments are deflated with the price deflator for personal consumption expenditures. This figure includes state and local government spending.

Source: Adapted from Figure B in Josh Bivens, Why is recovery taking so long—and who’s to blame?, Economic Policy Institute Report, August 11, 2016

The agonizingly slow pace of recovery from the Great Recession is easy to explain: it is the result of austerity policies championed by Republican policymakers at the federal and state levels. Like every other postwar recession before it, the Great Recession was caused by a shortfall in aggregate demand, meaning that the spending of households, businesses, and governments was not sufficient to keep the economy’s resources fully employed.

Despite the Great Recession being the sharpest and longest on record since World War II, and despite monetary policy reaching its conventional limits to boost spending early in the recession, policymakers made damaging decisions to limit public spending following the recession’s trough in 2009. This growth has been historically slow relative to other business cycles even as the economy needed substantially faster-than-average growth to mount a full and timely recovery.

The figure shows the growth in per capita spending by federal, state, and local governments following the troughs of the four recessions. Astoundingly, per capita government spending in the first quarter of 2016—27 quarters into the recovery—was nearly 3.5 percent lower than it was at the trough of the Great Recession. By contrast, 27 quarters into the early 1990s recovery, per capita government spending was 3 percent higher than at the trough; 23 quarters following the early 2000s recession (a shorter recovery), it was 10 percent higher; and 27 quarters into the early 1980s recovery, it was 17 percent higher.

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Nominal wage growth shows economy is not overheating: Year-over-year change in private-sector nominal average hourly earnings, 2007–2016

10
All nonfarm employees Production/nonsupervisory workers
Mar-2007 3.59% 4.11%
Apr-2007 3.27% 3.85%
May-2007 3.73% 4.14%
Jun-2007 3.81% 4.13%
Jul-2007 3.45% 4.05%
Aug-2007 3.49% 4.04%
Sep-2007 3.28% 4.15%
Oct-2007 3.28% 3.78%
Nov-2007 3.27% 3.89%
Dec-2007 3.16% 3.81%
Jan-2008 3.11% 3.86%
Feb-2008 3.09% 3.73%
Mar-2008 3.08% 3.77%
Apr-2008 2.88% 3.70%
May-2008 3.02% 3.69%
Jun-2008 2.67% 3.62%
Jul-2008 3.00% 3.72%
Aug-2008 3.33% 3.83%
Sep-2008 3.23% 3.64%
Oct-2008 3.32% 3.92%
Nov-2008 3.64% 3.85%
Dec-2008 3.58% 3.84%
Jan-2009 3.58% 3.72%
Feb-2009 3.24% 3.65%
Mar-2009 3.13% 3.53%
Apr-2009 3.22% 3.29%
May-2009 2.84% 3.06%
Jun-2009 2.78% 2.94%
Jul-2009 2.59% 2.71%
Aug-2009 2.39% 2.64%
Sep-2009 2.34% 2.75%
Oct-2009 2.34% 2.63%
Nov-2009 2.05% 2.67%
Dec-2009 1.82% 2.50%
Jan-2010 1.95% 2.61%
Feb-2010 2.00% 2.49%
Mar-2010 1.77% 2.27%
Apr-2010 1.81% 2.43%
May-2010 1.94% 2.59%
Jun-2010 1.71% 2.53%
Jul-2010 1.85% 2.47%
Aug-2010 1.75% 2.41%
Sep-2010 1.84% 2.30%
Oct-2010 1.88% 2.51%
Nov-2010 1.65% 2.23%
Dec-2010 1.74% 2.07%
Jan-2011 1.92% 2.17%
Feb-2011 1.87% 2.12%
Mar-2011 1.87% 2.06%
Apr-2011 1.91% 2.11%
May-2011 2.00% 2.16%
Jun-2011 2.13% 2.00%
Jul-2011 2.26% 2.31%
Aug-2011 1.90% 1.99%
Sep-2011 1.94% 1.93%
Oct-2011 2.11% 1.77%
Nov-2011 2.02% 1.77%
Dec-2011 1.98% 1.77%
Jan-2012 1.75% 1.40%
Feb-2012 1.88% 1.45%
Mar-2012 2.10% 1.76%
Apr-2012 2.01% 1.76%
May-2012 1.83% 1.39%
Jun-2012 1.95% 1.54%
Jul-2012 1.77% 1.33%
Aug-2012 1.82% 1.33%
Sep-2012 1.99% 1.44%
Oct-2012 1.51% 1.28%
Nov-2012 1.90% 1.43%
Dec-2012 2.20% 1.74%
Jan-2013 2.15% 1.89%
Feb-2013 2.10% 2.04%
Mar-2013 1.93% 1.88%
Apr-2013 2.01% 1.73%
May-2013 2.01% 1.88%
Jun-2013 2.13% 2.03%
Jul-2013 1.91% 1.92%
Aug-2013 2.26% 2.18%
Sep-2013 2.04% 2.17%
Oct-2013 2.25% 2.27%
Nov-2013 2.24% 2.32%
Dec-2013 1.90% 2.16%
Jan-2014 1.94% 2.31%
Feb-2014 2.14% 2.45%
Mar-2014 2.18% 2.40%
Apr-2014 1.97% 2.40%
May-2014 2.13% 2.44%
Jun-2014 2.04% 2.34%
Jul-2014 2.09% 2.43%
Aug-2014 2.21% 2.48%
Sep-2014 2.04% 2.27%
Oct-2014 2.03% 2.27%
Nov-2014 2.11% 2.26%
Dec-2014 1.82% 1.87%
Jan-2015 2.23% 2.01%
Feb-2015 2.06% 1.71%
Mar-2015 2.18% 1.90%
Apr-2015 2.34% 2.00%
May-2015 2.34% 2.14%
Jun-2015 2.04% 1.99%
Jul-2015 2.29% 2.04%
Aug-2015 2.32% 2.08%
Sep-2015 2.40% 2.13%
Oct-2015 2.52% 2.36%
Nov-2015 2.39% 2.21%
Dec-2015 2.60% 2.61%
Jan-2016 2.50% 2.50%
Feb-2016 2.38% 2.50%
Mar-2016 2.33% 2.44%
Apr-2016 2.49% 2.53%
May-2016 2.48% 2.33%
Jun-2016 2.64% 2.48%
Jul-2016 2.72% 2.57%
Aug-2016 2.47% 2.42%
Sep-2016 2.67% 2.60%
Oct-2016 2.82% 2.36%
Nov-2016 2.45% 2.36%
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*Nominal wage growth consistent with the Federal Reserve Board’s 2 percent inflation target, 1.5 percent productivity growth, and a stable labor share of income.

Source: Adapted from EPI’s “Nominal Wage Tracker

The year 2017 looks to be the year that the Fed begins raising short-term interest rates in earnest. The Fed should raise rates only when it fears the economy is growing too fast and pushing unemployment low enough that workers are empowered to demand (and get) raises above what their productivity justifies. Data on nominal wage growth show that the economy is not getting overheated and thus a rate increase is not justified.

The pace of economic growth should be considered unsustainable only when increases in labor costs force firms to raise prices enough to accelerate inflation above the Federal Reserve’s stated goal of 2 percent inflation. An absolutely crucial link in this chain is wage growth. If nominal (i.e., not inflation-adjusted) wages simply grow at the rate of economy-wide productivity, then wages are putting no upward pressure on prices. To see why, think of a 2 percent raise in hourly pay of a worker whose productivity (how much they produce in an hour) also rises 2 percent. The worker is getting 2 percent more, but is also producing 2 percent more. So the labor cost per unit of output is unchanged, and there is zero upward pressure on firms’ costs, or overall inflation. And the goal of Federal Reserve policy is not zero upward pressure on prices (or 0 percent inflation). Their stated target is 2 percent inflation. This means that nominal wages can grow at the rate of economy-wide productivity growth plus 2 percent before they are putting enough upward pressure on prices to make the Fed rein them in. EPI’s nominal wage tracker looks are how wages have grown over this recovery relative to a target of 1.5 percent (a common estimate of long-run, trend productivity growth) plus 2 percent. Nominal wage growth has been consistently below this target, meaning there is very little reason to worry about overheating in the economy.

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The U.S. has a lower share of prime-age women with a job than do peer countries: Employment-to-population ratio of women workers age 25–54, select countries, 1995–2014

11
Canada Germany Japan United States
1995 69.434551% 66.360158% 63.233624% 72.189196%
1996 69.577146% 67.220440% 63.701741% 72.770073%
1997 70.971110% 67.399584% 64.566038% 73.541046%
1998 72.183646% 68.944387% 64.036077% 73.642970%
1999 73.245982% 70.253128% 63.551051% 74.147991%
2000 73.944309% 71.210539% 63.582090% 74.213847%
2001 74.297867% 71.607431% 64.124398% 73.421299%
2002 75.348504% 71.845950% 63.863976% 72.259684%
2003 76.000458% 71.981067% 64.407421% 72.006189%
2004 76.720415% 72.129055% 65.028791% 71.848458%
2005 76.488663% 70.969949% 65.733178% 71.963537%
2006 76.984912% 72.647765% 66.614235% 72.504467%
2007 78.190906% 74.045933% 67.370518% 72.501768%
2008 78.008148% 74.744854% 67.495987% 72.301570%
2009 77.114622% 75.420875% 67.595960% 70.208609%
2010 77.075022% 76.320711% 68.157788% 69.343654%
2011 77.207691% 77.892216% 68.459240% 68.967922%
2012 77.710148% 78.235789% 69.161920% 69.196894%
2013 78.090883% 78.625264% 70.773639% 69.253713%
2014 77.444969% 78.839200% 71.835052% 69.997790%
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Source: Adapted from Figure F in Josh Bivens et al., It’s time for an ambitious national investment in America’s children, Economic Policy Institute Report, April 6, 2016

Reducing gender and inequality wage gaps and lowering unemployment enough to spur sustainable wage growth are absolutely essential steps if we are serious about restoring economic security to millions of working families. But a working labor market requires more than just jobs and wages. It requires a policy infrastructure that enables workers to enter the labor market and be productive in their roles as employees because they don’t have to make difficult choices between their careers and their caregiving responsibilities.

Paid family leave and subsidized child care provide family security, which benefits employers and the economy. But there are currently no national standards regarding paid family leave or subsidized child care. Each worker is left to the whims of individual company policies, which often means no allowance or support for family leave or child care. Therefore, workers have to make difficult choices between their careers and their caregiving responsibilities precisely when they need their paychecks the most, such as following the birth of a child or when they or a loved one falls ill. The lack of these policies particularly affects women, as they currently take on the lion’s share of unpaid care work. In contrast, many of our peer nations have such policies. Not surprisingly, the United States has fallen far behind some of our international peers in the share of women who are working. The graph shows the share of women age 25–54 with a job between 1995 and 2014. While the share of prime-age women with a job rose in Germany, Canada, and Japan, in the United States it actually fell. Policies that help workers, particularly women, balance work and family could meaningfully increase women’s employment, which would also mean more earnings for families and more economic activity for the country. (See EPI’s latest investigation into child care for how progressive child care policy, in particular, can benefit families, reduce inequality, and increase economic growth.)

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The number of salaried workers guaranteed overtime pay has plummeted since 1979: Number of salaried workers* covered by overtime salary threshold, 1979–2014 (in millions)

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Year Number of salaried workers* covered
1979 12.6
1980 10.8
1981 8.9
1982 7.4
1983 6.5
1984 5.8
1985 5.1
1986 4.5
1987 3.8
1988 3.5
1989 3.4
1990 3.0
1991 2.4
1992 2.2
1993 2.1
1994 2.5
1995 2.3
1996 2.2
1997 2.0
1998 1.9
1999 1.6
2000 1.5
2001 1.3
2002 1.2
2003 1.1
2004 5.5
2005 5.5
2006 4.9
2007 4.8
2008 4.4
2009 3.9
2010 3.8
2011 3.8
2012 3.7
2013 3.6
2014 3.5
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* The sample included salaried (nonhourly), full-time workers who are 18 years or older. It excluded teachers (pre-K through college) and religious workers, who are automatically exempt from overtime protections.

Note: The nominal threshold was set at $250 per week from 1975 until 2004 when it was increased to $455 per week. Under the Fair Labor Standards Act, all salaried workers under the threshold must receive overtime pay for hours worked beyond 40 per week.

Source: Adapted from Figure A in Ross Eisenbrey, Raising the overtime salary threshold is an important improvement in working families’ labor standards, Economic Policy Institute Testimony, October 5, 2015

Work-life balance is a fundamental goal of the Fair Labor Standards Act (FLSA). Its requirement that employers pay hourly and lower-earning salaried employees a premium for time worked beyond 40 hours a week makes the FLSA the most family-friendly law ever passed in the United States. Excessive work is detrimental to family life, health, well-being, and productivity, and the law aims to protect workers who are junior enough that they can be forced to work extra hours. If not for the law’s overtime rules, tens of millions more workers would be working 50, 60, or 70 hours a week for no additional pay, just as millions of Americans did before the FLSA was enacted in 1938.

But millions more are still dealing with this overwork and stress on families, in part because the salary threshold that determines whether workers are automatically eligible for overtime pay is set for a 1970s economy, not a 2010s economy. As shown in the graph, in 1979 more than 12 million salaried workers earned less than the salary threshold and were therefore automatically guaranteed the right to overtime pay, regardless of their duties. Today, with a 50 percent bigger workforce, only 3.5 million salaried employees are automatically protected.

A new rule that guaranteed overtime protection to salaried workers making between $23,660 and $47,476 was instituted by the Department of Labor and was supposed to go into effect on December 1, 2016. But an egregiously bad legal decision has delayed enforcement of this common-sense rule.

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It’s not technology killing manufacturing—employment was steady for 35 years between 1965 and 2000: Manufacturing employment and trade deficit with China, 1965–2015

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Trade balance  Manufacturing employment
1965 0.00% 17051
1966 0.00% 17998
1967 0.00% 18025
1968 0.00% 18410
1969 0.00% 18485
1970 0.00% 17309
1971 0.00% 17202
1972 0.00% 18158
1973 0.00% 18820
1974 0.00% 17693
1975 0.00% 17140
1976 0.00% 17719
1977 0.00% 18531
1978 0.00% 19334
1979 0.00% 19301
1980 0.00% 18640
1981 0.00% 18223
1982 0.00% 16690
1983 0.00% 17551
1984 0.00% 18023
1985 0.00% 17693
1986 0.04% 17478
1987 0.06% 17809
1988 0.07% 18025
1989 0.11% 17881
1990 0.17% 17395
1991 0.21% 16916
1992 0.28% 16769
1993 0.33% 16815
1994 0.40% 17217
1995 0.44% 17231
1996 0.49% 17284
1997 0.58% 17588
1998 0.63% 17449
1999 0.71% 17280
2000 0.82% 17181
2001 0.78% 15711
2002 0.94% 14912
2003 1.08% 14300
2004 1.32% 14287
2005 1.54% 14193
2006 1.69% 14015
2007 1.79% 13746
2008 1.82% 12850
2009 1.57% 11475
2010 1.82% 11595
2011 1.90% 11802
2012 1.95% 11960
2013 1.91% 12086
2014 1.98% 12294
2015 2.04% 12320
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Note: Data on manufacturing employment are from Current Employment Statistics (CES) program of the Bureau of Labor Statistics (BLS). Data on Chinese trade balance are from the Census Bureau. As a share of GDP, the US/China trade balance was 0.00% in 1985 (first year of data availability). We assume this value holds for pre-1985 years as well.

The presidential campaign often highlighted the decline of American manufacturing jobs. An incorrect conventional wisdom among economic commentators holds that the decline of manufacturing employment has been driven by automation. This explanation does not fit the facts. Manufacturing employment was actually quite stable (aside from business cycle fluctuations) for 35 years between 1965 and 2000. But certainly there was plenty of automation between 1965 and 2000. Indeed productivity growth (a proxy for automation) was just as rapid in those years as thereafter.

But 3 million jobs were lost in the 2001–2003 recession and jobless recovery from that recession. Then rapidly growing trade deficits—particularly with China—kept the subsequent recovery from aiding manufacturing jobs. This meant that manufacturing entered the Great Recession without having regained the jobs lost in the previous recession, and in fact having lost a small number more as the rest of the economy recovered. As a result of two recessions and the “China shock,” the manufacturing sector today has nearly 5 million fewer jobs than it did in 2000.

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