Low-wage workers experienced historically fast wage growth between 2019 and 2022—even after accounting for inflation—according to a new Economic Policy Institute report. Real hourly wages for workers in the 10th percentile grew 9.0% over the three-year period, significantly faster than any other period of economic shock in the last 40 years. By comparison, middle-wage workers experienced just 2.4% real wage growth, while the 90th-percentile wage grew 4.9%.
Large government COVID relief and recovery measures, combined with a tight labor market, made these strong gains for low-wage workers possible, the report explains. Federal policymakers helped low-wage workers with improved unemployment insurance, economic impact payments, and child care tax credits, among other provisions. These measures also fed the surge in employment, which gave low-wage workers better job opportunities and leverage to see strong wage growth.
Nevertheless, low-wage workers, who are disproportionately women and Black and Hispanic, continue to suffer from grossly inadequate wages: The 10th-percentile wage in 2022 was $12.57, or $26,145 annually for a full-time worker. This is not enough to attain a modest yet adequate standard of living in any county or metro area in the United States, according to EPI’s Family Budget Calculator.
“The fast wage growth for low-wage workers over the last three years didn’t happen by luck—it was largely the result of intentional policy decisions that addressed the pandemic and subsequent recession at the scale of the problem. But low-wage workers are still not paid enough to make ends meet. Policymakers must raise the federal minimum wage and strengthen labor standards so that workers can lock in the gains made and continue to build on them, even in weaker labor markets,” said EPI senior economist Elise Gould.
In 2022, more than 20 million workers, or 15% of the workforce, were paid less than $15 an hour. Meanwhile, 18% of working women but just 12% of working men were paid less than $15 an hour. Black and Hispanic workers were also disproportionately more likely to be paid less than $15 an hour: 20% of Black workers and 19% of Hispanic workers were, while 13% of white workers were.
Given the faster wage growth that occurred at the bottom of the distribution, we would expect to see gender and racial wage gaps narrow. However, the gender wage gap widened and the Hispanic–white wage gap saw no improvements between the 2019–2022 period, though the median Black–white wage gap narrowed slightly.
The recent gains to low-end wage growth may be short-lived if policymakers curtail the recovery. The Federal Reserve should refrain from raising interest rates too fast in the name of controlling inflation. Even a “mild” recession resulting from these actions will do significant harm to low-wage workers and their families.