Our recently released State of Working America wages report includes new data on wages through 2024. Cumulative median wage growth was just 29% since 1979—or less than 0.6% per year on average.

This was far slower than the economy’s potential to deliver wage growth for all workers. In fact, as Figure A shows, median wage growth was only one-third as fast as how much could have been delivered to all workers by growing productivity. This disconnect between pay and productivity is why we now refer to the post-1979 trajectory of wages as “wage suppression” rather than “wage stagnation.”

Too often, the bar for policy success on wage growth has been set at anything greater than zero. So long as literal wage stagnation was avoided, discussion about the urgent task of boosting typical workers’ wage growth could be forestalled.

This is too lax a standard for labor market success. Outside years of extreme crisis, capitalist (and even non-capitalist) economies in the modern world almost always grow in per-capita terms. The relevant questions are whether this overall economic growth could be faster and whether this growth lifts all boats near-equally or concentrates at the top. In the United States, overall growth has slowed significantly since 1979 and the fruits of this slower growth have concentrated significantly at the top. Relative to these key benchmarks, U.S. wage growth has been very poor.  

This slow post-1979 median wage growth happened in fits and starts, with gains only occurring in those rare years that saw tight labor markets. Further, even the potential to deliver faster growth for typical workers slowed significantly after 1979. For example, economy-wide productivity growth (value of output produced in an average hour of work in the economy) averaged 2.5% annually in the 30 years before 1979, but has just averaged 1.4% since.

Figure B illustrates cumulative median hourly wage growth between 1979 and 2024. Green segments of the line identify the periods when the labor market was tight and there was consistently healthy wage growth for workers at the middle of the wage distribution. Periods with little or no growth are identified in the dotted red line segments. If it hadn’t been for the strong wage growth from 1996–2002 and over the last 10 years, median real wages would have been flat over the entire post-1979 period. The underlying wage levels can be found in EPI’s new data library.

In Figure C, we convert this wage growth into average annualized changes. On average, the median wage grew 1.7% annually in real terms during the 16 years when labor markets were tight but failed to grow at all during the other 29 years. During the periods when real wage growth averaged zero, the unemployment rate averaged 6.9%. Meanwhile, the average unemployment rate during the faster wage growth periods was 4.8%, even when including the huge spike in unemployment during the first year of the pandemic. In short, tighter labor markets deliver for middle-wage workers.

Figure C shows even more striking results for lower-wage workers during this same period. In tighter labor markets, low-wage workers experienced 2.7% real annual wage growth on average. However, low-end real annual wages fell 0.6% on average during the 29 other years. Without the stronger periods of lower unemployment, wages at the 10th percentile would have fallen outright. The last set of bars shows that median wages kept pace with productivity during years of tight labor markets but lagged far behind in other years. In other work, we’ve shown that accounting for non-wage benefits does not materially close this gap at all.

The healthy wage growth of the past decade has been driven by a long stretch of low unemployment. Unfortunately, recent policy decisions are on track to reverse the gains made from maintaining full employment in recent years. Even with the strong economy the Trump administration inherited, their pursuit of a deeply chaotic policy agenda has led to a rise in economic uncertainty and brewing economic distress. Policy changes that strengthen workers’ bargaining power in labor markets are needed to not just keep pace with productivity growth but to regain some of the losses incurred by typical workers in previous decades.