First half 2017 data reveal broadly based wage growth, but inequality persists
Earlier this year, I wrote about the state of American wages through 2016. Now, we have a chance to see what’s been happening to wages in 2017 by examining wages in the first half (FH) of the year. In the table below, I present EPI’s most up-to-date real (inflation-adjusted) hourly wage series from the Current Population Survey (CPS) across the wage distribution. I compare the most recent six months of wage data with FH2016, FH2007, and FH2000.[1] My conclusions about FH2017 data are fairly consistent with what I found when I analyzed the 2016 data compared to previous years. Preliminary findings from 2017 suggest more broadly based wage growth—with significant gains at the 10th percentile—associated with an economy approaching full employment as well as state-level increases in the minimum wage. That good news is tempered by the fact that the vast majority of workers are, in reality, only beginning to make up for lost ground, rather than getting ahead, and wage inequality is still far greater today than in 2007 or 2000.
Hourly wages by wage percentile, FH2000–FH2017 (FH2017 dollars)
| Wage by percentile | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Year | 10th | 20th | 30th | 40th | 50th | 60th | 70th | 80th | 90th | 95th |
| FH2000 | $8.98 | $10.89 | $12.85 | $14.79 | $17.25 | $20.43 | $24.22 | $29.40 | $38.45 | $48.91 |
| FH2007 | $9.14 | $11.15 | $13.02 | $15.31 | $17.83 | $21.11 | $24.95 | $30.76 | $41.01 | $53.24 |
| FH2016 | $9.39 | $10.85 | $12.99 | $15.33 | $17.99 | $21.37 | $25.61 | $32.03 | $44.32 | $59.11 |
| FH2017 | $9.85 | $11.12 | $13.19 | $15.46 | $18.17 | $21.74 | $26.09 | $33.00 | $45.60 | $59.95 |
| Percent change | ||||||||||
| 2000-2007 | 0.3% | 0.3% | 0.2% | 0.5% | 0.5% | 0.5% | 0.4% | 0.6% | 0.9% | 1.2% |
| 2007-2017 | 0.8% | 0.0% | 0.1% | 0.1% | 0.2% | 0.3% | 0.4% | 0.7% | 1.1% | 1.2% |
| 2016-2017 | 5.0% | 2.4% | 1.6% | 0.9% | 1.0% | 1.7% | 1.9% | 3.0% | 2.9% | 1.4% |
| 2000-2017 | 0.6% | 0.1% | 0.2% | 0.3% | 0.3% | 0.4% | 0.4% | 0.7% | 1.0% | 1.2% |
Note: The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more.
Source: EPI analysis of Current Population Survey microdata
Real wage growth over the last year is broadly based and stronger than the wage growth we’ve seen for much of the economic recovery from the Great Recession. This type of growth is expected as we continue to inch towards full employment. When the unemployment rate falls even as more workers are drawn into the labor market, available workers of all types become scarcer and employers have to increase wages to attract and retain the workers they want. Lowered unemployment has, in the past, benefited low-wage workers more than middle-wage workers and middle-wage more than higher-wage workers. Though we’ve seen slow but steady improvement over the last several years, today’s labor market still exhibits a fair amount of slack with a weaker prime-age employment-to-population ratio that we’ve seen at other times of similar unemployment rates and nominal wage growth slower than target levels.
Trump admin works to roll back worker protections before the president leaves on vacation
Monday, July 24 marked eight years since the federal minimum wage was raised from $6.55 to $7.25. While the anniversary passed with little fanfare, the Trump administration chose Monday to issue a Request for Information (RFI) in an effort to weaken or kill the Department of Labor’s (DOL) 2016 update to the overtime rule. On Wednesday, the Trump Department of Justice (DOJ) filed a brief arguing that Title VII does not protect employees from discrimination based on sexual orientation. On Thursday, Members of Congress introduced a bill to weaken the joint employer standard under both the Fair Labor Standards Act and the National Labor Relations Act. And throughout the week, Senate Republicans continued their never-ending attempt to repeal the Affordable Care Act, with the effort ultimately failing early this morning.
Minimum wage anniversary
It has now been more than eight years since the federal minimum wage was last raised. Over this time, the purchasing power of the federal minimum wage has fallen by over 12 percent. Had the minimum wage kept pace with productivity since the late 1960s, it would be over $19 per hour today. With action on the federal level stalled, many states and municipalities have raised their minimum wages, but there are still 21 states where the minimum wage is stuck at $7.25. If policymakers raised the federal minimum wage to $15 by 2024, 41 million American workers would benefit.
Trump Department of Labor begins the process of weakening the overtime rule
In 1975, DOL set the salary level at which workers could be exempt from overtime to the equivalent of around $58,000 in today’s dollars. At that level, more than 50 percent of full-time salaried workers were covered. However, the salary threshold was not raised enough to keep up with wage growth or inflation, leaving millions of workers without protections by 2016.
The Obama administration issued a rule to raise the salary threshold, setting it at $47,476—high enough to cover about 34 percent of full-time salaried workers. The Trump administration has refused to fully implement and enforce the updated rule, first by deciding not to defend against a lawsuit attacking the rule and now by opening up a wasteful RFI. The RFI asks for input on a number of factors, such as whether there should be multiple standards based on geography or job duties. National wage standards ensure decent basic standards for all workers, and the updated rule had already set a salary threshold linked to the lowest-wage Census region. Workers’ wages should not be undercut even further by weakening the salary threshold.
Black women have to work 7 months into 2017 to be paid the same as white men in 2016
July 31st is Black Women’s Equal Pay Day, the day that marks how long into 2017 an African American woman would have to work in order to be paid the same wages as her white male counterpart was paid last year. Black women are uniquely positioned to be subjected to both a racial pay gap and a gender pay gap. In fact, on average, black women workers are paid only 67 cents on the dollar relative to white non-Hispanic men, even after controlling for education, years of experience, and location.
Why does this wage gap exist for black women?
Pay inequity directly touches the lives of black women in at least three distinct ways. Since few black women are among the top 5 percent of earners in this country, they have experienced the relatively slow wage growth that characterizes growing class inequality along with the vast majority of other Americans. But in addition to this class inequality, they also experience lower pay due to gender and race bias.
In the last 37 years, gender wage gaps have unquestionably narrowed—due in part to men’s wages decreasing—while racial wage gaps have gotten worse. Despite the large gender disadvantage faced by all women, black women were near parity with white women in 1979. However in 2016, white women’s wages grew to 76 percent of white men’s, compared to 67 percent for black women relative to white men—a racial difference of 9 percentage points. The trend is going the wrong way—progress is slowing for black women.
Myth #1: If black women worked harder, they’d get the pay they deserve.
The truth: Black women work more hours than white women. They have increased work hours 18.4 percent since 1979, yet the wage gap relative to white men has grown.
Over the last several decades, both black and white workers have increased their number of annual hours in response to slow wage growth. While men typically work more hours than women, the data reveal that growth in work hours, for both whites and blacks, was heavily driven by the growth of work hours among women. The increase in annual hours is particularly striking for workers in the bottom 40 percent of the wage distribution, where it has been driven almost entirely by women.
Policy Watch: Spring Regulatory Agenda puts corporations first
President Trump’s spring regulatory agenda throws out hard-fought protections for workers
The administration released its spring regulatory agenda this week. Its proposals to rescind regulations that protect workers’ safety, paychecks, and retirement savings reflect an ambitious agenda that consistently puts corporate interests first. The administration’s proposals to reopen rules protecting workers from exposure to beryllium, making it easier for OSHA to track injury and illness on the job, as well as the overtime and conflict of interest (fiduciary) rules, put workers’ pay, retirement security, and safety at the bottom of their list of priorities.
The administration’s proposal also includes changes to the current regulations on “tip pooling. The National Restaurant Association, who praised this move, has lobbied for years to loosen these restrictions and give employers more control over workers’ tips. While there are few details in this proposal at the moment, it’s worth noting that the restaurant industry, where tipping is prevalent, is rife with labor violations. In a recent EPI study on wage theft, more than 14 percent of food and drink service workers reported being paid less than the minimum wage, while 6 percent of other leisure and hospitality workers reported the same. And nearly half of workers reporting wage theft in the ten most populous states worked in service occupations. Under these circumstances, a policy action that could hand even more authority over a worker’s tips to their bosses would not be a step in the right direction.
Young workers face a tougher labor market even as the economy inches towards full employment
Over the last several years, the economy has moved steadily (if more slowly than we would have wanted) towards full employment. Payroll employment growth in excess of working-age population growth is a positive sign of a growing economy, but unrecovered labor force participation and below-target wage growth are clear signs of remaining economic slack—signaling that we haven’t yet reached genuine full employment.
Last week, Valerie Wilson and I put the black unemployment rate in perspective. Today, I want to talk about the plight of young workers in our economy. The overall unemployment rate between July 2016 and June 2017 (we look at data over a full calendar year to allow large enough sample sizes to compare subgroups within the labor force) was 4.7 percent. But this rate masks important differences within the population. Young workers, ages 16-24 years old, had an unemployment rate more than twice as high as prime-age (25-54 year old) workers (9.8 percent versus 4.0 percent) and nearly three times as high as older (55-64 year old) workers (3.3 percent). While young workers typically have much higher unemployment rates, tight labor markets could induce employers to turn to younger workers and push their unemployment rate down disproportionately in coming years. And like all workers, young workers need tighter overall labor markets to see their wages grow.
The UN Global Compact and labor migration: What can we expect?
The Global Compact on Migration (GCM) is an agreement that is being negotiated through the United Nations (UN) by its Member States to establish a new regime for cooperation on international migration. One of the major goals of the GCM is to expand labor migration and labor mobility channels for migrants seeking work in countries other than their own. But what could that look like in practice?
Migrant workers and international labor migration
There are approximately 244 million international migrants around the globe, accounting for approximately 3 percent of the world’s population. The UN’s International Labour Organization (ILO) estimated that 150 million or two-thirds of all international migrants were in the labor forces of the countries to which they moved in 2013, suggesting that many, if not most, migrants cross national borders for economic reasons.
Source: Figure is adapted from Figure 2.1 in ILO global estimates on migrant workers, Results and methodology, Special focus on migrant domestic workers
Policy Watch: Cuts to DOL budget, attacks on joint employer standard
Congress returned from the July 4th recess this week, and Senate Republicans debuted yet another proposal in the ongoing attempt to repeal and replace the Affordable Care Act. The latest proposal still includes the severe cuts to Medicaid found in earlier drafts, so millions of Americans will lose health care coverage if this week’s version of the Republican plan becomes law. Meanwhile, the House Appropriations Committee released a fiscal year 2018 Labor, Health and Human Services, Education (LHHS) funding bill that would cut funding for the Department of Labor (DOL) by $1.3 billion. This measure also includes several non-funding-related requirements (often called “riders”) that would block or weaken labor protections. The House Committee on Education and the Workforce held a hearing attacking the concept of joint employer liability under various worker protection laws. And, the Senate Committee on Health, Education, Labor and Pensions (HELP) held a consolidated hearing on President Trump’s nominees to the National Labor Relations Board (NLRB) and to DOL.
Draining worker protection and training resources from the FY18 DOL and NLRB budgets
The LHHS funding bill from Appropriations Subcommittee Republicans would further reduce funding for agencies that are already stretched thin. Occupational Safety and Health Administration funding would be nearly $12 million less than even President Trump’s draconian budget request earlier this year (and about 4 percent less than the current budget). The Wage and Hour Division would face a roughly 6 percent cut. In other areas, the bill takes a hatchet to job training programs and other services, particularly the Workforce Innovation and Opportunity Act programs at the Employment and Training Administration. There’s also a whopping 9 percent cut ($25 million) to the National Labor Relations Board. The Bureau of Labor Statistics, crucial for providing much-needed data on the workforce, would suffer a 5 percent cut.
Missouri’s new preemption law cheats 38,000 workers out of a raise
Minimum wage workers in St. Louis just had a taste of what life might be like with a raise, only to have it taken back by the Missouri state legislature. St. Louis is part of a growing number of cities across the country seeking to raise their own minimum wage by city ordinance.
In 2015, the City of St. Louis passed an ordinance establishing a minimum wage for the city that was higher than Missouri’s minimum wage. In the bill’s preamble, the City’s leaders explained the need for a wage increase for the its poorest workers:
WHEREAS, the defining issues of our time include the increase in income inequality, the growing gap between rich and poor, and the obstacles preventing people from rising into the middle class; and . . .
WHEREAS, low-wage workers in the St. Louis region struggle to meet their most basic needs and to provide their children a stable foundation, a safe dwelling, and an opportunity to obtain a high-quality education; and . . .
WHEREAS, minimum wage laws promote the general welfare, health, and prosperity of the City of St. Louis by ensuring that workers can better support and care for their families and fully participate in the community[.]
In 2015, Missouri’s state minimum wage was pegged at $7.65 per hour, and by passing its local ordinance, St. Louis raised it to $8.25 for employees working within the city limits. Because of that ordinance, St. Louis’ minimum wage rose to $9.00 in 2016, and $10.00 on January 1, 2017. Meanwhile, the state’s minimum wage barely budged to $7.70 during that same time period.
State lawmakers in Missouri just undercut wages for 38,000 workers in St. Louis
Last week, Missouri’s governor announced that he will let a preemption law take effect, prohibiting cities from requiring a minimum wage higher than the state’s—nullifying the city of St. Louis’s minimum wage ordinance and effectively lowering the city’s minimum wage from $10 down to $7.70. With this law, lawmakers have potentially undone raises for roughly 31,000 workers in St. Louis who received a raise when the city’s ordinance took effect in May, and likely stopped scheduled raises for those same 31,000 workers plus another 7,000 workers, for a total of 38,000 workers who would have gotten a pay increase when the city’s minimum wage was scheduled to rise to $11 an hour in January. (Minimum wage increases typically also lead to raises for workers slightly above the new minimum wage. The estimates here do not include these “spillover” effects.)
In 2015, the St. Louis city council and mayor approved a minimum wage ordinance, which would have gradually raise the city’s minimum wage to $11 per hour by January 2018. A protracted legal dispute delayed implementation of the ordinance until this past spring, but on May 5th, the ordinance finally took effect, raising the city minimum wage to $10 per hour. Now the city’s minimum wage will lose effect on August 28th, and the wage floor for workers in the city will fall back to the state minimum wage of $7.70.
It is impossible to know how many of the 31,000 St. Louis workers who were directly affected when the city’s minimum wage rose from to $10.00 will now see their pay cut, but some may. Workers can only hope that their employers will not roll back their raises. For some, that raise may have been the key difference in affording a new apartment rental, car payment, or similar long-term financial commitment. In any case, anyone starting out in the St. Louis workforce, or any low-wage worker considering changing jobs, is likely to find that most opportunities pay less than they would have had the ordinance remained in effect.
Healthcare’s biggest losers, part two: How the Senate’s TrumpCare bill can increase your state taxes
This blog post references the version of the Better Care Reconciliation Act introduced in June 2017. EPI will update the analysis if newer versions of the bill are significantly different.
In anticipation of cuts in federal spending, we often fail to consider the extent to which state governments will be obliged to pick up the slack when the cuts include grants-in-aid to the states. This concern applies with particular intensity to the largest item in most state government budgets: the Medicaid program. The Republican Senate initiative to “repeal-and-replace ObamaCare” with the so-called “Better Care Reconciliation Act (BCRA)” makes significant reductions in federal grants to state governments for Medicaid.
The Congressional Budget Office estimates that by 2036, these cuts will rise to 35 percent of spending under current law. It should be noted that current-law spending levels in the future accommodate expected increases in health care costs. Under the BCRA, future Medicaid spending might be higher than current-year spending, but it would still fall well-short of what would be necessary to absorb those future increases in health care costs. That is why the BCRA is said to cut “current services” spending, a concept that reflects projected increases in health care costs and Medicaid beneficiaries.
People who became eligible for Medicaid after 2010 under President Obama’s stimulus bill and the Affordable Care Act (ACA)—over ten million people—will lose health insurance coverage, except insofar as state governments replace the lost funds with their own tax revenue, or with cuts to other programs. (A likely victim in the latter respect is the other large item in state government budgets: K-12 education, in the form of grants to local governments and school districts.)
An important analysis by Allison Valentine, Robin Rudowitz, Don Boyd, and Lucy Dadayan provides insight into the impact of the effort by Republicans in the House of Representatives’ effort to abolish ObamaCare.