Strong across-the-board wage growth in 2015 for both bottom 90 percent and top 1.0 percent
Annual inflation-adjusted earnings of the top 1.0 percent of wage earners grew 2.9 percent in 2015, and the top 0.1 percent’s earnings grew 3.4 percent, according to our analysis of the latest Social Security Administration wage data. What is relatively unique about 2015 was that the 3.4 percent wage growth for the bottom 90 percent matched that of the top 0.1 percent. This strong wage growth for the bottom 90 percent reflects both the lull in inflation (up just 0.1 percent) and the failure of wage inequality to continue its growth in 2015. Annual wages of the bottom 90 percent now stand 3.5 percent above what they were pre-recession in 2007, with all of that growth essentially occurring in 2015. The top 1.0 percent’s earnings have surpassed their previous high point, attained in 2007, by a mere 0.2 percent, recovering from the steep 15.6 percent fall during the financial crisis from 2007–09. High earners between the 90th and 99.9th percentile have seen the strongest growth since 2007, with earnings rising 7.7 percent. It’s only the earnings of the top 0.1 percent that remain below 2007 levels (down 5.1 percent).
Wage inequality has grown tremendously over the longer-term period from 1979 through 2015. The annual earnings of the top 1.0 percent rose 156.7 percent from 1979 to 2015 while the very top 0.1 percent enjoyed earnings growth of 338.8 percent. In contrast, the bottom 90 percent of wage earners had annual earnings grow by just 16.7 percent over the 1979–2007 period and an additional 3.5 percent between 2007 and 2015 for a cumulative annual earnings growth of 20.7 percent over the thirty-six years from 1979 to 2015.
Oregon Measure 97 would provide short and long-run boost to Oregon economy
The national recovery since the end of the Great Recession has been needlessly held back by spending cuts at all levels of government. Figure A below compares the growth in per capita spending by federal, state, and local governments in this recovery with previous recoveries.
Fiscal austerity explains why recovery has been so long in coming: Change in per capita government spending over last four business cycles
| 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 |
| 0 | 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 |
Note: For total government spending, government consumption and investment expenditures deflated with the NIPA price deflator. Government transfer payments deflated with the price deflator for personal consumption expenditures. This figure includes state and local government spending.
Source: EPI analysis of data from Tables 1.1.4, 3.1, and 3.9.4 from the National Income and Product Accounts (NIPA) of the Bureau of Economic Analysis (BEA)
As tight as federal spending growth has been in recent years, the bulk of the differences between the current recovery and previous ones shown in Figure A actually stems from state and local spending decisions. These state-level spending cutbacks have held down growth substantially.
States, unlike the federal government, are generally constrained in their ability to boost spending by the need to raise revenue. But as a general rule, government spending boosts economic activity in a weak economy more than tax cuts drag on activity. (In economist jargon, spending increases have higher “multipliers” than revenue increases.)
A women’s economic agenda for the 45th U.S. president: Investing in the infrastructure to support a 21st century economy
Progress on closing the gap between men’s and women’s wages in the U.S. economy has been glacially slow in recent decades—and gender wage parity has become a top priority for those committed to ensuring the economic security of American women. This priority is absolutely essential. No matter how you cut it, the gender wage gap is real and it matters. That said, pay parity cannot be the only goal for those looking to improve the economic lot of American women. In recent decades, the hourly pay of typical male workers has essentially stagnated even as the economy has grown. Closing only the gap between typical female and typical male workers threatens to ensure parity in this stagnation, not parity in progress. To achieve parity in progress, gains in reducing gender wage gaps must be paired with gains in closing another gap: the gap between economy-wide productivity and the wages of all typical workers. This is an ambitious goal, but it’s the only one that ensures genuine economic security for American women and the families that rely on them.
Here, I hope to draw out the importance of taking a holistic approach to improving the lot of women, men, and families across society. I can summarize my argument in three major points:
- The gender wage gap exists and progress closing it has been agonizingly slow, particularly in recent years. And, when combined with wage penalties faced by workers of color, it leads to wages for women of color being drastically lower than for white men.
- Rising inequality has kept the vast majority of men’s and women’s wages from rising as fast as gains in economy-wide productivity over the last four decades.
- Solutions need to close both the gender and inequality wage gaps and invest in a policy infrastructure to support all workers’ efforts to balance demands of work and home.
White House issues call to action on non-compete clauses
Labor mobility is fundamental to the ability to earn good wages. The improvement in incomes and living standards over the centuries is tied tightly to the growing ability of workers to quit the job they have and take another. And it is a timeless truth that employers will try to find new ways to hamper their employees’ legal right to leave. Increasingly, they are turning to non-compete clauses that they slip into the fine print of employment contracts. Thirty million U.S. employees, many of them relatively low wage workers, are bound by non-competes.
Peasants in medieval times were generally not permitted to leave the land on which they were born, and throughout Europe and Russia they were essentially owned by the owner of the land, their lord and master. The use of indentured servitude in the cities was a less onerous but still heavy burden on young workers, who were forced to work for years with little or no compensation for a single master, whose abuse or mistreatment usually had no remedy.
Slavery is the most extreme example of a legal limitation on labor mobility and the most destructive. Slavery in the United States not only brutalized and impoverished the enslaved, it dragged down the wages of anyone forced into competition with them. Slavery’s effects on free labor were an additional reason beyond simple morality for Abraham Lincoln and the free soil movement to oppose slavery. How could free construction workers, for example, demand higher wages if their employer’s competitor was using unpaid, enslaved labor?
Buried in the fine print: Forced arbitration
This article first appeared on the American Constitution Society (ASC) Blog.
From First Lady Michelle Obama’s speech in New Hampshire to accusations by Fox News’ Gretchen Carlson against Roger Ailes, sexual harassment and sexual assault have been dominating the headlines for months.
Also in the news has been the topic of forced arbitration agreements that limit victims’ ability to have their day in court. Very much a part of the Wells Fargo scandal has been the bank’s argument that it shouldn’t have to face its clients at trial.
These two stories actually have more in common than is often mentioned. First, of course, Fox tried to shut down Carlson’s suit by saying her contract’s arbitration clause prevented her from using that public forum. Few realize how common it is for women and men who allege harassment at work to be shunted into a secretive process that often prioritizes the interests of the employer.
Lawsuit filed to block Fair Pay and Safe Workplaces Executive Order
One of President Obama’s most important contributions to better pay and working conditions in the United States is his executive order on Fair Pay and Safe Workplaces, which he issued two years ago and is finally taking effect this month. The order, which addresses wage theft and on-the-job hazards, including sexual harassment and race discrimination, affects 25 million employees working for businesses that provide goods and services under contract to the federal government – businesses that range from janitorial services to ship builders.
The first provisions are set to take effect in two weeks – unless a lawsuit filed in Texas by various business groups succeeds in delaying or blocking enforcement of the rules.
Why is the Executive Order Needed?
The federal government purchases over $500 billion in goods and services from the private sector, and the firms it deals with employ about 20 percent of the nation’s total workforce. It is important that the government chooses to deal with honest employers and that, when given a choice of two otherwise similar contractors, it chooses to do business with the one that demonstrates superior integrity and a greater inclination to obey the law. That is common sense.
Race tax harms African Americans
In Quartz, I described a rarely noticed but devastating development that is undermining African American working and middle class families—a racially disparate property tax system that, in many cities, extorts a premium from African American homeowners. This premium can be so large that families lose homes when cities foreclose on properties where taxes have become unaffordable.
This discriminatory race tax has arisen because homes in African American neighborhoods that lost value following the housing price bubble collapse in 2008 have, in the subsequent recovery, been slower to recover value than properties in white neighborhoods. In most cities, assessors are required to re-assess properties on a regular basis, but when they have failed to do so, homeowners in African American neighborhoods wind up paying more tax relative to their home values than homeowners in white neighborhoods.
What to Watch on Jobs Day: The teacher gap, and how today’s unemployment masks continued weakness in the economy
On Friday, the Bureau of Labor Statistics will release the September numbers on the state of the labor market. As usual, I’ll be paying close attention to the prime-age employment-to-population ratio (EPOP) and nominal wages, which are two of the best indicators of labor market health. Friday’s report will also give us a chance to examine the “teacher gap”—the gap between local public education employment and what is needed to keep up with growth in the student population.
The unemployment rate has fallen steadily over the last six years, and many have said that the current rate of 4.9 percent means we are back (or at least very close) to full employment—meaning that pushing unemployment any lower would cause inflation to accelerate above the Federal Reserve’s preferred 2 percent target. That is why some observers are calling upon the Fed to raise rates—before workers see the economic recovery translate into consistently strong nominal wage growth.
But the headline unemployment rate (which is notably higher than previous labor market peaks) continues to understate slack in the labor market. Today’s 4.9 percent unemployment rate is associated with much lower prime-age EPOPs—the share of the working age population who is actually working—than in the recent past. To make that comparison, let’s look at where prime-age EPOPs were in the last two business cycles when the overall unemployment rate was 4.9 percent. The graph below shows that the prime-age EPOP averaged 80.9 percent in the three months the unemployment rate hit 4.9 percent in 1997 and 79.5 percent in the two months unemployment hit 4.9 percent in 2005. On average, those five months saw a 2.5 percentage point higher prime-age EPOP (80.3 percent) than the average 77.8 percent we’ve seen in the five months with 4.9 percent unemployment this year.
Don’t Be Fooled: The TPP Is Not About National Security
This blog was first posted at The Globalist.
During the 1993 U.S. congressional debate over the North American Free Trade Agreement, a Democratic Congressman with a solid pro-labor voting record asked me why I thought NAFTA would be bad for working people.
After I had given my answer, he responded: “Well, you may be right about the economics.” “But we have a 2000-mile border with Mexico. The President told me we need NAFTA to make it secure.”
Who can argue against national security?
NAFTA was the economic model for the ever more corporatist trade deals that followed, including the currently proposed 12-nation Trans-Pacific Partnership.
The arguments for NAFTA also set the pattern for the debates over those deals. Whenever the economic case crumbles, “national security” becomes the fallback rationale.
After a quarter century of off-shored jobs and depressed wages in the wake of corporate-driven trade de-regulation, the claim that the Trans-Pacific Partnership will make life better for American workers is so discredited that both Hillary Clinton and Donald Trump are opposed.
$916 million losses aside, there are many ways Trump could avoid paying taxes
This weekend, the New York Times broke the story that Republican presidential nominee Donald Trump claimed a $916 million loss in 1995, possibly allowing him to avoid paying federal income taxes for as long as 18 years. The ability to use a large, one-time loss to reduce future income tax liability is not, on its face, all that objectionable—it simply allows individuals to smooth out their tax liability and avoid being penalized for having a volatile income.1 But Trump’s refusal to release his tax returns continues to obscure the numerous other potential loopholes that can be exploited by those at the top that are more arbitrary and objectionable.
Take one loophole that is especially relevant to Trump and real estate developers: “like-kind exchange.” Like-kind exchange allows investors owning real estate to defer, and coupled with another loophole in our tax code eventually avoid, paying capital gains taxes.
To see how, consider an investor who owns a stock and would like to invest in another stock. Selling their stock will trigger capital gains taxes. Not so for real estate. Instead, like-kind exchange rules allow investors like Trump to defer paying taxes on their capital gains if they’re exchanging the real estate for broadly defined like-kind property.