Yesterday, Ezra wrote a piece on a now-famous interview that Chris Rock did with Frank Rich. You should read the interview, it’s great. At one point, Rock floats the idea that President Obama would have received more credit for his efforts to fight the Great Recession if he had waited for a while after taking office before addressing the downturn.  As Rock says in this snippet:

“When Obama first got elected, he should have let it all just drop.

Let what drop?

Just let the country flatline. Let the auto industry die. Don’t bail anybody out. In sports, that’s what any new GM does. They make sure that the catastrophe is on the old management and then they clean up. They don’t try to save old management’s mistakes.”

Ezra spends most of the article making the case that this strategy would be a political loser, but first notes (correctly) that:

“The big problem with this idea — which I’ve heard other liberals propose in the past — is it’s morally odious: it would have meant putting millions of Americans through harrowing pain in order to help Obama out politically.”

This is exactly right (well, I haven’t actually heard many liberals at all say this, but moving on); but we should remember that there really is a non-hypothetical set of policymakers who have precisely put millions of Americans through harrowing pain solely for their own political advantage: Republican members of Congress.

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EPI has long documented wage trends. We have tracked real (inflation-adjusted) wage growth over the last month, over this business cycle, over the last 35 years, and over the last 60 years. What we measure when we look at real wages is how well workers and their families are doing—whether their wages are keeping up with inflation and whether the vast majority of Americans are seeing any increase in their standards of living. And, we’ve also proposed ways to Raise America’s Pay.

But wages can provide information on issues besides just the state of American living standards. They can also be a key indicator of macroeconomic health. One example is the degree to which wage growth puts upward pressure on prices. The Federal Reserve’s mandate is to balance the benefits of low unemployment versus the benefits of keeping inflation stable. One sign of growing inflationary pressure is when nominal (not real) wages are rising significantly faster than the Fed’s target rate of inflation (currently 2 percent, which is not set in stone but which is widely acknowledged to be what the Fed is aiming for) plus productivity growth (between 1.5 to 2 percent). The fact is that nominal wages have been growing far slower than any reasonable wage target for the last five years.

Tomorrow, we are unveiling our new Nominal Wage Tracker, which will host the most up-to-date information on nominal wages, released every month with the Bureau of Labor Statistics’ Employment Report. We will explain how slow wage growth continues to be a key signal of how far the U.S. economy is from a full recovery. In addition, we will track the cumulative effect of the ongoing failure of wages to hit target levels, and how this relates to labor’s share of corporate income.

Given this, the Nominal Wage Tracker will be a key tool to analyze whether the Federal Reserve should take action in the near-term to slow the economy. So far the wage tracker data shows that we are far from a full recovery. And, sluggish nominal wage growth is a key sign that there’s still too much slack remaining in the labor market.

Matt O’Brien hit the nail on the head in a Wonkblog post about non-compete agreements for doggy day care workers yesterday. Camp Bow Wow, as Dave Jamieson reports, forces new hires to agree not to work for a competing business within 25 miles of their location’s “franchise territory” for two years after leaving the company. Dog sitters obviously don’t learn valuable trade secrets that have to be protected from competitors, so something else is motivating the chain’s non-compete clause—just as trade secrets were not driving Jimmy John’s to restrict where its employees could work when they moved on from the sandwich shop. That motivation is wage suppression. As O’Brien puts it:

“Non-competes create a Balkanized labor force where you’re not a sandwich maker, but either a Jimmy John’s or Subway sandwich maker. Workers, in other words, are being forced to pledge fealty to companies that can still fire them at will. The payoff, of course, is that workers who, practically-speaking, can’t switch jobs are workers who can’t ask for raises.”

It’s common sense that increased experience in an occupation should eventually lead to higher wages and that if, for example, Camp Bow Wow doesn’t sufficiently reward an employee’s experience, some other dog care chain will. The employee might look around and find that experienced dog sitters are paid $1.00 an hour more at Camp Canine. But a non-compete agreement keeps the employee from jumping ship to take the better-paying job. A two-year restriction on competing dog-care employment means the employee has to leave the area to get the benefit of her experience. It’s not slavery, but as O’Brien points out, it’s not the kind of freedom capitalism promises, either. (If the National Right to Work Committee weren’t simply a union-hating sham, it would take up the cause of workers who are being forced to accept such contracts.)

Limiting the right to quit and take another job leaves the employer with ever more bargaining power. How do you negotiate a raise if your employer knows you can’t take your experience and knowledge elsewhere?

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Last week, President Obama indicated he would veto an emerging Senate deal that cobbled together $440 billion worth of tax breaks, with big business reaping the vast majority of the benefits. The rationale for the veto threat was that the potential “tax extenders” deal did not make permanent the expansions of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which were originally included in the Recovery Act and are currently set to expire in 2017.

The veto threat has been portrayed as dividing Democrats in two groups: those that would have been willing to vote for the nearly-agreed upon $440 billion tax deal as is, versus those that would have only accepted the deal had it included the EITC and CTC.

Not mentioned: anyone who thinks that simply tacking on an expanded EITC and CTC on top of the Senate agreement would still be bad policy, and that these issues should get disentangled, quickly—a group which, spoiler alert, contains EPI.

To be clear, the expanded EITC and CTC are good policies, and both should be a permanent part of our tax code. The Center on Budget and Policy Priorities writes that letting the expansions expire would push 16 million people—including 8 million children—either into or deeper into poverty. The steep progressivity of taxes at the bottom of the income distribution helps a lot of needy people and also aids the cause of economic recovery; the people that receive the EITC and CTC tend to spend the money, helping it circulate throughout the economy quickly. And the cost for making these expansions permanent—$96 billion between now and the end of the 10-year budget window in 2024—is pretty modest compared to the packages floating around the House and Senate this week.

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As we near the end of the calendar year, we’ve once again reached tax extender season—the time of year when senators and representatives set aside their differences to hand out tax breaks, loopholes, credits, and deductions as if they got them at a Black Friday sale. For the uninitiated, “tax extenders” refers to a whole package of supposedly temporary tax breaks that are lumped together and passed into law every year or two, like clockwork.

Tax extender packages are genetically designed to sail through even the most acrimonious Congress. For one thing, there’s something for everyone. Supporters of schoolteachers will vote for the package because it includes a deduction for teachers to buy items for their classrooms, even if it includes tax breaks they don’t like at all, like those that benefit thoroughbred racehorse owners and NASCAR racetrack developers. (Policymakers that like watching fast things race in circles, but don’t care much for teachers, are also happy to vote for the package.) Moreover, the temporary nature of extenders packages allows Congress to simultaneously pretend that the tax breaks will actually expire soon (so as to deflate the budgetary cost of the legislation) while telling key constituencies—most of whom happen to be big businesses—that their cherished tax breaks are effectively permanent because they have always been extended before.

This week, Congress appears to be zeroing on a tax extender deal to be voted on when lawmakers return to Washington after Thanksgiving—and somehow, the biannual tax-cut fest is worse than normal.

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The holidays are coming, and this means dealing with the stereotypical uncle or brother-in-law who will make for a tense dinnertime by (among other things) loudly spouting conservative talking points on the economy.

There’s not time to detail the full Bingo board of silly views on the economy, but we can go over five themes that regularly recur, along with some detail on why they’re wrong.

1) The government’s spending too much—they should tighten their belts the same way households had to following the Great Recession

This “tighten the belts” line is perhaps the worst analogy ever. And yes, it’s bipartisan silliness. Simply put, if everybody (households, businesses, and governments) tightens their belts together (i.e., stops spending money) then the result is just a steep recession. Even with increased federal government spending, tightened household and business spending in 2008-2009 led to a savage economic downturn. Actively cutting government spending would’ve made it worse. Much worse. There really is tons of evidence that the increases in government spending during and right after the Great Recession (the Recovery Act, mostly) made the recession much lighter and the recovery come faster.

But, say you continue to disbelieve the overwhelming evidence that spending cuts slow growth and worsen recessions. Let’s just look at the data on federal spending in the recovery since the Great Recession versus recovery from the previous three recessions (in the early 1980s, early 1990s, and early 2000s) to see if even the premise of “exploding spending” in recent years is right. The figure below shows (inflation adjusted) federal government spending over the full business cycle (centered on the recession’s trough in the middle of 2009.

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While the economy continues to create jobs, we’ve been tracking nominal wages as well as job growth, and it’s clear from this that continued slack in the labor market has left workers without bargaining power to bid up their wages. And it may be some time before wage growth gets anywhere near 3.5 to 4 percent, a growth rate that would be consistent with the Fed’s 2 percent inflation target and assumption of 1.5 percent productivity. Eventually, wage growth at that rate could even begin to claw back labor share of corporate-sector income, which has not even started moving in the right direction since the recession began.

This week, the Bureau of Labor Statistics released the Consumer Price Index for October 2014. These data allow us to look at real (inflation-adjusted) wages. The figure below shows real average hourly earnings of all private employees (top line) and production/nonsupervisory workers (bottom line) since the recession began in December 2007. For both series, you can see that real wages fell during the recession, then jumped up in late 2008 in direct response to a drop in inflation. When inflation falls and nominal wages hold steady, the mathematical result is a rise in inflation-adjusted wags. After the deflation leading up to 2009 stopped boosting real wages, wage growth has been flat.

Real Wage

Real average hourly earnings, December 2007– November 2014

	All private employees	Production/Nonsupervisory
Dec-2007	$23.84	$19.90
Jan-2008	$23.79	$19.88
Feb-2008	$23.81	$19.89
Mar-2008	$23.83	$19.90
Apr-2008	$23.79	$19.90
May-2008	$23.76	$19.86
Jun-2008	$23.56	$19.72
Jul-2008	$23.47	$19.65
Aug-2008	$23.62	$19.76
Sep-2008	$23.63	$19.77
Oct-2008	$23.89	$20.01
Nov-2008	$24.44	$20.43
Dec-2008	$24.71	$20.67
Jan-2009	$24.65	$20.64
Feb-2009	$24.62	$20.60
Mar-2009	$24.69	$20.69
Apr-2009	$24.71	$20.69
May-2009	$24.69	$20.68
Jun-2009	$24.51	$20.55
Jul-2009	$24.56	$20.59
Aug-2009	$24.56	$20.59
Sep-2009	$24.51	$20.60
Oct-2009	$24.50	$20.58
Nov-2009	$24.48	$20.58
Dec-2009	$24.47	$20.60
Jan-2010	$24.50	$20.64
Feb-2010	$24.55	$20.68
Mar-2010	$24.57	$20.68
Apr-2010	$24.61	$20.74
May-2010	$24.66	$20.80
Jun-2010	$24.65	$20.81
Jul-2010	$24.68	$20.81
Aug-2010	$24.68	$20.83
Sep-2010	$24.69	$20.82
Oct-2010	$24.68	$20.86
Nov-2010	$24.63	$20.81
Dec-2010	$24.54	$20.72
Jan-2011	$24.58	$20.76
Feb-2011	$24.48	$20.68
Mar-2011	$24.37	$20.58
Apr-2011	$24.34	$20.55
May-2011	$24.32	$20.53
Jun-2011	$24.31	$20.50
Jul-2011	$24.34	$20.53
Aug-2011	$24.25	$20.48
Sep-2011	$24.23	$20.45
Oct-2011	$24.34	$20.49
Nov-2011	$24.29	$20.49
Dec-2011	$24.30	$20.48
Jan-2012	$24.27	$20.44
Feb-2012	$24.26	$20.41
Mar-2012	$24.26	$20.40
Apr-2012	$24.29	$20.45
May-2012	$24.33	$20.47
Jun-2012	$24.37	$20.47
Jul-2012	$24.43	$20.52
Aug-2012	$24.29	$20.41
Sep-2012	$24.24	$20.33
Oct-2012	$24.17	$20.32
Nov-2012	$24.31	$20.42
Dec-2012	$24.38	$20.45
Jan-2013	$24.40	$20.50
Feb-2013	$24.31	$20.43
Mar-2013	$24.38	$20.50
Apr-2013	$24.47	$20.55
May-2013	$24.46	$20.54
Jun-2013	$24.47	$20.53
Jul-2013	$24.42	$20.53
Aug-2013	$24.46	$20.53
Sep-2013	$24.46	$20.55
Oct-2013	$24.49	$20.58
Nov-2013	$24.52	$20.61
Dec-2013	$24.48	$20.61
Jan-2014	$24.50	$20.63
Feb-2014	$24.55	$20.71
Mar-2014	$24.53	$20.65
Apr-2014	$24.47	$20.62
May-2014	$24.44	$20.59
Jun-2014	$24.44	$20.58
Jul-2014	$24.43	$20.59
Aug-2014	$24.56	$20.69
Sep-2014	$24.54	$20.66
Oct-2014	$24.57	$20.70
Nov-2014	$24.66	$20.74

ChartData Download data

The data below can be saved or copied directly into Excel.

The data underlying the figure.

Note: Earnings are adjusted to November 2014 dollars.

Source: Author analysis of Bureau of Labor Statistics's Current Employment Statistics and Consumer Price Index, public data series.

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The second figure below charts the year over year change in real hourly earnings for both series over the last four years, notably after the spikes in real wages associated with a brief deflationary period. From the figure, it is obvious that wages for both series—all private sector and production/nonsupervisory workers—have stayed close to zero over the entire period. Both the nominal wage series and the real wage series tell a consistent story. Wages are continuing to flat line far into the so-called recovery.

Real Wages

Year-over-year change in real average hourly earnings of all private nonfarm employees and private production/ nonsupervisory employees, November 2009– November 2014

	All Private Employees	Production/Nonsupervisory
Nov-2009	0.15%	0.76%
Dec-2009	-0.98%	-0.31%
Jan-2010	-0.62%	0.01%
Feb-2010	-0.32%	0.35%
Mar-2010	-0.50%	-0.01%
Apr-2010	-0.40%	0.25%
May-2010	-0.10%	0.57%
Jun-2010	0.55%	1.26%
Jul-2010	0.46%	1.08%
Aug-2010	0.49%	1.18%
Sep-2010	0.73%	1.08%
Oct-2010	0.72%	1.34%
Nov-2010	0.60%	1.12%
Dec-2010	0.29%	0.56%
Jan-2011	0.30%	0.56%
Feb-2011	-0.26%	0.02%
Mar-2011	-0.80%	-0.52%
Apr-2011	-1.13%	-0.94%
May-2011	-1.36%	-1.30%
Jun-2011	-1.39%	-1.46%
Jul-2011	-1.35%	-1.35%
Aug-2011	-1.74%	-1.70%
Sep-2011	-1.85%	-1.80%
Oct-2011	-1.36%	-1.75%
Nov-2011	-1.38%	-1.58%
Dec-2011	-1.01%	-1.16%
Jan-2012	-1.23%	-1.53%
Feb-2012	-0.90%	-1.31%
Mar-2012	-0.47%	-0.89%
Apr-2012	-0.19%	-0.48%
May-2012	0.03%	-0.30%
Jun-2012	0.24%	-0.16%
Jul-2012	0.35%	-0.03%
Aug-2012	0.17%	-0.35%
Sep-2012	0.03%	-0.57%
Oct-2012	-0.68%	-0.86%
Nov-2012	0.11%	-0.35%
Dec-2012	0.33%	-0.13%
Jan-2013	0.51%	0.26%
Feb-2013	0.18%	0.12%
Mar-2013	0.51%	0.51%
Apr-2013	0.75%	0.51%
May-2013	0.52%	0.35%
Jun-2013	0.44%	0.30%
Jul-2013	-0.04%	0.02%
Aug-2013	0.71%	0.62%
Sep-2013	0.92%	1.06%
Oct-2013	1.30%	1.32%
Nov-2013	0.86%	0.97%
Dec-2013	0.44%	0.81%
Jan-2014	0.41%	0.63%
Feb-2014	0.99%	1.33%
Mar-2014	0.60%	0.75%
Apr-2014	0.01%	0.33%
May-2014	-0.08%	0.25%
Jun-2014	-0.11%	0.21%
Jul-2014	0.05%	0.28%
Aug-2014	0.40%	0.75%
Sep-2014	0.33%	0.55%
Oct-2014	0.34%	0.56%
Nov-2014	0.82%	0.87%

ChartData Download data

The data below can be saved or copied directly into Excel.

The data underlying the figure.

Note: Earnings are adjusted to November 2014 dollars. Light shaded area denotes recession.

Source: Author analysis of Bureau of Labor Statistics's Current Employment Statistics and Consumer Price Index, public data series.

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As retailers and consumers gear up for the holiday shopping season, it’s a good time to take a closer look at what things are like for the person on the other side of the cash register. Over the past year, there have been an increasing number of retail strikes as workers in the industry call for higher pay and better working conditions. Why should this matter to the ordinary shopper just out looking for the perfect gift? Because poor wages in retail may be shrinking your paycheck as well, and in more ways than one.

Retail workers tend to be paid significantly lower than workers in other industries. As the graphic below shows, the median hourly wage for workers in the retail sector is 32.4% lower than the median hourly wage for all other industries.1 Importantly, the lower wages in retail are not simply the result of demographic factors that might contribute to lower wages, such as the age or education levels of typical retail workers. Using a regression approach to control for demographic and regional factors, the data show that wages in retail are 18% lower than in other industries.2 This is the “wage penalty” of working in retail.

The prevalence of low-wage work in the retail sector leads to lower annual incomes and higher concentrations of poverty among retail workers. In 2013, the average annual weekly earnings of nonsupervisory retail workers was $423—that’s less than $23,000 per year, and more than $500 below the federal poverty line for a family of four. It should come as no surprise then that poverty rates for retail workers are significantly higher than for workers in other industries. The poverty rate for workers in retail was 10.1 percent, compared with 6.6 percent of workers outside of retail.3

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I can’t for the life of me understand what all the noise is about over the president’s plan to issue an executive order on immigration this evening. I remember many years ago when Ronald Reagan issued an executive order that gave many immigrants “amnesty.” At that time, Democrats did not threaten to sue him, because everyone said that it was the right thing to do. So why is it wrong now?

When President Reagan issued his executive order, many people from all around the world benefited. They had lived here for many years, working and living under false pretense, making minimum wage, and taking any job just to be employed—even though many were highly educated and had college degrees obtained right here in America. The same situation applies to those affected immigrants today. So why was it right to give those people under Ronald Reagan’s signature an opportunity, and wrong for Obama to do the same for the millions of immigrants who have lived—many for ten years or more—worked, paid taxes, and received an education in this country?

The Republicans have many immigrants in their ranks, and they must know that the president is doing the right thing but, because he is taking the initiative to make things right for these undocumented immigrants—just like he took the initiative to give health care to millions of Americans—they’re once again foaming at the mouth about it.

The president’s actions tonight will go a long way to make America better, both socially and economically.

Alyce Anderson is a Liberian American and the Executive Assistant to EPI President Larry Mishel.

This post originally ran on the Wall Street Journal‘s Think Tank blog.

The New York Times David Leonhardt is a sharp observer of American economic trends, but I think he took a wrong turn in his Monday piece on wages—and data released Wednesday by the Congressional Budget Office helps show why.

Mr. Leonhardt pointed out the dismal wage trends for the vast majority of American workers in recent decades and how it would be a heavy policy lift to reverse them. This seems right to me. But then he wrote:

“Washington could definitely do more to help growth: better infrastructure, a less burdensome tax code, a less wasteful health care system, more bargaining power for workers and, above all, stronger schools and colleges, to lift the skills of the nation’s work force.”

As they might say on “Seinfeld,” you can’t “yada yada” more bargaining power for workers. It’s the most important part of the story.

The root of the U.S. wage problem (which is, in turn, the root of America’s inequality problem) is that most workers aren’t seeing their wages keep pace with overall productivity growth. The policies on Mr. Leonhardt’s list are worthy, but most would not reliably close this gap between productivity and pay. Boosting the bargaining power of workers would.

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