In a recent blog post, we introduced a calculator showing how much higher your wages (for a stylized definition of “your”—more on this below) could be if they had kept pace with economy-wide productivity, defined as economic output produced in a given hour of work. Why is this relationship between wages and productivity interesting? Well, for decades following World War II, wages across the board closely tracked productivity. In recent decades, however, while average wages (almost) track productivity growth, wages for the vast majority of Americans have not. So, telling people what this wedge between productivity and wage-growth means in dollar terms seems like a useful way to make rising inequality less abstract and more salient.

The calculator itself is pretty spare, so I figured I’d take this blog post to explain a little more about our methods. First, we constructed the actual wage distribution for 2012 by using the BLS’s CPS-ORG data (Bureau of Labor Statistics Current Population Survey Outgoing Rotation Group).

Next, when somebody inputs their own wage into the calculator, we use this 2012 distribution to figure out where they fall in the overall wage distribution. Specifically, we are looking at where that wages falls with respect to the ventile cuts in that distribution—that is, for instance, between the 55^th and 60^th percentile of the wage distribution. Next, we look at that same point in the wage distribution of 1979.

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What we read today, as well as some good pieces from Labor Day:

• Detroit, Labor Day and a Hard Day’s Night (The Hill)
• The STEM Crisis Is a Myth (Spectrum)
• Hispanic College Enrollment Surges in 2012 (Census.gov)
• Labor, Then and Now (New York Times)
• Why business needs a stronger labor movement (MSNBC)

The nation has made great progress in race relations in the last 50 years. But in some respects, we’ve gone backwards, and we continue to do so.

A case in point is a Wednesday interview with U.S. Secretary of Education Arne Duncan on NPR’s Diane Rehm Show.

Host Susan Page asked the secretary about his views on racial integration. I was a panelist on the program, and was asked to comment.

Ms. Page’s specific question concerned a lawsuit in Louisiana. This is what Secretary Duncan said about the broader issue of racial integration:

“I fundamentally think the need for integration and more integrative schools is very real, and there are things that we can do. Obviously, there are housing patterns that present challenges.… But I was fortunate to go to an integrated school, you know, all the way through K-12.

And I don’t think I could do a job like this was I not, you know, didn’t have that kind of opportunity. And far too many children today are denied that opportunity. So, yes, we want to do everything to make sure they’re, you know, getting rigorous course work and have great teachers and are academically prepared for college. But you want children to grow up comfortable and confident with other people who come from different backgrounds from them.

And if they don’t have those opportunities—not that you can’t learn it as an adult, but it’s much harder. So whatever we can do to continue to increase integration in a voluntary way—I don’t think you could force these kinds of things—we want to be very, very thoughtful and to try to do more in that area quite frankly.”

It was a shocking statement in two respects, but typical of how even many liberals who claim to support racial justice today think of integration.

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Washington, DC, Mayor Vincent Gray has not announced a decision yet on whether he will veto the bill to require big, billion-dollar retailers to pay a fair wage to their employees in the District of Columbia. The writing seems to be on the wall, however, given that Gray’s deputy mayor for planning and economic development, Victor Hoskins, is holding the bill up as a “job killer.”

Why is a bill that requires total compensation far below the national median wage ($16.30) considered a job killer? The Large Retailer Accountability Act would require the biggest retailers to pay $12.50 an hour in total compensation (wages and benefits), barely more than the federal poverty income threshold of $23,550 for a family of four and nowhere near what it costs to live in the District. The LRAA is flexible and permits a lower wage: it would permit an $11.50 an hour wage, for example, if the business paid other benefits like health care or a pension contribution that equaled at least $1.00. How is that a job killer for a billion dollar corporation? Well, it just is, says Walmart, which has threatened to abandon plans for three new stores in DC if the bill is enacted.

For politicians, the prospects of visible new jobs (no matter how poorly they pay) are almost irresistible, so any threat to the three Walmart stores, however much it smacks of bullying and exploitation, makes some of them blind to the other implications of Walmart jobs paying about $8.90 an hour.

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In last month’s jobs report, virtually every indicator demonstrated that, more than four years since the official end of the Great Recession, we have not yet entered a robust jobs recovery. That main point will not change when the August numbers are released on Friday; we will very likely see a continuation of these troubling labor market trends that persist due to weak hiring.

Additional Indicator to Watch: It is possible that the public sector will have added jobs in August. If so, this would be the second month in a row of gains (in July, the public sector added 1,000 jobs). This would represent an important step in the right direction—jobs losses in the public sector have been an enormous drain on the recovery. However, it’s useful to keep in mind just how large a public-sector jobs hole in the economy faces. Since the recovery began in June 2009, the public sector has lost 733,000 jobs. Public sector employment should naturally grow as the population grows. To keep up with population growth over this period, public sector employment should have increased by around 680,000.

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Americans probably have a vague sense (and dread) that Washington will once again be preoccupied with budget issues this fall. Debates over the budget get airy and general very quickly, so it’s useful to focus on some key, specific issues that actually matter. One of these real issues—one that matters a lot for the pace of economic recovery—is the level of discretionary spending that will be agreed to in the “continuing resolution” for fiscal year 2014.

The current fiscal year ends September 30, so some arrangement to fund the federal government after this date must be arranged. But because prospects for agreeing on any substantive change to spending priorities is so dim, the assumption is that a “continuing resolution” will be passed that simply funds the government at levels currently called for under law.

But even this budget auto-pilot approach will not be uncontroversial, and the major sticking point regards discretionary spending levels for 2014.

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In honor of Labor Day, we made a little tool—based on our project inequality.is—that shows how much you would be making if wages had kept pace with productivity, a key indicator of an economy working for all.

Economic inequality is a real and growing problem in America. Since the 1979, workers are working more, making more goods, and not reaping the rewards of their increased productivity. Instead, CEOs and executives—the top 1% of earners—now take home 20% of the nation’s income.

But it doesn’t have to be like this. Growing inequality isn’t an inevitability—it was created. It’s the result of intentional policy decisions on taxes, trade, labor, and financial regulation. But that’s the good news: if inequality is not inevitable, then it can be fixed.

Take a look, and share with your friends. And remember that American workers should be earning more than we are. To do something about it, visit inequality.is.

[epi-wagecalculator]

Last week, Dylan Matthews wrote that, “You can always rely on the Economic Policy Institute for really depressing charts about just how far behind the U.S. middle class is falling.” In an attempt to show our positive side, here’s a new video, from our friends at the Topos Partnership, that explains the economy in terms everyone can understand.

The video makes the case that helping low wage workers helps everyone, and it does it without depressing charts or regression analyses. Given that today’s weak labor market is due to a severe demand shortage, raising wages at the bottom and middle can indeed boost economy-wide demand. When the economy is closer to full-employment, raising wages at the bottom and middle may not necessarily lead to higher GDP, but increasing the minimum wage and strengthening labor standards creates a floor that raises living standards for everyone. That, to us, is the very definition of a better-working economy.

NPR’s Planet Money had a good story this week about problems with the official measure of poverty, noting the general consensus among academics, researchers, and policy analysts alike that the federal poverty line has some fundamental flaws.

For one, the poverty line doesn’t take into account geographic differences—ignoring the widely varying regional prices for necessities like rent and child care. In New York City for example, where Marion Matthews, the single mom in the NPR story lives, rent and child care for a one-adult-one-child family can cost $2,544 per month, but only costs $923 per month in Simpson County, Mississippi.

Furthermore, the federal poverty line is calculated using a method that is obsolete given recent and historical trends in the U.S. economy. The current methodology was designed in 1963, and it basically set the poverty line at three times the cost of a basic food budget. Since then, the line has been only updated to account for overall inflation. Thus, for example, it doesn’t accurately reflect the increasing share of family budgets going towards housing and health care and the decreasing share going to food.

Besides these problems in calculating the right threshold for poverty, the current methodology does not account for resources that help raise living standards, such as food stamps and tax credits.

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On February 13, 2012, Apple announced that it would be relying on inspections by the Fair Labor Association as a path to ending labor rights abuses in its supply chain, leading to front page coverage in the New York Times. Six weeks later the FLA released a report documenting a range of serious labor rights violations at three Foxconn factories making Apple products, most of them previously reported by independent investigators whose findings Apple had largely ignored. Apple, Foxconn and the FLA pledged that these violations would be addressed through reforms to be implemented by July 2013.

That deadline has now passed, strangely unremarked upon by Apple and its chosen labor rights monitor, and Apple has not made good on its commitments. It is clear from interim verification reports by the FLA and from independent assessments that progress in Apple’s supply chain has fallen far short of the sweeping change promised early last year, particularly in the areas of unpaid compensation, inadequate wages, illegal overtime, violations of workers’ rights to freedom of association, and the scope of the reform efforts within Apple’s full (and massive) supply chain. The FLA’s August 2012 and May 2013 interim reports claimed great strides, but included concrete findings that often belied this positive spin (as we discussed here and here).

The FLA reports helped obscure a number of disturbing realities.

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