Today, EPI Economist Elise Gould testified before the U.S. House of Representatives Ways and Means Committee on rising inequality in the United States.
In her testimony, Gould argued the poor performance of American workers’ wages in recent decades—particularly the failure of workers’ wages to grow anywhere near the pace of overall productivity—is one of the country’s central economic challenges. She notes that a range of other economic challenges—reducing poverty, increasing mobility, closing racial and gender wage gaps, and spurring a more complete recovery from the Great Recession—also rely largely on boosting hourly wage growth for the vast majority.
“Going forward, policymakers should prioritize keeping labor markets tight while also strengthening institutions and policies that provide workers the leverage they will need to achieve decent wage growth even when the economy is not at full employment,” said Gould. “Policymakers should strengthen and enforce labor standards, make it easier for workers to collectively bargain, and raise the federal minimum wage.”
Gould explained income inequality is the primary reason why the vast majority of Americans experienced disappointing gains in their living standards over the last four decades. Since labor market income (wages and wage-related income) representing the largest source of income for most Americans, policymakers cannot tackle income inequality without tackling wage growth.
Wage growth has been uneven in the last four decades, with sizable growth only occurring at the top, while wages for most workers have failed to rise with productivity growth. This uneven wage growth continued through the 2000s, as wage gaps between demographic groups persisted and, in some cases, worsened. Recent wage gains for the lowest-wage workers can be explained by tight labor markets and the institution of a number of state-level minimum wage increases.