The U.S. economy is more equitable when workers have the freedom to join together and bargain collectively through a union. The bottom line in the graph shows a sharp rise in union membership after enactment of the National Labor Relations Act (NLRA) in 1935. (The NLRA itself was the outcome of an explosion of worker organizing around 1920). For decades the NLRA protected workers’ rights to negotiate with their employers—rights that workers used to secure a fairer share of overall income generated in the economy. This worker leverage led to decades of fast and equitable economic growth that persisted through the 1970s. The top line in the graph shows that the top 10 percent of Americans collected almost half of all income in the late 1920s and early 1930s, but only around a third by the 1950s, when union membership was at its peak and gains were spread more evenly to the bottom 90 percent.

In the 1970s fierce corporate opposition to unions, coupled with policymakers’ failure to protect private-sector workers’ collective bargaining rights, led to policies and practices that strangled union organizing in the private sector. The rapid de-unionization that ensued contributed to wage declines for all workers and reversed much of the economic progress that had been made by the broad American middle class in the decades following World War II. While the NLRA still protects workers’ rights to unionize, the law has not kept up with the onslaught of employer anti-union practices. The graph shows that as union membership declined, the top 10 percent’s share of all income rose, returning to Great Depression levels by the 2010s.

Janus v. AFSCME, a case that will be argued before the U.S. Supreme Court in February 2017, could accelerate growing inequality. A decision in favor of the plaintiff in Janus would outlaw mandatory fair share fees in the public sector—letting nonunion members in a school or fire department or other public workplace benefit from union representation but not pay for it. This opens the door for employers to use fear and intimidation to erode financial support for—and thus membership in—public-sector unions the same way that anti-union legislation (such as so-called “right-to-work” laws) has eroded union membership in the private sector.

The fiduciary rule is an Obama-era regulation that protects Americans’ hard-earned retirement savings by requiring that financial professionals offering retirement investment advice put their clients’ interests first. The rule was supposed to be implemented on April 10, 2017. But the Trump administration has repeatedly delayed enforcement of the rule, most recently to July 1, 2019, and is using the rule-making process and delays to significantly weaken the rule.

Because of the enforcement delays, industry actors presenting themselves as neutral advisers can continue to steer retirement savers to products with high fees and commissions that benefit the advisers but reduce net returns for the client. The map shows the annual costs retirement savers in each state incur due to underperforming IRA assets that are invested in products for which savers received “conflicted” advice (that is, advice provided by financial advisers whose earnings depend on the actions taken by the client).1

EPI has used the data on annual losses to retirement savers from conflicted advice to estimate that an August 2017 Department of Labor directive delaying the rule for 18 months, to July 1, 2019, would cost workers saving for retirement $10.9 billion dollars over the next 30 years.

1. Underperformance of investment returns in which savers received conflicted advice can be attributed to a wide range of factors, including high fees, high trading costs, poor market timing, and increased risk exposure without increased returns.

The federal minimum wage was established in 1938 to help ensure that regular employment provided a decent quality of life. By making periodic increases in the minimum wage, Congress also guaranteed that the country’s lowest-paid workers would share in the benefits of broader improvements in the economy. For the first 30 years of the minimum wage’s existence, regular raises allowed the minimum wage to keep pace with growth in economy-wide productivity. But, as the graph shows, since the 1970s Congress has failed to adjust the minimum wage to match the economy’s capacity for higher wages—leaving low-wage workers behind.

The bottom line shows how inflation has eroded the buying power of a minimum wage income even as the economy grew and was able to afford a higher minimum wage. If you were paid the $7.25 minimum wage in 2017, you made 27 percent less—in inflation-adjusted terms—than someone who earned the minimum wage in 1968 (when the value of the federal minimum wage peaked, at $9.90 in 2017 dollars). The middle line shows that if the minimum wage had kept up with average wage growth for typical U.S. workers (specifically, production and nonsupervisory workers, who constitute essentially the bottom 80 percent of the workforce) since 1968, it would be $11.62 an hour. But even that would not have been sufficient to distribute the fruits of economic growth equitably. If the minimum wage had kept pace with rising productivity since 1968, someone earning the minimum wage in 2017 would have received $19.33 an hour—and millions of people earning above the minimum wage today would also be getting higher wages than they currently do.

The expectation that the minimum wage rise in step with broader trends in the economy would not have been unreasonable for previous generations—that was the trend throughout the 1950s and 1960s. Today’s minimum wage workers have been harmed both by the failure to raise the minimum wage in step with pay for typical workers and by the huge and growing gap between these nonsupervisory wages and economy-wide productivity. The Raise the Wage Act of 2017 would raise the federal minimum wage to $15 by 2024. Such a raise would certainly bring the pay of minimum wage workers closer to providing a decent quality of life, even though it would still fall short of what the economy could have delivered for low-wage workers over the past 50 years.

In the recent tax debate, proponents of corporate tax cuts once again trotted out the myth that taxes on American corporations are excessive and are responsible for recent slow economic growth. These proponents claim that cutting corporate tax rates will encourage companies to make productivity-boosting investments that would increase wages. We’ve noted the many ways this claim fails when tested against real-world evidence.

But the simplest rebuttal to this claim is this graph, which shows that corporate taxes as a share of the U.S. economy have been extraordinarily low in recent years, even as corporate profits have been historically high. At a time when ginned-up hysteria over federal budget deficits is used to attack crucial social insurance and income support programs like Social Security, Medicare, and nutrition assistance, it is odd that we’d ask even less of corporations when it comes to collecting taxes.

While taxes dominated the end-of-year agenda, cuts to the social safety net are looming. Republicans in Congress passed a budget resolution in October calling for draconian cuts to Medicare, Medicaid, and a number of key safety net programs like food stamps and Supplemental Security Income (SSI). In the wake of tax cuts providing huge benefits to the richest households and corporations, Republicans in Congress will likely assert that the federal budget deficit demands that we make these spending cuts. This predictable response would represent a triumph of chutzpah over economics. As past EPI research has shown, the deficit is not a pressing economic problem. But “deficit hysteria”—ginned up over decades by policymakers and analysts in both parties—could provide political cover for making cuts to popular social programs that would otherwise be politically impossible. This will devastate families that rely on these programs.

As the chart shows, these programs keep tens of millions of people out of poverty. For example, eliminating food stamps would push 3.6 million people, including 1.5 million children, into poverty, as measured by the Supplemental Poverty Measure. This cut alone would raise the total number of people in poverty to more than 48 million. Eliminating Supplemental Security Income would push 3.4 million people into poverty, including adults and children with disabilities. Eliminating housing subsidies would push 3.1 million people into poverty. (For more in the age breakdown of the population affected by these programs, see EPI’s expanded chart from September 2017, “Without government programs, millions more would be in poverty.”)

The legacy of economic disadvantage for black Americans is apparent in the enormous wealth divide between black and white families in the United States. In 2016 the average white household had nearly seven times as much wealth ($933,700 in financial assets minus liabilities) as the average black household (which had a net worth of $138,200). This relative disparity grows when looking at “typical,” or median, households (those in the exact middle). In 2016, the net worth of the typical white household was $171,000, almost ten times the $17,600 in wealth held by the typical black household. What the chart does not show is that these gaps persist even after accounting for age, household structure, education level, income, and occupation.

These numbers are as disturbing for the past inequities they represent as for the future opportunity gaps they foretell. Wealth provides a buffer of economic security against periods of unemployment, enables families to finance a child’s college education or a new business venture, and helps finance a comfortable retirement. But African Americans have been shortchanged out of the materials to build wealth. Besides facing discrimination in employment and wages, black families historically have been shut out of the most important wealth-building market: housing. Overall, home equity makes up about two-thirds of all wealth for the typical household. In short, for median families, the racial wealth gap is overwhelmingly a housing wealth gap. And this housing wealth gap is no accident; it is the outcome of intentional policies at all levels of government, in particular housing policies that prevented blacks from acquiring land, created redlining and restrictive covenants, and encouraged lending discrimination. These policies created and reinforced the racial wealth gap we are still struggling to address.

On average, black women workers are paid only 67 cents on the dollar relative to white non-Hispanic men, after controlling for education, years of experience, and location (using 2016 data). This distressing statistic reflects the dual inequities faced by black women—they are subject to both a racial pay gap and a gender pay gap. A key focus of those committed to a fairer economy should be closing these gaps and accelerating economic progress for black women. A number of myths block steps toward real solutions, including the myth that racial and gender pay gaps are simply due to black women making unconstrained choices to pursue careers that pay less. In reality, occupational segregation is not simply a voluntary choice, but is clearly affected by discrimination both before and after people begin their careers. Further, racial and gender pay gaps persist even within occupations.

The chart shows the average wages of black women and white men in a range of occupations. In every occupation shown—both female-dominated and male-dominated—black women earn less than white men. White male physicians and surgeons earn, on average, $18.00 per hour more than black women doing the same job ($54.94 versus $36.94). The gap for retail salespersons is also shocking, at more than $9.00 an hour ($20.12 versus $10.99). The data confirm that black women are underpaid, period.

In 2017, there was no meaningful pickup in the pace at which the labor market is improving. This figure shows the share of 25- to 54-year-olds (“prime-age adults,” in the jargon of economists) who are employed. From November 2013 to November 2016, this share rose by 2.1 percentage points, or an average of 0.7 percentage points per year. From November 2016 to November 2017, this share rose by 0.8 percentage points.

EPI set up the Autopilot economy tracker at the beginning of 2017 so that claims about changing economic indicators—such as the share of prime-age adults who are employed—could be judged in context. By pinpointing where key indicators were already heading, the tracker shows that the new administration inherited an economy that was already on the upswing. In fact, the economy has made steady and significant progress toward full economic health in every year since 2009. This progress continued in 2017, but not at a pace that was significantly greater than in recent years.

This failure of employment growth to measurably improve under the Trump administration is no surprise. So far, policymakers have enacted no measures that would measurably boost job growth (though plenty of policies have been passed to erode workers’ bargaining power and hurt their wage growth). Employment growth in 2017 simply represents the upswing that was already underway before 2017 began.

Finally, the on-trend improvement that we have seen in 2017 owes more to the Fed’s decisions to not raise interest rates aggressively enough to stomp out job growth than it does to anything the current administration has accomplished. Before too long the Trump administration (and the rest of us) may well regret its decision to not renew Janet Yellen’s term as Fed chair, as her successor may not follow her cautious approach to raising rates.

Average monthly private-sector job growth in the first 11 months of 2017 fell short of both prior years’ tallies and the Trump administration’s own job creation goals. With an average of 170,000 new jobs being added each month, private-sector job growth in the first 11 months of 2017 was slower than in any year since 2010. Some of this slowdown might be because the economy is moving closer to full employment. The huge stock of unemployed workers created by the Great Recession was largely reabsorbed into the economy in the years following 2009 and boosted job growth above its long-run trend between 2010 and 2016. But we shouldn’t be too quick to assume there’s no more slack in the labor market. For example, the share of prime-age workers with jobs remains quite depressed relative to previous job-market recoveries, as shown in the previous top chart. That suggests there still may be ample room to pull in workers who were idled by the economic crisis.

Early in its term, the Trump administration announced that it would create 25 million new jobs over a decade. Essentially, to meet this claim the economy would need to add an average of 208,000 jobs each month over the next 10 years. This monthly tally is ambitious but actually achievable for the first few of those years if the economy were to continue to absorb idled workers. But as the figure shows, even this moderately ambitious benchmark has been missed in 2017. And this monthly tally would be near impossible to meet toward the end of those 10 years, once most of the idled prime-age workers have been absorbed into the labor market. As EPI analysis has shown, adding 25 million new jobs in a decade would require massive immigration or forcing elderly Americans to work at unprecedented rates.

The median income of working-age households grew faster in 2015 than in any previous year. Growth in 2016 was also among the strongest on record for this statistic. This two-year span of historically rapid growth raised the median income of working-age households to $66,487 in 2016, up from $61,304 in 2014.

This growth occurred before the Trump administration was in place. Data on what happened to median household income in the first year of the administration will be available in fall 2018.

The strong growth in household income in 2015 and 2016 does not make up for the brutal hit to household incomes inflicted by the Great Recession and the slow recovery that has followed. But this growth absolutely constituted a welcome new trend and offers hope that middle-class households might really, finally, gain something from the steady recovery.

The large and persistent gaps in educational attainment between children of different races and income levels in the United States are profoundly disturbing. If education is to truly serve as a vehicle for upward mobility, these gaps must be closed. We will make little headway toward this goal if we don’t address the many ways that inequality contributes to these gaps.

The chart presents stark evidence that the broader inequities extending all through the American economy contribute to these gaps: the presence of skills gaps before formal education even starts. As the chart shows, low socioeconomic status (SES) children begin kindergarten already well behind their high-SES peers.

Socioeconomic status is a composite of information on parents’ educational attainment and job status as well as household income. The chart compares the average performance of children in the top fifth of the socioeconomic status distribution (high-SES) with the average performance of children in the bottom fifth (low-SES). Skills measured include reading and math and self-control and approaches to learning as reported by teachers. High-SES children score significantly higher in reading and math than their low-SES peers; gaps in both subjects are larger than a full standard deviation. High-SES children also score significantly higher on social and emotional skills, though the gaps are smaller (about one-third to one-half a standard deviation).

Though not reflected in the chart, these gaps are about as wide as they were for the last generation of kindergartners. These education inequalities not only threaten children’s development during their school years but shortchange them by lowering their economic prospects later in life. The lack of true equality of opportunity calls for a shift from blaming schools and teachers for achievement gaps that begin before school starts and that largely persist as children move through school. Instead we should be advancing comprehensive education policies that address the poverty and social inequalities that are the real drivers of low economic performance, and pursuing economic policies that address the broader structural forces that drive poverty and inequality and hold back our children.

Twenty-six states have laws on the books that prohibit cities and counties from enacting policies that raise standards for working people. The map shows the states with such “preemption” laws, and which of the five key worker rights the preemption laws target. In law, the term “preemption” refers to situations in which a law passed by a higher government authority, such as a state legislature, supersedes a law passed by a lower one, such as an ordinance passed by a city council. What the map doesn’t show is the proliferation of preemption laws since the turn of the century, particularly in the last five years. This same map in 2000 would have highlighted only Louisiana and Colorado, which preempted local governments from enacting higher minimum wages. In 2012, the map would have highlighted an additional eight states, with most preempting local minimum wage laws and/or local paid leave laws. In 2013, the number of states with preemption laws tackling other worker rights began its steady ascent.

Today, cities, counties, and other local governments in 25 states can’t set minimum wages higher than the state minimum wage. Local governments in 21 states can’t require that local employers offer paid sick leave or other forms of paid family or medical leave. Local governments in nine states can’t require that employers provide workers with advance notice of work hours or compensation for last-minute schedule changes. Local governments in seven states can’t require that employers with government contracts pay at least the local median wage for the given type of work. And local governments in six states can’t pursue project labor agreements that set basic conditions for worker safety and pay when building roads, bridges, or other municipal infrastructure.

What happened after 2010 to cover the map in red? While waiting for state and federal governments to act, local governments (such as cities and counties) began taking action to raise working conditions in their communities. Before 2012, only five localities had enacted their own local minimum wage laws, but as of 2017, 40 counties and cities have done so. Republicans in control of all branches of state government in a number of states pivoted to state preemption laws to lower those standards back down. A corporate-backed lobbying group, the American Legislative Exchange Council (ALEC), had model preemption laws with sample legislative language ready to adapt. The rapid spread of preemption followed, with the number of states with such laws more than doubling from 10 in 2012 to 26 in 2017, and the number of preemption laws more than quadrupling, from 15 to 67.

The federal minimum wage is meant to ensure a fair wage for the nation’s lowest-paid workers. But it hasn’t done that since 1968. Since the inception of the federal minimum wage in 1938, Congress has periodically raised it, ostensibly so that its real (inflation-adjusted) value would reflect changing economic circumstances. Before 1968, the real value of the federal minimum wage grew at roughly the same pace as the growth in labor productivity—i.e., the rate at which the average worker can produce income from each hour of work. This makes sense: if the economy as a whole can produce more income per hour of work, it means there is capacity for wages across the distribution to grow at a similar rate. But after 1968, when the real value of the minimum wage in today’s dollars was $9.63, the minimum wage stopped rising at the same pace as productivity. As the top line in the graph shows, had the minimum wage kept pace with rising productivity, it would be nearly $19 per hour today. Not $7.25.

This is only one way in which policymakers have failed to ensure that the lowest-paid Americans get their fair share of economic growth and improving labor productivity. As the middle line in the figure shows, if, since 1968, the minimum wage had even just been raised at the same growth rate as average hourly wages of typical U.S. workers, the minimum wage would be $11.35 today. To sum up, minimum wage workers are falling behind not only productivity growth but typical worker pay growth and pay growth of their 1968 counterparts! And as the next chart shows, typical workers (measured here as the nonsupervisory production workers who constitute roughly 80 percent of all private-sector U.S. workers) themselves are lagging behind highly paid supervisors and executives when it comes to claiming a share of economic growth.

The compensation of the CEOs of the largest firms has grown much faster than stock prices, corporate profits, and the wages of the top 0.1 percent. But the most dramatic difference is between the compensation of CEOs and the compensation of typical workers. From 1978 to 2015, CEO compensation grew 941 percent compared with just 10 percent for the compensation of a typical worker (annual compensation of the workers in the key industries represented by the sample).

The figure illustrates the gap in pay between CEOs and employees by tracking the ratio of CEO compensation to that of the typical worker. CEOs of major U.S. companies earned 20 times more than a typical worker in 1965; this ratio grew to 59-to-1 by 1989, and then it surged in the 1990s, hitting 376-to-1 by the end of the 1990s recovery, in 2000. The two stock market crashes after 2000 reduced CEO stock-related pay and caused CEO compensation to tumble. But by 2014, the stock market had recouped all of the value it lost following the 2008 financial crisis and the CEO-to-worker compensation ratio was back to 302-to-1. A dip in the stock market and the value of associated stock options led to a decline in CEO compensation in 2015 and, correspondingly, the CEO-to-worker pay ratio fell to 276-to-1, similar to what happened in other stock market declines at the start of the new millennium and during the Great Recession. Though the CEO-to-worker compensation ratio remains below the peak values achieved earlier in the 2000s, it is far higher than it was in the previous four decades.

The root cause of the extraordinary rise in inequality and the near-stagnant growth of wages for typical workers over most of the past generation is the pay-productivity gap. Before the late 1970s, wages of the vast majority of workers grew in line with productivity. In the late 1970s, typical worker pay growth split from economy-wide productivity growth. Productivity is a measure of how much income is generated in an average hour of work in the economy. While productivity after 1979 grew more slowly relative to previous decades, it did grow steadily, offering the potential for broad-based wage gains. But income gains were not broad-based. In fact, average pay (wages plus benefits) for the 80 percent of the private-sector workers who are not supervisors barely budged in that time. The growing wedge between productivity and pay is the income generated by workers in the economy that has been claimed by corporate owners and managers and others at the very top of the pay scale.

Closing the pay-productivity gap must be a part of an agenda to improve women’s economic security. Although the gap between what median men and median women are paid has narrowed (albeit too slowly) since 1979, the gap between typical workers’ compensation and economy-wide productivity growth has widened. Tackling both gaps would also raise the economic security of men. One example of why the pay-productivity gap needs to inform our thinking about progress in closing gender pay gaps is the fact that roughly a third of the progress made in closing the median gender wage gap since 1979 was due to the decline in men’s wages in an era of increasing inequality. Remedying unfairness of pay for women is necessary, but wage parity gained simply because male wages dropped is no cause for celebration.

The figure shows how high median wages for women could be if gender wage disparities had been closed between 1979 and today and if the economy had generated wage growth for all workers that matched economy-wide productivity growth. If the gender wage gap were closed and the economy’s gains broadly shared, women’s median hourly wages would be 69 percent higher today ($26.47 instead of $15.67). Notably, men’s median hourly wages would also be 40 percent higher. (To see how these differences compare for age and education cohorts, check out EPI’s new gender wage calculator.) These figures show that getting to gender pay equity is not a zero-sum game—if we also tackle inequality, typical men and women have much to gain.

In the wake of Trump’s election, some commentators have focused on the economic failures afflicting white working-class men. White working-class men are suffering, but they are not the only group suffering from the chasm between what the economy can provide and what it is providing, and their loss has not translated into gains made by typical workers of other races. In fact, wage gaps between workers of different races have widened at the same time that economy-wide productivity and wages for typical workers overall have diverged. In short, what has caused sluggish wage growth for the vast majority of all workers is the rise of inequality that has redistributed income toward the very top of the income distribution.

The figure shows that between 1979 and 2015, median hourly real wage growth fell far short of productivity growth—a measure of the potential for pay increases—for men as well as for women and for both black and white workers. And white workers are not losing income to their black counterparts. Median hourly wages of black men fell 5.7 percent, compared with a 1.0 percent decline for white men. Median hourly wages of white women grew 31.6 percent, compared with 15.2 percent for black women.

What this figure does not show is that black workers already start out with a big pay disparity. In 2015, black workers overall were paid 26.2 percent less than their white peers. What has this double penalty of overall wage stagnation and regress on racial pay disparities cost black workers? Quite a lot, according to a 2016 report by Valerie Wilson. If the 1979 racial wage gap at the median had closed by 2015 and the overall median had grown with productivity (63.9 percent) between 1979 and 2015, the median black worker would be earning an hourly wage of $26.47 instead of $14.14—an increase of $12.33. That means the hourly wage of the median black worker would be an astounding 87.2 percent higher! And under this scenario, the median white worker would also receive an hourly pay increase of $7.30—the difference between $26.47 and $19.17—boosting their wages by 38.1 percent. The vast majority of workers of all races would be better off if we addressed both class and racial inequalities, with larger gains for African Americans because of the dual penalties imposed by class and race.

All workers would be better off in terms of wage levels had the right of workers to associate and bargain collectively not been severely eroded in recent decades. Between 1979 and 2013, the share of private-sector workers in a union fell from about 34 percent to 10 percent among men, and from 16 percent to 6 percent among women. This decline in union density has eroded wages for nonunion workers at every level of education and experience, costing billions in lost wages. For the 32.9 million full-time nonunion women working in the private sector and the 40.2 million full-time men working in the private sector, there is a $133 billion loss in annual wages because of weakened unions. This translates to real weekly wage losses for workers. Women would be making $13.80 more a week and men would be making $52.39 more a week, had union density (the share of workers in similar industries and regions who are union members) remained the same as in 1979.

Unions keep wages high for nonunion workers for several reasons. Union agreements set wage standards that nonunion employers follow. And a strong union presence prompts managers to keep wages high to prevent workers from organizing or leaving. Unions also set industry-wide norms, influencing what is seen as a “moral economy.”

Though not shown in the graph, working-class men have felt the decline in unionization the hardest. Specifically, nonunion men lacking a college degree would have earned 8 percent, or $3,016, more in 2013 if unions had remained as strong as they were in 1979.

A new data set confirms what we know about the enormous increase in income inequality after 1979. This data set allows us to take another cut at this issue, with all of total national income and its distribution accounted for—market-based incomes like wages and dividends, transfer incomes like Social Security and Medicare, and even the income stemming from direct government purchases. The figure charts incomes (indexed to be 100 in 1979) for the bottom 50 percent of households, bottom 90 percent of households, households between the 50th and 90th percentiles, households in subgroups of the top 10 percent, and the top 0.1 percent of households. The results are clear: households nearer the top of the income distribution have seen far more rapid growth in recent decades. And counting income in the form of government benefits does not close the gap between income growth at the top and the income growth of everybody else.

Over the past generation of economic life, the U.S. economy undertook a grand experiment in making defined-contribution (DC) pension plans such as 401(k)s, often financed directly by workers’ savings themselves, the primary vehicle of private retirement security. This experiment has decisively failed. Overall pension coverage has not increased, and fewer Americans are in defined-benefit (DB) plans (think company pensions). The DB plans crowded out by DC plans were more secure, providing a guaranteed income for life that was not subject to the vagaries of the stock market. They were also much more equal than DC plans because they were employer-funded and participation was automatic (rather than workers bearing most of the costs and all of the risks).

Nearly half of working-age families have nothing saved in retirement accounts, and the median working-age family had only $5,000 saved in 2013. Meanwhile, families in the 90th percentile of retirement savings had $274,000 in retirement, and the top 1 percent of families had $1,080,000 or more (not shown on chart). These huge disparities reflect a growing gap between the haves and the have-nots since the Great Recession, as accounts with smaller balances have stagnated while larger ones have rebounded.

The agonizingly slow pace of recovery from the Great Recession is easy to explain: it is the result of austerity policies championed by Republican policymakers at the federal and state levels. Like every other postwar recession before it, the Great Recession was caused by a shortfall in aggregate demand, meaning that the spending of households, businesses, and governments was not sufficient to keep the economy’s resources fully employed.

Despite the Great Recession being the sharpest and longest on record since World War II, and despite monetary policy reaching its conventional limits to boost spending early in the recession, policymakers made damaging decisions to limit public spending following the recession’s trough in 2009. This growth has been historically slow relative to other business cycles even as the economy needed substantially faster-than-average growth to mount a full and timely recovery.

The figure shows the growth in per capita spending by federal, state, and local governments following the troughs of the four recessions. Astoundingly, per capita government spending in the first quarter of 2016—27 quarters into the recovery—was nearly 3.5 percent lower than it was at the trough of the Great Recession. By contrast, 27 quarters into the early 1990s recovery, per capita government spending was 3 percent higher than at the trough; 23 quarters following the early 2000s recession (a shorter recovery), it was 10 percent higher; and 27 quarters into the early 1980s recovery, it was 17 percent higher.

The year 2017 looks to be the year that the Fed begins raising short-term interest rates in earnest. The Fed should raise rates only when it fears the economy is growing too fast and pushing unemployment low enough that workers are empowered to demand (and get) raises above what their productivity justifies. Data on nominal wage growth show that the economy is not getting overheated and thus a rate increase is not justified.

The pace of economic growth should be considered unsustainable only when increases in labor costs force firms to raise prices enough to accelerate inflation above the Federal Reserve’s stated goal of 2 percent inflation. An absolutely crucial link in this chain is wage growth. If nominal (i.e., not inflation-adjusted) wages simply grow at the rate of economy-wide productivity, then wages are putting no upward pressure on prices. To see why, think of a 2 percent raise in hourly pay of a worker whose productivity (how much they produce in an hour) also rises 2 percent. The worker is getting 2 percent more, but is also producing 2 percent more. So the labor cost per unit of output is unchanged, and there is zero upward pressure on firms’ costs, or overall inflation. And the goal of Federal Reserve policy is not zero upward pressure on prices (or 0 percent inflation). Their stated target is 2 percent inflation. This means that nominal wages can grow at the rate of economy-wide productivity growth plus 2 percent before they are putting enough upward pressure on prices to make the Fed rein them in. EPI’s nominal wage tracker looks are how wages have grown over this recovery relative to a target of 1.5 percent (a common estimate of long-run, trend productivity growth) plus 2 percent. Nominal wage growth has been consistently below this target, meaning there is very little reason to worry about overheating in the economy.

Reducing gender and inequality wage gaps and lowering unemployment enough to spur sustainable wage growth are absolutely essential steps if we are serious about restoring economic security to millions of working families. But a working labor market requires more than just jobs and wages. It requires a policy infrastructure that enables workers to enter the labor market and be productive in their roles as employees because they don’t have to make difficult choices between their careers and their caregiving responsibilities.

Paid family leave and subsidized child care provide family security, which benefits employers and the economy. But there are currently no national standards regarding paid family leave or subsidized child care. Each worker is left to the whims of individual company policies, which often means no allowance or support for family leave or child care. Therefore, workers have to make difficult choices between their careers and their caregiving responsibilities precisely when they need their paychecks the most, such as following the birth of a child or when they or a loved one falls ill. The lack of these policies particularly affects women, as they currently take on the lion’s share of unpaid care work. In contrast, many of our peer nations have such policies. Not surprisingly, the United States has fallen far behind some of our international peers in the share of women who are working. The graph shows the share of women age 25–54 with a job between 1995 and 2014. While the share of prime-age women with a job rose in Germany, Canada, and Japan, in the United States it actually fell. Policies that help workers, particularly women, balance work and family could meaningfully increase women’s employment, which would also mean more earnings for families and more economic activity for the country. (See EPI’s latest investigation into child care for how progressive child care policy, in particular, can benefit families, reduce inequality, and increase economic growth.)

Work-life balance is a fundamental goal of the Fair Labor Standards Act (FLSA). Its requirement that employers pay hourly and lower-earning salaried employees a premium for time worked beyond 40 hours a week makes the FLSA the most family-friendly law ever passed in the United States. Excessive work is detrimental to family life, health, well-being, and productivity, and the law aims to protect workers who are junior enough that they can be forced to work extra hours. If not for the law’s overtime rules, tens of millions more workers would be working 50, 60, or 70 hours a week for no additional pay, just as millions of Americans did before the FLSA was enacted in 1938.

But millions more are still dealing with this overwork and stress on families, in part because the salary threshold that determines whether workers are automatically eligible for overtime pay is set for a 1970s economy, not a 2010s economy. As shown in the graph, in 1979 more than 12 million salaried workers earned less than the salary threshold and were therefore automatically guaranteed the right to overtime pay, regardless of their duties. Today, with a 50 percent bigger workforce, only 3.5 million salaried employees are automatically protected.

A new rule that guaranteed overtime protection to salaried workers making between $23,660 and $47,476 was instituted by the Department of Labor and was supposed to go into effect on December 1, 2016. But an egregiously bad legal decision has delayed enforcement of this common-sense rule.

The presidential campaign often highlighted the decline of American manufacturing jobs. An incorrect conventional wisdom among economic commentators holds that the decline of manufacturing employment has been driven by automation. This explanation does not fit the facts. Manufacturing employment was actually quite stable (aside from business cycle fluctuations) for 35 years between 1965 and 2000. But certainly there was plenty of automation between 1965 and 2000. Indeed productivity growth (a proxy for automation) was just as rapid in those years as thereafter.

But 3 million jobs were lost in the 2001–2003 recession and jobless recovery from that recession. Then rapidly growing trade deficits—particularly with China—kept the subsequent recovery from aiding manufacturing jobs. This meant that manufacturing entered the Great Recession without having regained the jobs lost in the previous recession, and in fact having lost a small number more as the rest of the economy recovered. As a result of two recessions and the “China shock,” the manufacturing sector today has nearly 5 million fewer jobs than it did in 2000.

Corporate profits don’t support the claim that U.S. corporations need tax relief to become more competitive. In recent years, in the U.S. non-financial corporate sector, both pre-tax and post-tax profit margins—the share of revenues claimed by profits rather than employee compensation or other business costs—are at their highest levels since the mid-to-late 1960s.

Corporations complain about high tax rates stifling economic growth and profitability. But since 1952, corporate profits as a share of the economy have risen dramatically (from 5.5 percent to 8.5 percent), while corporate taxes as a share of the economy have plummeted (from 5.9 percent to just 1.9 percent). That is a 55 percent increase in profits and a 68 percent decrease in taxes.

Federal revenue contributed by corporate taxes has dropped by two-thirds over the last six decades—from 32.1 percent in 1952 to 10.8 percent in 2015. Corporations used to contribute $1 out of every $3 in federal revenue. Today, they contribute just $1 out of every $9—at a time when they have never been more profitable.

When corporations do not pay their fair share of taxes, public investments can suffer. While there may not be a direct cause and effect, it is worth noting that corporate profits as a share of the economy have risen by 37 percent over the last six decades—from 6.2 percent in 1956 to 8.5 percent today. At the same time, federal spending on infrastructure as a share of the economy has remained flat, while the U.S. population has ballooned.

Many corporations do not pay the official 35 percent federal tax rate on all their profits (domestic and offshore combined). Citizens for Tax Justice (McIntyre, Gardner, and Phillips 2014) found that Fortune 500 companies that were profitable over 5 years paid a 19.4 percent federal corporate income tax rate. Using data from Gabriel Zucman (2014) we find that over 2010–2013, the effective U.S. federal corporate tax rate was 12.5 percent—down from 43 percent in the 1950s. Similarly, the Government Accountability Office (GAO 2014) found that profitable U.S. corporations paid an effective federal tax rate of 14 percent on their worldwide income over 2008–2012.

The official, or statutory, U.S. corporate tax rate is 35 percent. But that is not what most companies pay, especially multinational corporations that are able to shift profits to tax havens. Two major studies show that the average effective tax rates on profits in tax havens range from just 3.0 percent to 6.6 percent (Clausing 2016; Zucman 2014). Such a low rate for multinationals requires the rest of us to make up the difference. It also gives them an unfair advantage over domestic firms, many of which pay close to the statutory rate.

The share of U.S. offshore corporate profits that are in tax-haven countries has increased dramatically since 1982—from about 23 percent of the total to 55 percent in 2013. Corporations shift profits to these low-tax jurisdictions—which include Ireland, the Netherlands, Luxembourg, Switzerland, Bermuda, and Singapore—to dodge paying their fair share of taxes.

Corporations had $2.4 trillion in profits booked offshore in 2015 (CTJ 2016a). This is equal to 13.4 percent of U.S. GDP. This has risen from $2.1 trillion as of 2014 (Credit Suisse 2015). Corporations have not paid any U.S. taxes on these profits because our tax system lets them defer paying taxes until that income is brought back to the U.S. parent corporation (i.e., repatriated).

The amount of untaxed offshore profits stood at $434 billion in 2005. This means it has increased nearly five-fold over 10 years—four-fold as a share of GDP. Congress established a one-time repatriation tax holiday in 2004 with a tax rate of just 5.25 percent, which took effect in 2005. Corporations were barred from using the funds for stock buybacks, but it is estimated that up to 92 cents of every dollar repatriated went to shareholders, primarily through stock repurchases (Dharmapala et al. 2009, 26). Since then, offshore profits have increased dramatically in anticipation of another tax holiday.

Just two industries—high-tech/information technology and pharmaceutical/health care—hold about half of offshore profits. Information technology firms hold 29 percent, while health care companies, primarily pharmaceutical firms, hold 20 percent. Companies that earn their profits from intellectual property, such as patents, are best able to shift their profits to tax havens.

Proponents of corporate tax breaks will often refer to offshore corporate profits as “trapped.” For instance, Apple CEO Tim Cook has stated that “almost nobody’s bringing back their money” (NPR 2015). However, in reality it is simply that large multinational corporations don’t want to pay the taxes they owe. A Credit Suisse report shows that in every year but one between 2006 and 2014, more U.S. offshore earnings were repatriated or were earmarked for future repatriation than were stashed offshore. This tells us that many American corporations are in fact bringing their money back home and paying the taxes they owe. Rather, as detailed in the next few charts, offshore tax avoidance is mainly about particular large multinational corporations that refuse to pay the taxes they owe.

By the end of 2015, Fortune 500 companies held $2.4 trillion in profits booked offshore. Just four corporations—Apple, Pfizer, Microsoft, and General Electric—had one-quarter of these untaxed profits offshore. Only 10 corporations hold nearly 40 percent of them, and 50 companies hold more than three-quarters of these untaxed offshore profits. (See Appendix Table A1 for the list of all 50 companies.) These corporations are the most adept at dodging taxes because of their ability to shift profits offshore.

The share of corporate income paid in taxes to foreign governments on offshore profits stands at between 6.4 percent and 10.0 percent, according to respected estimates. That means U.S. corporations will owe to the U.S. Treasury between 28.6 percent and 25 percent when their profits are repatriated, based on a 35 percent tax rate (less deductions for foreign taxes paid). Thus, corporations owe between $533 billion (based on $2.1 trillion in offshore profits in 2014) and $695 billion on those offshore profits (based on $2.4 trillion in offshore profits in 2015).

President Obama’s corporate tax reform plan proposes that a mandatory 14 percent tax be assessed on the offshore profits (less credits for foreign taxes paid). A 14 percent rate would raise $195 billion—a tax break of roughly $500 billion from the up to $695 billion that is owed. Republicans have proposed even lower rates that would lose even more revenue.

Some very large multinational corporations owe a substantial amount of U.S. taxes on their offshore profits because they have paid very little in foreign taxes, as many of these profits are booked in tax havens.

For example, Apple, which reported paying just 4.6 percent in taxes on its offshore profits (CTJ 2016a, 6), owes nearly $61 billion (based on the 35 percent tax rate Apple would owe if it brought its offshore profits home, less the foreign taxes already paid). Microsoft, which reported paying just 3.1 percent on its offshore profits, owes nearly $35 billion. Citigroup owes nearly $13 billion.

But these large multinational corporations would get huge tax breaks under President Obama’s proposal to apply a 14 percent tax rate to existing offshore profits. For example, Apple would owe about $24 billion—a tax break of about $37 billion from the 35 percent rate.

Corporations say they want Congress to cut the tax rate on the profits that have accumulated offshore in order to encourage them to bring the money home to make investments. That is not necessary. Corporations are free to invest these untaxed profits in any U.S. firm, deposit them in any U.S. bank, or use them to purchase any federal, state, or local government security as long as it is not directly returned to the U.S. parent in the form of dividends. A congressional study found that 46 percent of the offshore profits of 27 major corporations were already invested in the United States (as of 2010).

And corporations are finding even more clever ways to skirt the rules. Microsoft has used its offshore profits to acquire Skype and LinkedIn, while Apple has used its offshore profits to benefit shareholders by undertaking large share buybacks. They are able to engage in such moves, while still avoiding paying the taxes they owe, by financing the moves with borrowing using their offshore cash as implicit collateral.

Corporations are able to accumulate offshore profits without paying U.S. taxes on them because of a loophole known as “deferral.” It lets corporations defer paying taxes on profits earned overseas indefinitely, as long as they claim it is permanently reinvested offshore. Using estimates from the Joint Committee on Taxation, we project the deferral loophole will cost the U.S. Treasury almost $1.3 trillion in tax revenues over 10 years—or $126 billion a year, on average. Ending deferral would also eliminate some incentives to ship jobs offshore, end incentives to shift profits offshore, and make the tax system more equitable so that multinational corporations no longer pay a much lower tax rate than domestic firms.

The driving forces behind offshore tax avoidance are the deferral loophole and the tax incentives that exist for multinational corporations to shift their U.S. profits to make them appear as offshore profits. That is, much of the offshore earnings that corporations can defer taxes on weren’t really earned offshore at all, and corporations have no intention of keeping them offshore. They are simply waiting for Congress to grant a new tax holiday to bring them home at a low tax rate. The resulting revenue loss to the U.S. government is growing substantially—and was $111 billion per year as of 2012. This is equal to roughly 0.7 percent of U.S. GDP.

Multinational corporations can create complicated arrangements through the varied array of bilateral tax agreements that exist between countries, and they can manipulate transfer pricing rules (rules that determine the prices at which multinational corporations exchange goods and services internally). The simplest example is assigning all profits earned from royalty payments on intellectual property assets (patents, for example) to the subsidiaries of U.S. corporations based in low-tax countries.

It is clear that U.S. corporations haven’t actually relocated production for the sake of “competitiveness”; they are simply dodging taxes. Of the top 10 profit locations for overseas affiliates, seven are tax havens with effective tax rates of less than 5 percent. Ninety-eight percent of the revenue loss results from profit shifting to countries with corporate tax rates of less than 15 percent. And 82 percent of revenue loss stems from profit shifting to just seven tax-haven countries. These seven tax havens are responsible for 50 percent of all foreign profits of U.S. multinational firms. And those seven tax havens account for only 5 percent of their foreign employment (Clausing 2016).

In recent years, corporate income shifting has increasingly eroded the U.S. corporate tax base. If not for income shifting, corporate income tax revenues as a share of GDP would have been almost 50 percent higher in 2012—2.2 percent rather than 1.5 percent.

The reduction of corporate income tax revenue in 2012 due to income shifting is estimated at $111 billion (Clausing 2016). This is roughly the size of sequestration cuts to federal spending that Congress made in the Budget Control Act (BCA) of 2011 (Kogan 2013). The BCA-driven cuts remain the single biggest reason why full recovery from the Great Recession has taken more than 7 years to arrive (Bivens 2016). In short, the budgetary effects are likely to have been roughly equivalent had Congress tackled corporate income shifting in 2012 rather than enforcing arbitrary spending cuts. And ending corporate income shifting would have provided much less of an economic drag than did the BCA spending cuts.

While the scale of offshore tax avoidance is enormous, it shouldn’t be overlooked that businesses likely avoid taxes about as much here in the United States. Increasingly, the business sector is reorganizing as various “pass-through” entities to avoid taxes. Pass-through entities are businesses whose incomes are not taxed at the corporate level, but instead “passed through” entirely to the business owners and then taxed at individual income-tax levels.

The most dramatic shift is the rise in partnership income. In 1980, partnerships (a relationship where two or more persons join to carry on a trade or business) accounted for 2.6 percent of business income. Today they account for 26 percent.

The rise of pass-through income has eroded the corporate income tax base. Standard C-corporations (which pay the corporate income tax) accounted for almost 80 percent of business income in 1980. By 2012, they accounted for only 47 percent.

Increasingly, evidence points to the rise of pass-through business income being due to tax avoidance. Cooper et al. (2015) note that their inability to unambiguously trace 30 percent of partnership income to an ultimate owner or originating partnership lends evidence to the belief that firms are organizing opaquely in partnership form to minimize their taxes.

As with the rise of offshore profits, the rise of reorganization is likely due to the available tax incentives. Pass-through entities can avoid the first layer of the corporate income tax (i.e., the 35 percent statutory rate), and further minimize taxes by organizing opaquely. The capital income generated by standard C-corporations faces an average total tax rate of 31.6 percent. This rate includes not just an estimated 22.7 percent rate on C-corporations, but also an effective 8.9 percent tax on dividends. On the other hand, by organizing as an S-corporation, a company can expect an average tax rate of 25 percent. And indeed, it appears businesses have responded to these tax incentives. S-corporations have grown as a share of business income from less than 1 percent in 1980 to about 16 percent today.

Even more lucrative are the tax avoidance strategies available to partnerships. Partnerships face an average tax rate of just 15.9 percent. And one of the largest tax incentives in partnership organization is the ability to organize opaquely. Cooper et al. (2015) find that collapsing all circular partnerships (where partnership income could not be uniquely linked to non-partnership owners) into one would imply they pay a rate of about 8.8 percent.

Like offshore tax avoidance, this costs the rest of us in the form of forgone tax revenue. If pass-through activity had remained at 1980s levels, Cooper et al. (2015) find that 2011 tax revenue would have been approximately $100 billion higher.