New Report Blames Corporate Tax Cuts, Attacks on Unions for Persistent Inequality and Slow Wage Growth Among Low Earners in US

Americans who already enjoyed high incomes saw the most growth in their wages in 2019, according to a new report released Thursday, while wage growth for low hourly workers was sluggish—a continuation of what the Economic Policy Institute calls an “alarming trend” that has emerged over the last four decades.

In its report, “State of Working America Wages 2019,” EPI revealed that median hourly wages grew by just 1% over the past year, with racial and gender wage gaps persisting, while earners in the 95th percentile saw their incomes grow last year by 4.5%.

“Policymakers should take steps to foster strong wage growth, such as raising the federal minimum wage, addressing pay disparities, and protecting and strengthening workers’ rights to bargain collectively for higher wages and benefits.”
—Elise Gould, EPI
Even with wage growth for top earners, the think tank said, the median wage in the U.S. “is only $19.33 an hour, which translates into about $40,000 for a full-time, full-year worker.”

Unequal wages and wage growth “have been defining features of the U.S. labor market for the last four decades, despite steady productivity growth,” Elise Gould, senior economist for EPI and author of the report, said in a statement. However, she added, persistent inequality is the result of political choices—not an inevitability.

“These alarming trends,” Gould said, “are a direct result of a series of policy decisions that have reduced the economic power of most workers to achieve faster wage growth.”

The report counted policymakers’ failure to regularly raise the minimum wage, companies offshoring jobs as a bargaining tactic to keep wages low, and corporate tax cuts like those passed by the Republican Party in 2017 among the reasons for worsening income inequality.

“We need to use all the tools in our toolbox to reverse these policy trends,” tweeted Gould.

In the study, which looked at wage growth over the past 40 years, EPI reported that wages for many workers have not just leveled off but have gone down. The bottom 50% of college graduates earn less than they did in 2000, and the wage gap between black and white Americans has worsened in the past 20 years. In 2000, there was a 10.2% gap between black and white workers’ pay, compared to a 14.9% gap now.

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The wage gap between men and women persists—even among women who are more highly educated than their male counterparts—but it has narrowed slightly, with women earning 85 cents on the dollar.

Policy changes with workers in mind have demonstrably improved pay for low-wage workers, EPI reported. In states where the minimum wage was raised between 2018 and 2019, low-wage workers saw an average increase of 4.1% in pay, compared to a 0.9% growth in states without new minimum wage laws.

EPI rejected myths that slow wage growth for the lowest-paid Americans can be “be explained away by positing education shortages, by including benefits and looking at total compensation, or by changing the price deflator (changing the way wages are adjusted for inflation).”

Instead, Gould said, lawmakers must take responsibility for political choices in the past several decades which have left many American workers behind.

“Policymakers should not presume that the economy has already achieved full employment,” she said. “Instead, policymakers should take steps to foster strong wage growth, such as raising the federal minimum wage, addressing pay disparities, and protecting and strengthening workers’ rights to bargain collectively for higher wages and benefits.”

Ahead of Wednesday night’s Democratic presidential debate, EPI tweeted that declining union membership has played a role in the current crisis of rising inequality. In the 1950s, 35% of Americans working in the private sector were represented by labor unions, compared to just 6.2% now.

“This erosion was not driven by workers’ declining interest in unions but rather by concerted employer opposition along with state and federal policy that has made it near impossible for workers to form unions in the face of unwilling employer,” reads EPI’s report.

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