Paying for Productivity
One of the US economy's defining – and disheartening – trends over the last 40 years has been real-wage stagnation for most workers. America’s long-run living standards and economic competitiveness depend not just on productivity growth, but also on how that growth is shared.
BERKELEY – One of the United States’ defining – and disheartening – economic trends over the last 40 years has been real-wage stagnation for most workers. According to a recent US Census report, the median full-time male worker earned $50,033 in 2013, barely distinguishable from the comparable (inflation-adjusted) figure of $49,678 in 1973.
Because most households earn the bulk of their income from their labor, the absence of real-wage growth is a major factor behind the stagnation of family incomes. The average family income of the bottom 90% of households has been flat since about 1980. Real family income for the median household in 2013 was 8% below its 2007 level and nearly 9% below its 1999 peak.
Stagnating middle-class wages and family incomes are a major factor behind the US economy’s slow recovery from the 2007-2009 recession, and pose a serious threat to long-term growth and competitiveness. Household consumption accounts for more than two-thirds of aggregate demand, and consumption growth depends on income growth for the bottom 90%.
We hope you're enjoying Project Syndicate.
To continue reading, subscribe now.
Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.
Already have an account or want to create one to read two commentaries for free? Log in