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Credit Bidenomics for Rising US Wages

After five decades of widening inequality and stagnant pay, low- and middle-income workers in the United States experienced a significant increase in real wages over the past four years. This is a direct result of macroeconomic policies designed to create an exceptionally tight labor market.

AMHERST – Amid global inflationary pressures and geopolitical turmoil, the American job market is experiencing a major transformation: real wages, especially for low- and middle-income earners, are growing robustly. This trend marks a radical departure from decades of widening inequality and stagnant wages, defying the prevailing narrative of economic pessimism. Instead, it reflects a dynamic job market, powered by effective policies aimed at healing the wounds of the COVID-19 pandemic and subsequent economic shocks.

The evidence is compelling. In a recent study I co-authored with David Autor and Annie McGrew, we show that wage growth for most American workers has outpaced the spike in the cost of living since the beginning of the pandemic. Updated data show that in the middle pay range, between the 40th and 60th percentiles, inflation-adjusted wages in December 2023 were 3.9% higher than in December 2022, and 6.6% higher than in December 2019. Similar real wage gains can also be observed in establishment data.

Importantly, the real wages of the middle quintile are not only higher today than they were before the pandemic, but slightly higher than we would expect based on 2015-19 trends. In other words, the typical American worker’s purchasing power has grown at least as much as it likely would have in the absence of the global challenges posed by the pandemic and geopolitical conflicts.