Mishel, Shierholz & Schmitt on Wage Inequality, A Story of Policy Choices

Economists Lawrence Mishel, Heidi Shierholz and John Schmitt have published a new paper in New Labor Forum titled Wage Inequality: A Story of Policy Choices about the causes of wage stagnation and wage inequality in the United States.

Full PDF here.

EPI | Why It’s Time to Give Tipped Workers A Living Wage

By Sylvia A. Allegretto and David Cooper

Raising the wage floor for tipped workers is crucial for a number of reasons. Rising income inequality and the accompanying slowdown in improving American living standards over the past four decades has been driven by weak hourly wage growth, a problem that has been particularly acute for low-wage workers (Bivens et al. 2014). Tipped workers—whose wages typically fall in the bottom quartile of all U.S. wage earners, even after accounting for tips—are a growing portion of the U.S. workforce. Employment in the full-service restaurant industry has grown over 85 percent since 1990, while overall private-sector employment grew by only 24 percent.4 In fact, today more than one in 10 U.S. workers is employed in the leisure and hospitality sector, making labor policies for these industries all the more central to defining typical American work life. Ensuring fair pay for tipped workers is also a women’s issue. Women comprise two out of every three tipped workers; of the food servers and bartenders who make up over half of the tipped workforce, roughly 70 percent are women. Allegretto and Filion give an historical account of the tipped-minimum-wage policy and bring much-needed attention to how the two-tiered wage system results in significantly different living standards for tipped versus non-tipped workers. For instance, tipped workers experience a poverty rate nearly twice that of other workers. This contradicts the notion that these workers’ tips provide adequate levels of income and reasonable economic security.

Read rest here.

Bivens, Josh, Elise Gould, Lawrence Mishel, and Heidi Shierholz. 2014. "Raising America’s Pay: Why It’s Our Central Economic Policy Challenge." Economic Policy Institute, Briefing Paper #378. http://www.epi.org/publication/raising-americas-pay/

EPI | Raising America’s Pay - Why It’s Our Central Economic Policy Challenge

By Josh Bivens, Elise Gould, Lawrence Mishel, and Heidi Shierholz

From the introduction:

Slow and unequal wage growth in recent decades stems from a growing wedge between overall productivity and pay. In the three decades following World War II, hourly compensation of the vast majority of workers rose in line with productivity. But for most of the past generation (except for a brief period in the late 1990s), pay for the vast majority has lagged further and further behind overall productivity. This breakdown of pay growth has been especially evident in the last decade, affecting both college- and non-college-educated workers as well as blue- and white-collar workers.This paper argues that broad-based wage growth is necessary to address a constellation of economic challenges the United States faces: boosting income growth for low- and moderate-income Americans, checking or reversing the rise of income inequality, enhancing social mobility, reducing poverty, and aiding asset-building and retirement security. The paper also points out that strong wage growth for the vast majority can boost macroeconomic growth and stability in the medium run by closing the chronic shortfall in aggregate demand (a problem sometimes referred to as “secular stagnation”). Finally, the paper argues that any analyses of the causes of rising inequality and wage stagnation must consider the role of changes in labor market policies and business practices, which are given far too little attention by researchers and policymakers.

Read the rest here.

Unintended Consequence of Austerity America - Union Rep Share Grew in Private Sector

Reacting to new data from the Bureau of Labor Statistics on union membership, EPI President Lawrence Mishel said:

New data for 2013 on the number and share of workers with union coverage show some interesting trends. Private sector union coverage increased but was offset by an erosion in the public sector, leaving overall union coverage essentially unchanged (a decline of less than 0.1 percent, so rounding up becomes a 0.1 percent decline).  The increase in private sector collective bargaining coverage in 2013 is noteworthy because it happened in 2007 and 2008 but otherwise hasn’t happened since 1979. This was driven by increased union employment in manufacturing and construction, where more than thirty-five percent of net new jobs were covered by collective bargaining agreements. Union coverage has increased in some states that may be unexpected. For instance, private sector union coverage increased in each of the last two years in Virginia, North Carolina, Georgia, Kentucky and Tennessee. Improvements in the private sector have been offset, however, by erosion in the public sector. Between 2012 and 2013 union coverage in the public sector fell from 39.6 to 38.7 percent. The starkest change was in Wisconsin, where union coverage in the public sector fell from 53.4 percent in 2011 to just 37.6 percent in 2013. This suggests that the erosion of public sector union coverage reflects the new anti-collective bargaining policies implemented in several states.

See here.

***It is important to note that much of the growth is due to the offset of job loss in the public sector as a result of austerity along with, as mentioned above, the implementation of anti-collective bargaining policies...so-called "right to work" laws...***

EPI: Raising the Federal Minimum Wage Would Lift Wages for Millions and Provide a Modest Economic Boost

At a briefing at the Economic Policy Institute on Tuesday, January 14, 2014, Jason Furman (Chairman of the White House Council of Economic Advisers), Sen. Tom Harkin (D-Iowa), Rep. George Miller (D-Calif.) and Lawrence Mishel of the EPI  discussed the economic case for raising the federal minimum wage and the path forward to enact the Fair Minimum Wage Act of 2013.

EPI research shows (see here) the Harkin-Miller bill would give a raise to 27.8 million workers, who would receive about $35 billion in additional wages. A $10.10 minimum wage would increase GDP by $22 billion, creating roughly 85,000 new jobs.

Mind you, raising the federal minimum wage to $10.10 is meager...should be at at least $20.00, which would provide more than just a 'modest boost' to the US economy.

US CEO-to-Worker Compensation Ratio: A Radical Redistribution of Income

As EPI noted in this recent paper on the ratio of CEO to average worker pay, from 1978–2011, CEO compensation grew more than 876 percent, more than double the growth of the stock market and remarkably faster than the growth of annual compensation of a typical private-sector worker, up a meager 5.4 percent. The increased divergence between CEO pay and a typical worker’s pay over time is revealed in the CEO-to-worker compensation ratio, as shown in the figure. This ratio measures the gap between the compensation of CEOs in the 350 largest firms and the workers in the key industry of the firms of the particular CEOs.

See rest here.

A Decade of Flat Wages: Protracting The Long-term Trend

Wages for the typical U.S. worker did not rise at all in the 2000s, and annual compensation only grew slightly, protracting a long term trend (since roughly the early 1970's) of declining labor share of the total product of the US economy. An extensive analysis has been produced by Lawrence Mishel and Heidi Shierholz in a new EPI briefing paper, which can be seen here.