{"id":10738,"date":"2014-06-12T11:12:48","date_gmt":"2014-06-12T15:12:48","guid":{"rendered":"http:\/\/multiplier-effect.org\/?p=10738"},"modified":"2014-06-12T11:38:31","modified_gmt":"2014-06-12T15:38:31","slug":"the-supposed-decade-of-flat-wages-was-worse-than-we-thought","status":"publish","type":"post","link":"https:\/\/blogs.bard.edu\/multiplier-effect\/the-supposed-decade-of-flat-wages-was-worse-than-we-thought\/","title":{"rendered":"The Supposed Decade of Flat Wages Was Worse Than We Thought"},"content":{"rendered":"

It\u2019s well known that the wages of US workers have become disconnected from productivity growth, with real wages growing much more slowly than advances in productivity over the last several decades. This is a key part of\u00a0the story of widening income inequality.<\/p>\n

But these observed trends actually understate the degree to which working people\u00a0have been left behind. New research\u00a0reveals that the US economy is doing a worse job passing on productivity gains to workers than the wage growth (or even stagnation) numbers suggest.<\/p>\n

The Levy Institute\u2019s Fernando Rios-Avila and the Atlanta Fed\u2019s Julie Hotchkiss looked back to 1994 and tried to see what proportion of real wage growth since then can be accounted for by key changes in the demographic profile of the labor force: principally, the fact that the average worker has become older (i.e., more experienced) and more educated.<\/p>\n

What they found is that over 90 percent<\/em> of real wage growth between 1994 and 2013 was due to demographic shifts. And the\u00a02002\u201313 period, commonly\u00a0referred to\u00a0as the decade of flat wages, is more accurately described as\u00a0\u201ca decade of declining real wages within age\/education worker profiles.\u201d If we control for demographics,\u00a0wages are back to where they were in 1998.\u00a0That\u2019s what you\u2019re seeing in the red line below:<\/p>\n

\"Real<\/a><\/p>\n

Of course, generally speaking, the fact that we have a more educated workforce is good news. But we also want to know the extent to which workers with a particular demographic profile\u2014workers with a given level of experience and\/or education\u2014are seeing increases in compensation as labor\u00a0becomes more and more productive. “When describing the evolution of well-being in the population,” Rios-Avila and Hotchkiss suggest, “an official index for a \u2018fixed\u2019 wage trend might be more appropriate for policymakers.” Such an index would paint a disappointing picture\u00a0of the last decade.<\/p>\n

Since 2002, wages have fallen for workers at all levels of educational attainment (this is true whether or not we\u00a0take ageing\u00a0into account). And as you can also see in the next figure, when we control for changes\u00a0in the\u00a0age\/experience profile within each educational grouping, workers without a college diploma are being paid less than they were in 1994\u00a0<\/em>(the gradual erosion of their wages over\u00a02002\u201308, combined with the recession and unimpressive recovery, have wiped out all the gains these groups at the lower end of the educational scale made from 1994 to 2002).<\/p>\n

\"Fig4B_Wages<\/a><\/p>\n

The authors also find\u00a0that gender and racial wage gaps have shrunk by less than it may appear over the last decade, once we account for demographic changes. Controlling for shifts in the average age and educational attainment\u00a0within each group allows us to disentangle reductions in pay inequality between male and female workers that are due to, say, women\u2019s educational advancements outpacing men\u2019s, from other sources of progress (or lack thereof) in gender-based wage inequality.<\/p>\n

To see the full results, download their new policy note<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s well known that the wages of US workers have become disconnected from productivity growth, with real wages growing much more slowly than advances in productivity over the last several decades. This is a key part of\u00a0the story of widening income inequality. But these observed trends actually understate the degree to which working people\u00a0have been […]<\/p>\n","protected":false},"author":202,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[122,89],"tags":[906,237,1132,907,46,905,58,375],"class_list":["post-10738","post","type-post","status-publish","format-standard","hentry","category-demographics","category-distribution","tag-ageing","tag-demographics-2","tag-education","tag-gender-inequality","tag-inequality","tag-labor-force","tag-race","tag-wages"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/10738","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/users\/202"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/comments?post=10738"}],"version-history":[{"count":27,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/10738\/revisions"}],"predecessor-version":[{"id":10796,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/posts\/10738\/revisions\/10796"}],"wp:attachment":[{"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/media?parent=10738"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/categories?post=10738"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bard.edu\/multiplier-effect\/wp-json\/wp\/v2\/tags?post=10738"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}