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Wages Grew For Most Workers In 2017, But Slowly And Unequally

Inflation-adjusted wages rose for most workers in 2017, according to a new analysis by EPI Senior Economist Elise Gould. However, while many workers finally have hourly wages higher than before the Great Recession, large gaps by gender, race, and wage level remain—and some of these gaps are increasing. The State of American Wages 2017 details the most up-to-date hourly wage trends through 2017, showing that, while there have been welcome improvements, wage growth continues to be slower than what we should expect in a stronger economy.

“Rising inequality means that although we are seeing broad-based wage growth, most working people are just making up lost ground rather than getting ahead,” said Gould. “Workers at the top of the wage distribution are getting big raises, while over the last 17 years, low- and moderate-wage workers have only seen small increases in the size of their paychecks.”

 

Other key findings in The State of American Wages 2017, which is an annual look at wage trends and is part of EPI’s State of Working America series, include:

The main measures of wage growth—the Current Population Survey (CPS) and Current Employment Statistics data (CES)—tell a consistent story between 2016 and 2017: hourly nominal wages are slowly improving, but not fast enough.

 

Wage inequality has grown since 2000—on top of the rising inequality we saw since the 1970s. Notably, most men’s wages have barely budged above their 2000 level.

 

State-level minimum wage increases over the last few years are associated with stronger wage growth for low-wage workers.

Significant gender wage gaps remain across the wage distribution and by educational attainment. Men with college degrees are paid more on average than women with advanced degrees.

 

Wage growth since 2000 was stronger for white and Hispanic workers than for black workers, many of whom saw outright declines in 2017. The black-white wage gap across the wage distribution and by educational attainment is larger today than it was in 2000.

 

Over the 2000s, higher-educated workers have seen faster wage growth than those with less educational attainment. Workers with “some college” still have lower wages today than in 2000. However, an increasing college wage premium cannot explain the vast increases in wage inequality in the 2000s.

 

“One bright spot is faster-than-average wage growth for low-wage workers over the last four years,” said Gould. “This suggests that state minimum wage increases and an economy that continues to approach full employment are boosting wages. Policymakers should look to this as an example—raising the federal minimum wage and continuing to push for full employment will have an outsized impact on low-wage workers.”

 

EPI’s interactive wages calculator, which shows workers what their wages would be if wages had grown alongside productivity, has been updated with 2017 data. EPI’s gender pay gap calculator, which shows what women could be making in a more equal economy, has also been updated with 2017 data. The data in this paper are also available in EPI’s State of Working America Data Library, with newly updated hourly wage series, including by race and gender across the wage distribution, and by education. The data library also includes newly updated regression-adjusted gender and racial wage gaps.

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Strong employment growth and promising participation, but wage growth continues to fall short

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Economic Indicators • By Elise Gould • March 9, 2018

This morning’s jobs report showed the economy added a strong 313,000 jobs in February, with widespread gains across all sectors. The unemployment rate held steady at 4.1 percent, while the labor force participation rate (LFPR) and the employment-to-population ratio (EPOP) saw sizeable gains, 0.3 percentage points each, restoring them to levels last seen in September 2017. At 79.3 percent, prime-age EPOP, meanwhile, is the highest it’s been since June 2008. This is promising growth as many workers who found themselves idled by the Great Recession and its aftermath find their way back into the labor market and secure jobs.

 

Despite these impressive gains in employment and participation, it’s still too soon to declare full employment. Nominal hourly wage growth remains relatively disappointing at 2.6 percent year-over-year, so we clearly have a ways to go before reaching the 3.5 percent wage growth—at a minimum—that would be consistent with the Fed’s inflation target and estimates of potential productivity growth. And it’s important to remember that wage growth doesn’t need to simply hit 3.5 percent in a given month to declare that the job is done. It needs to exceed 3.5 percent for a substantial amount of time for workers to begin to claw back losses in the labor share of income they’ve felt during and since the Great Recession.

 

There are two hourly wage growth series reported on jobs day, the total private wage series and the production/nonsupervisory wage series, the latter of which roughly constitutes the bottom 82 percent of the workforce. The production/nonsupervisory series continues to be slightly slower, coming in at 2.5 percent over the year—indicating that the top of the wage distribution is continuing to pull away and accelerate faster than what typical workers are experiencing.

 

What the topline average on Jobs Day misses is that the experience is different across the wage distribution and for different demographic groups. Looking at 2017, we saw private-sector wage growth averaged 2.5 percent, and, using the Current Population Survey Outgoing Rotation Group microdata, we learn that it grew across the entire wage distribution, which means that the benefits of a growing economy are showing up in workers’ paychecks. But, since 2000, large disparities have worsened both between and within demographic groups in the economy. For instance, black-white wage gaps have widened over the last 17 years and the bottom 50 percent of college degreed workers have lower wages today than in 2000. For more demographic details for recent wage trends, see The State of American Wages 2017.

 

 

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