A new Economic Policy Institute report challenges the notion that record breaking wage growth in 2020 is “a cause for celebration.”
Median hourly wages rose an eye-popping 6.9% between 2019 and 2020 – the biggest single-year wage growth in 45 years, according to EPI analysis of the U.S. Census bureau’s Current Population Survey. (By comparison, median wages grew 1.0% from 2018 to 2019 amid a tight labor market and low unemployment.)
However, that wage growth was concentrated among the country’s highest earners. Millions of Americans saw their pay get cut in 2020. The bottom 25% of earners made up more than 80% of the 9.6 million jobs lost last year, according to EPI, a left-leaning think tank.
High-wage earners have emerged relatively unscathed from the pandemic induced recession, even gaining close to a million more jobs over the past year. More than 90% of top earners have remained employed, while low-wage workers bore the brunt of job losses with fewer than 75% of them earning a paycheck in 2020.
“Wage growth in 2020 is neither a cause for celebration nor a reason to inject fears of economic overheating into policy debates,” wrote EPI senior economist Elise Gould. “It is indicative, however, of increasing inequality where those at the top have largely been spared from the recession while those at the bottom have been absolutely devastated.”
When these lower-paying jobs don’t factor into the calculations, average wages skew upwards.
In an August report, the Federal Reserve Bank of San Francisco also noted the misleading positive wage growth data. Economists there stated that “this [wage growth] acceleration has been almost entirely attributable to job losses among low-wage workers.”
While 2020 plunged the country into an economic crisis, most workers have been facing slow wage growth for decades. Consistent positive wage growth has taken place in only 10 of the past 40 years, according to EPI.
“Most workers are still suffering from a relatively weak bargaining position that prevents them from securing pay raises sufficient to make up for decades of slow wage growth,” wrote EPI senior research assistant Jori Kandra.
President Biden is trying to include a minimum wage increase to $15 an hour in his $1.9 trillion fiscal relief legislation. But this month he told CBS Evening News he thinks it’s unlikely to be part of the aid package.
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