November 24, 2024
Editorial

THE WAGE SAG

Just in time for Labor Day, a variety of reports show American workers producing more efficiently than ever – and having less to show for it. The erosion of buying power for most workers has been a story for several years, but rarely has their decline been at such odds with corporate profits, which are at their highest levels in four decades. You might think this would be an issue of concern for politicians, but Congress has instead devoted much of its time this year trying to pass more tax breaks for the well off.

While a Labor Department reports sharp gains in worker productivity, wages have risen much more slowly, and over the last year have increased by 3.4 percent while inflation rose 4 percent. A Census Bureau study released Tuesday showed, “the real median earnings of both men and women who worked full-time, year-round declined between 2004 and 2005” – for men the drop was 1.8 percent; for women, 1.3 percent.

Meanwhile, the top 1 percent of salaries now account for more than 11 percent of all wages, up from 6 percent 30 years ago. Overall, however, the picture is quite different, with wages now making up the lowest percentage of the economy since at least 1947, when the government began to keep track. This prompted a recent story in the New York Times to point out that the buying power of the minimum wage currently is at a 50-year low.

In 1965, the Economic Policy Institute observes, average CEO salaries were 24 times the pay of the average worker. In 2005, they were 262 times the average pay. The wage gap between CEO and worker – even as worker retirement benefits are threatened – began in earnest in the 1990s, fell during the last economic downturn and is rising steeply again now. Congress cannot control the many technological and global changes that have contributed to this gap, but it is fair to ask whether they are helping to prevent the nation from tending toward a tiny minority of the very rich and a large majority of citizens growing poorer.

An unfortunate example of congressional reaction was earlier this summer when an increase in the minimum wage was proposed and Republican leadership tried to add on a huge tax break for multi-million-dollar estates. The result would have been a couple hundred extra dollars a year for low-wage workers and tens of thousands saved by the wealthy estates. The proposal did not survive, but the tax break for estates will be back as Congress returns from its August vacation. The increase in the minimum wage is less certain.

Falling wages in the United States have many causes, and policy changes in Washington often have only an indirect effect. But the question for members of Congress is whether the policies they support tend to make the gap larger or smaller. In some areas, Congress has spent a lot of energy making a difficult situation worse.


Have feedback? Want to know more? Send us ideas for follow-up stories.

comments for this post are closed

You may also like