Why Americans Aren’t Paid Enough

Name: Why Americans Aren’t Paid Enough
Uploaded: 2022-07-19T16:00:18.000Z
Duration: 28 min 18 s

Wage Stagnation in America

This transcript discusses the issue of wage stagnation in America, which has been a problem since the early 1970s. Despite some wage growth, wages have not kept up with inflation and productivity gains. The bottom 90% of American workers have seen much less wage growth than the top 1%, and automation is one explanation for this trend.

Wages Have Remained Virtually Unchanged Over the Last 50 Years

In June 2022, American workers made an average of $27.45 per hour.

In 1972, the same workers earned an average of $3.88 per hour.

When adjusted for inflation, wages have remained virtually unchanged over the last 50 years.

Wage Stagnation Is Worse for Lower and Middle Income Earners

Wage stagnation is worse for lower and middle income earners.

The bottom 90% of American workers saw their annual wages increase by only 28.2% from 1979 to 2020.

Meanwhile, wages for the top 1% increased by 179.3%.

Automation Is One Explanation for Wage Stagnation in America

Automation is one explanation for wage stagnation in America.

The McKinsey Global Institute predicts that advancements in technology will cause many workers to lose their jobs by 2030.

Automation has already caused many routine jobs to disappear or become poorly paid.

COVID Has Led to Surprising Wage Gains Across Industries

Despite causing severe disruption to the U.S. labor market, the COVID pandemic has led to surprising wage gains across industries.

COVID has actually seen a significant acceleration in wage growth, particularly for low wage earners.

This reflects a really serious tightness in the labor market due to excessive U.S. demand, but it's unclear whether this trend will continue.

Politicians Use Wage Stagnation as a Political Cynicism

Some economists argue that politicians use the concept of wage stagnation as a myth to promote their careers.

There is a bit of political cynicism and calculus involved in the wage stagnation debate and promises to fix the supposed problem.

Conclusion

Wage stagnation has been an issue in America since the early 1970s, with wages not keeping up with inflation and productivity gains. Automation is one explanation for this trend, which has hit lower and middle income earners hardest. While COVID has led to surprising wage gains across industries, it's unclear whether this trend will continue.

Globalization and Wage Stagnation

In this section, the speaker discusses how globalization has contributed to wage stagnation by forcing domestic workers to compete against unfair competition. The speaker also notes that while some jobs have gone overseas, it has resulted in cheaper goods for Americans. However, economists were too cavalier about the people who were hurt and there are still no good solutions to help them.

Impact of Globalization on Wage Stagnation

Workers with less specialized skills are competing in a market where they are paid less.

Companies use lack of competition in local markets to suppress worker wages.

Government policies discourage labor dynamism and moving to better job prospects.

Non-compete agreements lead employees to stay with their current employer, which can result in lower earnings over time.

Role of Unions

Union membership has drastically decreased over the years but workers in unions typically earn higher wages due to collective bargaining.

In industries where unionization stayed somewhat high, the effect of market power or monopsony of the employer on wages was muted.

Debating Wage Stagnation

Researchers have been using a certain inflation metric that dramatically overstates inflation over time, leading some to suggest that wage stagnation is an issue blown way out of proportion.

The Myth of Wage Stagnation

In this section, the speaker discusses how focusing on broad national data over individual experiences can create issues. They also talk about how the use of a different measure of inflation can show higher wage growth for middle-income workers and that legislation could help solve some of the biggest issues causing wage stagnation in America.

Different Measure of Inflation

The Federal Reserve uses a different measure of inflation called Personal Consumption Expenditures (PCE).

PCE shows more moderate inflation over several decades.

When you apply PCE to nominal wage growth, you discover much higher wage growth for middle-income workers.

Individual Experiences vs Broad National Data

Focusing on broad national data over individual experiences can create another issue.

People don't actually look at the people in those professions and what their wages have done over time.

For example, someone who is a janitor who works for 30 years and made substantial increases in wages and earnings would be lost if you just look at janitors overall.

Legislation to Solve Wage Stagnation Issues

There is a bill called the PRO Act, Protect Our Right to Organize, that could make it easier for workers to unionize.

Embracing more of the gig market could lead to better quality jobs that are more dynamic and let people get more upside risk and not just downsides.

The rise of remote work could also be beneficial to wage growth in local markets.

Achieving Fair Wages for All Americans

In this section, the speaker talks about how achieving fair wages for all Americans is vital in ensuring the success of the American economy. They also discuss how wages are a reflection of the productivity and skills of American workers.

Fair Wages and American Dream

Achieving a fair wage for all Americans is vital in ensuring the success of the American economy.

The American Dream attracts immigrants to our shores and motivates people to innovate and make the economy productive.

Wages are a reflection of the productivity and skills of American workers. If wages are stagnating for many people, it means that we are not becoming as productive a country as we can be.