Between 2000 and 2012, wages are stagnant (or have declined) for the entire bottom 70% of the wage distribution. In fact, as the latest study from the EPI shows, for virtually the entire period since 1979 (as we have discussed a number of times, most recently here and here), wage growth for most workers has been weak. The median worker saw an increase of just 5.0% between 1979 and 2012, despite productivity growth of 74.5%, while the 20th percentile worker saw wage erosion of 0.4% and the 80th percentile worker saw wage growth of just 17.5%. In other words, the vast majority of wage earners have already experienced a lost decade, one where real wages were either flat or in decline; and given the policies (monetary and fiscal) that shows no sign of changing, it seems our recent comment that the US appears to be worse than Japan is becoming more prescient.
It is obvious that the benefits of productivity growth are going increasingly to owners of capital, not to labor.
As WaPo notes,
How best to fix this is anyone’s guess.
Bruce Bartlett, for one, has suggested that this development means we should abandon economists’ preference for not taxing capital income as much as labor income. Whether that’d work or have unintended negative consequences, we don’t know for sure.
But this is a really significant change the likes of which we haven’t seen in modern memory.
Full EPI article below: