For Most Americans, Wages Aren’t Just Stagnating — They’re Falling

There is also the fact that many people who used to work at middle-class jobs are now in the labor pool for lower-paying jobs, partly due to the effects of age discrimination.

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By David Dayen
September 4, 2015

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The National Employment Law Project (NELP) released a study yesterday showing what occupations have seen falling wages since 2009. And they’ve found that the biggest wage declines hit the lowest-paying jobs. The recession hit the hardest those who could least afford it. If you want to know where the grassroots energy over the Fight for $15 comes from, it’s in this report.

Overall, real wages — meaning adjusted for inflation — dropped since 2009, so no sector is doing spectacularly well. Indeed, we’ve suffered from stagnating wages in America since at least the year 2000, and with the exception of a small boost in the late 1990s, going all the way back to 1979.

But the biggest drops came among restaurant workers: Cooks fell 8.9 percent, and food preparation workers fell 7.7 percent. Janitors, home health aides, retail salespersons and maids also experienced deeper wage cuts than the average. The wage declines get worse as you move down the income scale.

Not surprisingly, this corresponds to many of the occupations that are adding the most jobs. As competition increases within those fields, employers can squeeze workers on wages. Outside of registered nurses, the occupations with the highest job growth expectations over the next several years all offer average wages at the median or below. Personal care aides, a growing field as the population ages, had a median hourly wage last year of $9.82 an hour, 6.6 percent below the level in 2009.

This actually upends what we traditionally think about wages. As job growth expands and the pool of hiring dissipates, wages are supposed to go up. But at the sector level that’s not necessarily the case. First of all, with a low employment/population ratio, better job prospects brings out of the woodwork people who previously left the labor force. That means that, while overall the labor market is tightening, in the low-skill sectors, that tightening may not take place.

What we know is that the recession gave employers the opportunity to bargain down workers on wages, because of the lack of available jobs. They may have created a “new normal” with a new baseline for wages, slipping behind the pre-recession level.

All of this serves as a large argument for increasing the minimum wage. The low-wage worker has no bargaining power, and the recession exacerbated this. It’s worth noting that 22 states and a number of localities increased their minimum wages during the period NELP studied, and yet they still found wage declines. NELP says the declines were lowest among the very bottom rung of workers in their study, and most of these minimum wage hikes are phased in, with more increases to come in the next several years. Some will see unprecedented raises.

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The Economic Policy Institute, which has been tracking for years the failure of wages to keep up with productivity, released an update of their findings this week, showing that net compensation for the median worker rose a skinny 9.2 percent, total, during the 41-year period from 1973-2014. If wages rose in line with productivity during this period, “there would have been no rise in inequality,” the report argues.

Where is the money earned from higher productivity going, if not into worker paychecks? EPI cites corporate profits, CEO compensation and shareholder-value activities like higher dividends and stock buybacks. And this may be accelerating. The Labor Department found this week that productivity rose 3.3 percent in the 2nd quarter of the year, the fastest quarterly gain in several years. But “unit labor” costs fell during this period, because wage compensation rose only 1.8 percent. So workers are falling even further behind in 2015, despite wins on the minimum wage.

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