Economic Policy Institute Report Indicates Startling Trend in Employee Wages, Inflation

If you’ve been thinking that you’re probably not getting paid what you’re worth, a new report from the Economic Policy Institute might make you feel validated…or even more frustrated. According to the report, 70% of the US workforce’s inflation-adjusted wages are lower than they were in 2007, with declines in wages at every pay level except the bottom 10% from mid-2013 to mid-2014.

Perhaps the number that will stick out most to middle-class earners (those between the 20th and 80th percentiles) is $18,000. This is the amount of additional annual income the middle-class would have seen in 2007 if wage inequality hadn’t risen between 1979 and 2007. That means the average middle-class household in 2007 should have brought in more than $94,000 instead of the $76,451 it did.

Missing out on almost $20,000 they deserve is enough to make most people seethe, but it actually gets worse once the disparity in the increase of income at various levels is factored in. The average increase between 1979 and 2007 of 53.4% seems like a promising sign until a closer look shows how disproportionate the numbers are. Incomes in the bottom fifth increased by less than 30%, and those in the middle fifth fared even worse with an increase of less than 20%. Even those in the 80-90% range only saw an increase of 39%.

So where did the 53% average come from? Apart from being the size of the increase for those in the 91st-95th percentile, the average was given a tremendous lift by the 78% increases for the 96th-99th percentile and the whopping 244.7% bump for the top 1% of households. It’s a similar story when it comes to the wages themselves, with the average increase between 1979 and 2012 being just under 35%, but only a 17% increase for the bottom 90% of earners while it was more than 60% for those in the 96th-99th percentile and 153.6% for the top 1%.

When broken down by hourly wages over the past seven years, things are equally discouraging. Between 2007 and 2014, the bottom 80% of earners’ real hourly wages couldn’t keep pace with even modest inflation. Those in the lowest 30% were hit especially hard. On top of all that, since 1979, productivity has increased by almost 65%, while compensation for typical production and nonsupervisory workers has only grown by 8%.

While these kinds of income chasms are certainly felt on an individual level, the net effect on the economy is particularly troubling. Artificially lower wages for the vast majority of workers translate to less demand for consumer goods and services. Less demand for goods and services means less demand for hiring. Less hiring means less mobility for workers. This keeps them in jobs that pay them less than they’re worth because there aren’t better opportunities out there. And so the cycle continues.

Now reconsider from earlier the $18,000 that approximately 65 million middle-class families missed out on in 2007. If workers had been fairly compensated and spent a mere 10% of the extra income on goods and services, that would have put more than $100 billion back into the economy. That would have paid a lot of salaries.

Here’s where it would be nice to end the post on an upbeat note about how things are about to change. Unfortunately, it’s a tough fight that even Federal Reserve Chairwoman Janet Yellen is finding to be an uphill climb, although she is pushing for wage growth. Still, the Economic Policy Institute’s report is a solid starting point to a bigger national conversation and an interesting, if sobering, read. If nothing else, it might even help you argue that you deserve a raise in the best interests of the US economy.

While we can’t help you negotiate a raise, if you work in Georgia or Tennessee and believe your rights as an employee have been violated, contact an experienced Atlanta employment law attorney today at 404-873-8048. Parks, Chesin & Walbert represents plaintiffs in employment matters, including employment discrimination, wage and hour, FMLA, and more. With offices in Atlanta and Nashville, we offer a client-centered philosophy and strive to accomplish our clients’ goals as if they are our own.

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