The Widening Gap: How Policy Decisions Are Suppressing Middle-Class Wages
Since 1979, the United States has witnessed a staggering 80.9% increase in productivity, yet hourly pay has only risen by 29.4%. This phenomenon, known as wage stagnation, has been attributed to deliberate policy decisions that have actively hindered workers’ wage growth. One key factor contributing to this trend is the persistently high rate of unemployment.
Economists have long debated the concept of the “natural rate of unemployment,” which is believed to be the lowest level of unemployment achievable without sparking inflation. Historically, this rate has fluctuated between 4.5% and 5.5%. However, since 1979, the actual unemployment rate has consistently exceeded this threshold, having a profound impact on the American middle class.
When unemployment is high, workers lack bargaining power, making it difficult for them to negotiate higher wages. As Josh Bivens, chief economist at the Economic Policy Institute, explains, “The most effective way to secure a raise is to threaten to leave for a better-paying job. But when unemployment is high, this threat loses credibility.”
The consequences of this trend are far-reaching, with middle-class wages suffering as a result. To understand the mechanisms behind this suppression, watch the video above.
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