Economist tells Coloradans how to break wage stagnation

Economist tells Coloradans how to break wage stagnation

Much has changed in the American economy since 1973. As a country, we’ve weathered six recessions, endured wild oscillations in the stock market and built up our GDP by more than $11 trillion. Yet, despite these significant social and economic developments, not much has changed for working-class families in terms of their “bottom line.”

Though worker productivity rose by 72 percent since 1973, wages only went up for the median worker by 9 percent during that period of time. Since 2000, productivity surged by 22 percent but hourly compensation only budged by 2 percent.

The growing divide between productivity and wages has long been a hot-button issue for Lawrence Mishel, an economist and president of the Economic Policy Institute. EPI is a nonprofit, nonpartisan think tank formed to promote the needs of low- and middle-income workers in economic policy discussions. Mishel’s considerable influence has made wage disparity and income inequality among the most talked-about policy issues in the country. His insights, analysis and commentary are frequently cited in The New York Times and National Public Radio.

On Oct. 9, Mishel shared his thoughts during the Colorado Center for Law and Policy’s Second Annual Pathways from Poverty Breakfast at the History Colorado Center in Denver.

“Pay should be on the front-burner of the conversation of economic policy,” Mishel told roughly 150 people during his keynote address at the breakfast. “It will be one of the main topics in the presidential election.” He pointed out that the growing frustration about the economy stems from policies that weakened workers’ collective bargaining power and other initiatives designed to “skim income for everybody at the top.”

“Too many people believe the middle class is not doing well because somehow the economy is broken,” Mishel said. “The economy is not broken. … It is broken from the point of view of a working-class family. We have created lots of income and wealth. It just hasn’t gotten to the vast majority. … The problem is how to get that wealth to the vast majority.”

As an economist, Mishel said he was obliged to point out that growth and productivity are positive trends, but not sufficient to build a healthy and sustainable economy.

“This is not about GDP, but whether people are having an improved standard of living,” he said. “It’s about whether this generation will do better than the last generation.” Fortunately, the American public, policymakers and key decision-makers recognize there’s a serious problem. Mishel notes that talk about wage inequality started as a result of the Occupy Wall Street movement of 2011 as most Americans realized they weren’t reaping the benefits from the so-called economic recovery.

Though he criticized President Obama for not addressing wage stagnation and income inequality sooner in his presidency, he said that recent executive orders might move the needle in the right direction. The orders include memorandum directing the Department of Labor to set a new salary threshold for overtime pay that will financially benefit up to 15 million people.

Mishel praised the president’s order that would give up to 5 million undocumented immigrants the right to stay in the country.

“People don’t talk about the issue of immigration and undocumented workers as a wage issue and I think it’s a huge mistake,” he said. “In America, to be undocumented is to be exploitable and vulnerable. Therefore, they earn less money – anywhere from 12 to 20 percent less. When 5 percent of the workforce is undocumented and earns less money, that’s not good for the other people. So giving people legal rights and a path to citizenship will raise wages. We should forcefully acknowledge that and talk about it.”

Mishel said he’s also encouraged by policies targeting the “misclassification” of workers as independent contractors. Such misclassification denies workers access to critical benefits and protections such as the minimum wage, family and medical leave and unemployment insurance.

Most recently, Mishel said he was heartened by President Obama’s remarks during the White House Summit of Worker Voice, a convening that took place on Oct. 7 and included workers, labor and business leaders and worker advocates. Mishel was among the leaders participating in the summit.

He noted that the President gave a “full-bodied” endorsement of collective bargaining and the power of unions during the gathering, while acknowledging that wages have been flat-lined for a number of years. He said the President’s acknowledgment is “a good thing” and “a big deal” but reminded the audience that the breakthrough merely reflects the reality that 80 percent of the population has seen their wages stagnate or fall – a trend that’s consistent in Colorado, according to CCLP’s upcoming State of Working Colorado 2015 report.

Mishel said another factor that could help break wage stagnation is a growing movement to increase the minimum wage, which is set at $7.25 nationwide and $8.23 in Colorado. Recently, CCLP’s Self-Sufficiency Standard report for 2015 showed the minimum wage doesn’t pay enough to provide for the basic needs of most Coloradans.

Efforts to raise the minimum wage have been successful in several cities and states and polling shows the concept is popular among voters. Still, Mishel notes that while raising the minimum wage “can be a very important tool to help the bottom 10 percent,” it can’t be the only tool in fighting wage stagnation and income inequality. With the 2016 elections pending, Mishel said voters can play an active role in guiding policies that could give low- and middle-income families a lift – combined with a high-pressure economy that maintains low unemployment levels.

He also expressed hope that a “high-pressure economy” will give workers the upper hand if the unemployment rate stays low or continues to decline. Throughout his speech, Mishel emphasized that breaking the cycle of wage stagnation and income inequality is critical to the long-term prosperity and wellbeing of the country.

“We will not rebuild the middle class, we will not lift people out of poverty, we will not promote social opportunity and mobility, we will not promote social opportunity or create shared prosperity unless we get wage growth from the bottom through the vast majority,” he said.

Portions of Mishel’s Pathways from Poverty keynote address are available through CCLP’s YouTube channel.

– Bob Mook