Wage Growth Challenges for the American Middle Class

The middle class struggles as productivity rises, highlighting the disconnect between wages and economic growth.

### The Struggle of the American Middle Class: Wage Stagnation and Economic Pressures
* 📈 Between 1979 and 2024, US productivity increased by **80.9%**, while hourly pay only rose by **29.4%**, highlighting a **significant wage stagnation** for typical workers.
* 💔 In June 2024, **two-thirds of middle-income households** reported that their income was **failing to keep pace with the rising cost of living**, indicating **widespread financial distress**.
* 📉 Historical data shows that actual unemployment rates have consistently been **above the natural rate** since 1979, which correlates with **slower wage growth for the middle class**.
* 🏙 A decline in geographic mobility, with only **8.7% of Americans relocating for jobs** in 2022 compared to over **20% in 1948**, has limited opportunities for **wage increases in higher productivity areas**.
* 🏠 The skyrocketing housing costs, with median home prices reaching **$426,900** in June 2024, further restrict the ability of workers to **relocate for better job prospects**.
* 🌍 Globalization has also contributed to wage pressures, with trade with lower-wage countries reducing median wages for workers without a four-year degree by **approximately $2,000 annually** between 1995 and 2013.
* 🤝 Union membership has **plummeted from 20% in 1983 to 10% in 2023**, weakening workers' bargaining power, while regulatory policies and occupational licensing have **hindered wage growth further**.
* 🗳 Political responses vary, with proposals from leaders like Kamala Harris focusing on **strengthening unions and raising the minimum wage**, while others, like Donald Trump, advocate for **broad economic growth to benefit the middle class indirectly**.

Why Middle Class Wages Aren’t Growing

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The Struggle of the American Middle Class

Productivity in the US has increased by 80.

9% from 1979 to 2024, while hourly pay has only grown by 29.

4%, leading to financial struggles for typical workers.

Two-thirds of middle-income households felt their income was falling behind the cost of living in June 2024, despite many working full-time jobs.

The Federal Reserve's policy decisions, aimed at maximizing employment and stabilizing prices, have resulted in actual unemployment being consistently above the natural rate, hindering wage growth for the middle class.

Factors Holding Back Wage Growth for Middle-Class Americans

Higher-than-necessary unemployment and declining mobility are contributing to stagnant wage growth for middle-class Americans.

The surge in remote work during the pandemic has not led to significant wage increases, and astronomical housing costs are preventing people from relocating to higher-paying areas.

Globalization and trade with lower-wage countries have also put pressure on middle-class wages, although the impact of globalization on wage and income inequality is debated.

The Decline of Unionization and Its Impact on Workers

Union membership in the US has significantly decreased from 1 in 5 Americans in 1983 to 1 in 10 by 2023, limiting workers' power in the labor market.

Employers have shown growing hostility towards union organizing, with over 40% charged with violating federal laws during election campaigns.

The penalties for unfair labor practices, such as firing workers for trying to organize a union, have been low and ineffective, contributing to the decline of union membership and hindering wage growth for middle-class workers.

The Impact of Occupational Licensing on Wages and Inequality

Occupational licensing leads to an 8% wage increase for licensed workers, but a 10% rise in licensed workers can reduce wages for all by 1.

Eliminating licensing could decrease earnings inequality within occupations by 2 to 4%, and there is no significant difference in health and safety outcomes between states with and without licensing.

Political candidates have different approaches to strengthening the middle class, with a focus on boosting domestic industries, raising the minimum wage, and implementing tax policies to support startup businesses.

A plan for $6,000 in tax relief for young families during their child's first year has been proposed, alongside corporate tax hikes and increased taxes on the wealthy.

Trump's 2017 tax cuts aimed to lower the corporate tax rate, with mixed results on wage growth for workers.

The discussion highlights the importance of policy in influencing wage growth and the need for a combination of federal, state, and local action to support middle-class families.