Worried About Growing Inequality? It’s Time to Attack Wage Stagnation and Discrimination

What’s happening with wages is essentially connected to every form of economic inequality.

Valerie Wilson is Director of the Program on Race, Ethnicity and the Economy and economist at The Economic Policy Institute.
National Journal
Valerie Wilson
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Valerie Wilson
June 19, 2014, 8:05 a.m.

Eco­nom­ic in­equal­ity has ris­en to the top of our na­tion­al dia­logue in re­cent years, gar­ner­ing a lot of at­ten­tion in the me­dia, as well as from loc­al and na­tion­al lead­ers. This heightened in­terest in in­equal­ity has de­veloped be­cause eco­nom­ic in­sec­ur­ity is touch­ing more and more people — not just the poor or his­tor­ic­ally dis­ad­vant­aged — in a very real way. Though most of the at­ten­tion has been fo­cused on grow­ing gaps in in­come and wealth, as well as how dif­fi­cult it has be­come to climb the eco­nom­ic lad­der, much less has been said about a more ba­sic real­ity fa­cing people every day: After ac­count­ing for in­fla­tion, most Amer­ic­ans’ hourly wages have grown very little in the last three and a half dec­ades.

What’s hap­pen­ing with wages is es­sen­tially con­nec­ted to every form of grow­ing eco­nom­ic in­equal­ity. The main source of in­come for the ma­jor­ity of Amer­ic­an house­holds comes from the money earned at jobs. This is the money Amer­ic­ans use to meet ba­sic liv­ing ex­penses and to save for down pay­ment on a home, col­lege tu­ition, or re­tire­ment.

This is es­pe­cially true for Afric­an-Amer­ic­an and Latino work­ers who gen­er­ally have few­er as­sets and rely al­most ex­clus­ively on their paychecks to sup­port them­selves and their fam­il­ies. There­fore, any­one con­cerned about elim­in­at­ing eco­nom­ic in­equal­ity — everything from dis­par­it­ies in in­come and wealth to gulfs in op­por­tun­ity and mo­bil­ity — must also be con­cerned about wage growth and elim­in­at­ing ra­cial wage gaps. Gran­ted, broad-based wage growth is not a com­plete pan­acea for all ra­cial dis­par­it­ies in eco­nom­ic out­comes. Wealth, the value of cash and as­sets that a house­hold owns after ac­count­ing for debt, is lower for the vast ma­jor­ity of black and Latino work­ers even when com­pared with white house­holds with sim­il­ar in­comes. But broad-based wage growth would help to nar­row per­sist­ent wealth, op­por­tun­ity, and mo­bil­ity gaps.

A re­port re­leased by the Eco­nom­ic Policy In­sti­tute this month doc­u­ments the fact that since 1979, wages have grown slower than pro­ductiv­ity for every­one ex­cept the top 5 per­cent of work­ers. That means a very large ma­jor­ity of work­ers have reaped few­er of the eco­nom­ic re­wards they helped to pro­duce over the last 34 years. Most of it has gone to those at the very top of the wage scale. As there has been an ever-shrink­ing share of the pie for the ma­jor­ity of work­ers to di­vide, Afric­an-Amer­ic­ans and Lati­nos have got­ten only crumbs and ra­cial wage gaps have re­mained stub­bornly hard to close.

Ra­cial wage in­equal­ity is com­monly meas­ured by the ra­tio of Afric­an-Amer­ic­an (or Latino) wages to white wages. In 1979, the me­di­an black work­er earned 83 cents for every dol­lar paid to the me­di­an white work­er. The situ­ation has not im­proved, but worsened since then. In 2013, the me­di­an black work­er took home just 77 cents on the dol­lar. For the me­di­an His­pan­ic work­er, that gap has gone from 81 cents on the dol­lar to a shock­ing 69 cents on the dol­lar.

These gaps mean than on av­er­age, the work done by black or Latino work­ers is val­ued at less than the work done by white work­ers. Dif­fer­ences in pay are par­tially ex­plained by dis­par­it­ies in edu­ca­tion, ex­per­i­ence, or the kinds of jobs held by work­ers of col­or re­l­at­ive to whites. Yet, even when these char­ac­ter­ist­ics are the same, dif­fer­ences in pay still ex­ist. This re­main­ing gap is very likely the res­ult of on­go­ing dis­crim­in­a­tion — pay­ing work­ers of col­or less for the same work.

One of the reas­ons that the ra­cial wage gap has con­tin­ued to ex­pand is the fact that very few people of col­or re­ceive salar­ies that rank them among the top 5 per­cent of earners, where most wage growth has been con­cen­trated. The oth­er part of ra­cial wage in­equal­ity is re­lated to the fact that even with­in oth­er wage groups all along the scale, there’s of­ten a dif­fer­ence between what people of col­or make re­l­at­ive to whites.

After a brief peri­od in the late 1990s in which black work­er’s wages began to ac­cel­er­ate at a clip faster than those of white work­ers due to his­tor­ic­ally low un­em­ploy­ment, the old pat­tern re­turned.The growth of ra­cial wage in­equal­ity has con­tin­ued des­pite the fact that Afric­an-Amer­ic­an and Latino work­ers have col­lect­ively achieved more edu­ca­tion, an act that typ­ic­ally boosts wages. For work­ers of col­or, more edu­ca­tion gen­er­ally brings high­er wages than those earned by those with less edu­ca­tion, but it has not ne­ces­sar­ily res­ul­ted in wages equal to those paid to white peers.

Ad­dress­ing the prob­lems of stag­nant wages and ra­cial wage in­equal­ity in­volves a num­ber of tac­tics. On one hand, we must make cre­at­ing good, fam­ily-sup­port­ing jobs and faster wage growth for the vast ma­jor­ity of work­ers the cent­ral fo­cus of poli­cy­mak­ing. This in­cludes things like rais­ing the min­im­um wage, up­dat­ing over­time rules so that as many as 10 mil­lion more work­ers would be eli­gible, cre­at­ing new work-schedul­ing stand­ards, and more rig­or­ous en­force­ment of wage laws that can pre­vent vari­ous forms of wage theft. We also need to make real the abil­ity of people to bar­gain with their em­ploy­ers, a right that in prac­tice has been taken away. This has been done through laws passed by state le­gis­latures that re­strict pub­lic em­ploy­ees’ col­lect­ive-bar­gain­ing rights or the abil­ity to col­lect “fair share” dues through payroll de­duc­tions. All of these prac­tices, though not overtly race-based, would dis­pro­por­tion­ately raise wages for people of col­or who are more likely to work the kinds of jobs im­pacted by these is­sues.

We must also ad­dress ra­cial wage in­equal­ity in a more dir­ect way — for in­stance, by deal­ing with oc­cu­pa­tion­al se­greg­a­tion that lim­its minor­ity work­ers’ ac­cess to high­er pay­ing jobs, per­sist­ent un­em­ploy­ment dis­par­it­ies that stifle ca­reer de­vel­op­ment and wage growth, and out­right dis­crim­in­a­tion in the hir­ing, pro­mo­tion, and pay of minor­ity work­ers. Ad­di­tion­ally, we have to tackle so­cial is­sues like mass in­car­cer­a­tion that lim­it em­ploy­ment op­por­tun­it­ies and pay for count­less ex-of­fend­ers, par­tic­u­larly Afric­an-Amer­ic­an men. Without these re­forms, men who have been con­victed of minor of­fenses will con­tin­ue to be pun­ished for the rest of their lives.

An­oth­er broad so­cial change that would boost wages is im­mig­ra­tion re­form. Mean­ing­ful im­mig­ra­tion-policy changes would help to bring un­doc­u­mented work­ers out of the shad­ows and provide full rights to guest work­ers. Such re­forms would elim­in­ate some of the in­cent­ive to hire un­doc­u­mented work­ers and pay them less than oth­ers.

For far too long, wage stag­na­tion and in­equal­ity have been part of too many Amer­ic­ans’ work ex­per­i­ences. It’s time to ad­dress these prob­lems if we, as a na­tion, are ser­i­ous about elim­in­at­ing oth­er eco­nom­ic dis­par­it­ies.

Valer­ie Wilson is an eco­nom­ist and dir­ect­or of the Pro­gram on Race, Eth­ni­city, and the Eco­nomy at the Eco­nom­ic Policy In­sti­tute.

HAVE AN OPIN­ION ON POLICY AND CHAN­GING DEMO­GRAPH­ICS? The Next Amer­ica wel­comes op-ed pieces that ex­plore the polit­ic­al, eco­nom­ic and so­cial im­pacts of the pro­found ra­cial and cul­tur­al changes fa­cing our na­tion, par­tic­u­larly rel­ev­ant to edu­ca­tion, eco­nomy, the work­force and health. Email Jan­ell Ross at jross@na­tion­al­journ­al.com. Please fol­low us on Twit­ter and Face­book.

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