Due to a sharp dip in inflation, real hourly wages grew for all workers in 2015. However, falling inflation is unlikely to be a source of durable wage gains in the future. Growth in nominal (non-inflation adjusted) wages has not accelerated, and there is no evidence to indicate that the Federal Reserve Board should raise interest rates in an effort to slow the economy and ward off incipient inflation.
“It’s no surprise that typical workers are frustrated with the economy since wage growth has been slow for so long,” said Gould. “Real wage growth in 2015 is welcome news, since it means workers’ standards of living increased. However, this comes with two large caveats. First, wage inequality showed no sign of slowing down last year. And, meanwhile, relying on falling inflation is an unwanted and unsustainable strategy for increasing living standards.”
The strongest wage growth in 2015 occurred among men at the top of the wage distribution and women at the bottom of wage distribution. Men’s wages at the 95th and 90th percentiles grew by 9.9 percent and 6.2 percent, respectively, compared with only 2.6 percent at the median. Low wage workers, meanwhile, saw greater wage gains in states that increased their minimum wage. Women’s wages at the 10th percentile, which are lower than men’s at the bottom decile and therefore may be more likely to be impacted by changes in the wage floor, grew 5.2 percent in states with legislated minimum wage increases, compared with only 3.1 percent growth in states without increases.
[From an Economic Policy Institute press release]
]]>“When employers pay wages so low that working people have to turn to public assistance to make ends meet, they’re effectively receiving a subsidy from taxpayers,” said Cooper. “Policies that raise wages would free up resources that could then be used to strengthen anti-poverty programs or make investments in any number of other policy priorities. The simplest way we can do this is by raising the federal minimum wage.”
The majority (66.6 percent) of individuals and families who receive public assistance work or are in a family in which at least one adult works. This number grows to 71.6 percent when focusing on recipients under the age of 65. More than two-thirds (69.2 percent) of all public assistance benefits that go to non-elderly families go to families in which at least one adult works.
If the bottom 30 percent of wage earners received a $1.17 per hour pay raise, more than 1 million working people would no longer need to rely on public assistance. For every $1 that wages rise among these low-wage workers, spending on government assistance programs falls by roughly $5.2 billion. Because this estimate is conservative and does not include the value of Medicaid benefits, it has the potential to be even higher.
Other findings from the paper include:
[From a press release]
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