<p>Economic Policy Institute
January 6, 2015
WAGE STAGNATION IN NINE
B Y L A W R E N C E M I S H E L , E L I S E G O U L D , A N D J O S H B I V E N S
O ur country has suffered from rising income inequality and chronically slow growth in the living standards of
low- and moderate-income Americans. This disappointing living-standards growth—which was in fact
caused by rising income inequality—preceded the Great Recession and continues to this day. Fortunately,
income inequality and middle-class living standards are now squarely on the political agenda. But despite their increas-
ing salience, these issues are too often discussed in abstract terms. Ignored is the easy-to-understand root of rising
income inequality, slow living-standards growth, and a host of other key economic challenges: the near stagnation of
hourly wage growth for the vast majority of American workers over the past generation. Countering that by generating
broad-based wage growth is our core economic policy challenge.
With a group of simple charts, this paper brings the challenge we face into sharp focus, and lends clarity to the steps we
must take to meet it.
It should not be surprising that trends in hourly wage growth have profound consequences for American living stan-
dards. After all, the vast majority of Americans rely on their paychecks to make ends meet. For these families, the bulk
of income comes from wages and employer-provided benefits, followed by other income sources linked to jobs, such
as wage-based tax credits, pensions, and social insurance. Wage-related income also accounts for the majority of total
income among the bottom fifth of households.
Wage stagnation for the vast majority was not created by abstract economic trends. Rather, wages were suppressed by
policy choices made on behalf of those with the most income, wealth, and power. In the past few decades, the Ameri-
can economy generated lots of income and wealth that would have allowed substantial living standards gains for every
ECONOMIC POLICY INSTITUTE • 13