American Workers’ Trend in Wages Free Essay

The American dream, as envisaged by the founding fathers of America as an environment where everyone has an equal and unalienable right to live, be at liberty and to pursue own happiness as affording a decent housing, a good education, job and health care is dead. The American dream focused on ensuring that each individual had equal opportunity to realize their own vision and promoted hope in private investment in pursuing their happiness. This has not been realized and therefore the American dream is dead. The American dream has been selfishly redefined by individuals to mean materialistic happiness and bog the working class from achieving their own happiness since their wages have not been reviewed. This paper is an in-depth review of the trend in the wages for the American workers and the various determinants for this wage stagnation including a table of the trend.

The trend in hourly wages that are adjusted for inflation for typical workers in The United States since the 1970s has barely risen, a slow growth of only 0.2% annually. This period has been characterized by stagnation of wages for diverse sets of workers and a rise in inequality of wages. There has been a challenge mandating responsibility for policies and economic programs that underpin increasing inequality or reduction in the share of labor. The has been a downward pressure on this wages received by under-skilled workers by global trade and the progress in technology. The State of Working America asserts “Given the foundational nature of wages, it is discouraging that real hourly compensation (wages and benefits) of the median worker rose just 10.7 percent between 1973 and 2011 (Mishel, 2013).”

Many Americans stake in economic growth by the wages they acquire from their labor and not by income from investment (Nunn, 2017). Therefore, low wages mean low family incomes. The labor’s income share is inconsistent, it has fallen by 8% between the 1970s and 2017. Even though a number of the decline indicates measurement constraints, much of it is ascribed to changes in technology and the structures of the market which have underprivileged workers. Even with the decline of income share being channeled to labor, there has been unequal income distribution. Workers topping the distribution have enjoyed a rise since the late 1970s while workers at the lower half of the income distribution have decline or stagnating wages.

The table below briefly shows the trends in annual, weekly and hourly wages for workers and the productivity growth rate from 1967 to 2010. It represents a trend that has continued to date.

(Table 1 Average wages and work hours, 1967-2010(2011 dollars) Adapted from “Wages”. State of the Working America 12th Edition, the Economic Policy Institute, p179.)

It is also evident that there has been a bare growth despite the rising productivity. It, therefore, points at low compensation for workers for their labor. The mean annual wages reduced to 0.3% from 2007 to 2010 (Mishel, 2013). The annual hours worked must increase to get a higher wage.

The wages for educated/skilled workers have risen as those with degrees earn up to 134% of what a worker with high school education earns. Those with advanced degrees also earn up to 154% of what is earned by the worker with high school education (Shambaugh et al, 2017). With the increased demand for high skills, workers in the United States who are the majority, and have high school education have therefore experienced a wage fall. Therefore, the rise in educational attainment does not mean a significant rise in wages for the typical worker. Even so, many workers are struggling to attain the education wage premium but the increases in annual wages are enjoyed by those in the higher wage distribution bracket (Bernstein, 2016).

The bargaining power of workers has been affected by the local choices of policies. The value of wages adjusted for inflation has deteriorated in tandem with the decline in membership in unions, therefore, lowering wages for workers in the lower and middle wage distribution brackets (Bernstein, 2016). The decline in unionization has majorly been on private sector workforce and has brought a rise in wage inequality. The players in the labor market have led to worker issues such as incompletion of contracts, collusion agreements among firms and policies of no-poaching (Shambaugh et al, 2017). The wage growth for workers receiving low wages has been limited by a decline in minimum wages. The decline in union membership accounts for an increase in wage inequality.

There has been a linkage between wage stagnation and some developments that have repressed growth of productivity since 1973, except for a period between 1995 and 2004. It is reported that less than 2% or workers can move from one state to the other, in comparison with approximately 3% in 40 years ago who did move (Nunn, 2017). There is also a reduction in the switching of jobs. These developments portend the reduction in capability to choose jobs and places that are able to enhance self-improvement. The dynamism in businesses fell, as a reported 14% of firms were formed within one year, to only 8% in recent years (Bernstein, 2016). This means that with the fall in start-ups and young firms, wages reduced. The decline in dynamism bogs resource reallocation to firms that are highly productive. 

The differences in wages by genders and race/ethnicities with different ages have been linked to wage inequality. Initially, women received higher wages. White non-Hispanic men were paid highest than any other groups. Elder persons were preferred by firms. However, with women attaining an education, women’s wages have significantly risen, as white women got a 34% increase while the black and Hispanic women got 17% (Shambaugh et al, 2017). The wages for men have constantly experienced wage decrease, while segregation of careers for men and women diminished. The wage gaps by race/ethnicity, unfortunately, has not been closed, while there still is a discrimination labor market.

In order to mitigate and avert the trend in wages for American workers, the playing field of union organizations should be leveled so that more workers can join unions and articulate their issues together. Policies on wage and hour should be improved so that “wage thefts” among firms is made punishable and can be curbed. The wage threshold for overtime eligibility should be updated and increased to enable salaried workers to be able to get overtime. A comprehensive policy guiding education/wage debate needs to be clarified so as to be mindful of individuals who have the skills but are not necessarily more educated. These workers could be trained by the firms to be compliant to their needs.  The government should seek to balance trade in globalization so that American firms and workers are not subjected to unfair labor market from low-wage countries which have increased the supply of labor. Critics could argue that that is against globalization goals but I would argue that this is the better way for workers to get a better wage.