Why Americans Aren't Paid Enough?

Around $3.88 per hour. That's what American workers earned on average in 1972. Now in 2023, these same workers earn around $27.45 per hour. Minimum wage on January 1st, it will go from $14.49 an hour to $15.74 an hour. That's an increase of $1.25. These figures might give the impression that wages in America have risen significantly in recent years. However, when we take inflation into account, wages have remained practically identical over the last 50 years, with today's workers earning only 12 cents more than in 1972. More workers are rejecting the federal minimum wage. That's according to an article from the New York Times, which found the federal wage floor of $7.25 is becoming increasingly irrelevant. But with inflation at its highest since 1981, Americans feel the impact of slow wage growth. Petrol and housing costs in the U.S. have also jumped dramatically in recent weeks, forcing millions of families to make tough choices. Moreover, two-thirds of American workers claim that inflation outpaced any salary increases in the last year. So why aren't American workers paid enough, and what can be done about it? Wages in the United States have stagnated since the early 1970s, but it was in 1979 when the gap between workers' productivity and their wages began to substantially increase. Between 1979 and 2023, workers' wages grew by 17.5 percent, while productivity grew more than three times faster, at 61.8 percent. In other words, today's workers are 61.8 percent more efficient than workers 50 years ago, yet they earn only a few cents more than back then. People in Kentucky are struggling to make ends meet, and it has nothing to do with their employment status. Wage stagnation is worse for low- and middle-income workers, as the bottom 90 percent of American workers saw their annual wages increase by only 28.2 percent from 1979 to 2023, while the top 1 percent saw a 179.3 percent increase in wages. Meanwhile, the top 0.1 percent experienced a staggering 389.1 percent growth. This means that the gap between the rich and the poor has widened over the last 50 years. Growing gap between rich and poor Americans is one of the biggest challenges facing the country. Get this, the richest 1 percent controls more wealth now than at any time in more than a half century. Real wages, adjusted for inflation, haven't changed much since the late 1970s. However, inequality increased during most of this period. In 2019, during the disruption in the U.S. labor market caused by the pandemic, there were surprising wage increases in various industries. In fact, there was a significant acceleration in wage growth of around 16 percent, especially for low-wage workers. This was due to a labor market shortage caused by excessive demand in the United States, immigration restrictions, early retirements and, of course, illnesses or fatalities. There is a shortage of skilled tradespeople throughout the U.S. economy, a persistent problem that started well before the pandemic. Automation is another explanation for wage stagnation in the United States. The McKinsey Global Institute predicts that 45.3 million workers will lose their jobs due to technological advances by 2030. Automation has been a significant factor so far, especially in manufacturing jobs. For example, in the past, cars were built using machines. But there was a lot of hands-on work. Now, much of that is done with machines, and workers need many more skills to operate them, resulting in the disappearance or underpayment of many routine jobs. As wages in such jobs have decreased by about 12 percent in recent years. There's no question artificial intelligence will remake the workplace. Recent analysis from investment firm Goldman Sachs looked at the global impact and found AI could replace 300 million full-time jobs, including positions in the legal and engineering fields. Over the next two or three decades, many economists believe there will be significant disruption in the labor market due to new automation. Even workers with university education, such as financial assistants and accountants, and even some diagnostic medical roles, will be performed by machines with artificial intelligence, posing competition for many Americans. Globalization is another reason for wage stagnation, forcing domestic workers to compete against unfair competition, where workers in many countries are paid much less. BBC investigation found evidence that workers were being exploited. Women at the factory which makes home textiles for the brands said that they were forced to work excessive hours and weren't even allowed toilet breaks. The BBC also heard claims of poor working conditions from staff at an Indian supplier to Ralph Lauren. Economists suggest that labor market dynamics played a more significant role than expected. About 35 percent of American workers today change jobs less frequently than before, although job changes lead to strong net wage growth. While about 43 percent of Americans do not change jobs for the sake of stability, the other 22 percent cannot do so because there is nowhere else to go. In many local markets, companies use the lack of competition to suppress the wages of their workers. About 60 percent of U.S. labor markets are considered highly concentrated, meaning a few employers compete for local workers. Just 10 percent more workers in an area can lead to a 1 percent reduction in wages. In a booming market like ours, just about every industry is looking for high skill employees who can get into a career quickly right now. Companies can also play a direct role in stifling competition with methods like non-compete agreements. Approximately half of private sector companies in the United States that responded to the EPI survey said at least some of their employees are subject to non-compete agreements, meaning around 36 to 60 million private sector workers in America are subject to these agreements. Similarly, unions that originally fought for higher compensation have drastically lost their power over the years. Union membership in the U.S. dropped from 20 percent of American workers in 1983 to only 10.3 percent in 2023. Workers in unions usually earn higher wages, around 10.2 percent more, compared to similar non-unionized workers, thanks to methods like collective bargaining. It is expensive to live here in California, and a new statewide campaign launched today hopes to help with affordability. It's called Living Wage for All. At issue is California's $15.50 minimum wage. The campaign is pushing for that to go higher. Legislation could help address some of the major issues causing wage stagnation in the United States. However, there is a limit to what can be done through policy when there are significant changes in technology and globalization. But policy can address other aspects, such as non-compete agreements, as these contribute to wage stagnation, as they are often applied to low-skilled jobs. On the other hand, the increase in remote work could also be beneficial for wage growth in local markets, as some employers prefer their employees to work remotely. In a way, remote work reduces the monopoly power of U.S. companies, as talented workers could work for any company worldwide remotely, earning a higher salary. Before COVID, only 23% of professionals worked remotely. Today, 59% are working remotely most or all of the time, as according to data from the Pew Research Center. Achieving a fair wage for all Americans is vital to ensuring the success of the U.S. economy. Similarly, fair wages promote innovation and make the economy productive. Therefore, wages truly reflect the productivity and skills of American workers. So, if wages stagnate for a lot of people, it could be an indicator that productivity in the country is falling, which could affect the economy and all Americans in the future.