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EPI Report: Policy Choices Led To Strong Wage Growth
The Economic Policy Institute examines the post-Covid economy in their report Policy choices did not cause recent years’ inflation, but did deliver strong wage gains.…
For decades when wage growth for the vast majority of workers was anemic, these workers were often told it was because they weren’t skilled enough to keep pace with the demands of technological changes and globalization. This was false. It was intentional policy decisions that suppressed wage growth in those decades, policy choices meant to redistribute income upwards toward capital-owners and corporate managers.
In the past four years, workers have seen fast wage growth not because they are working more productively or harder—U.S. workers have always been the most productive in the world and have always worked hard. What changed was that policymakers decided to target a rapid return to sustained low unemployment, keeping unemployment below 4.5% for the longest stretch of time since the Vietnam War. In 2021, these tight labor markets were also accompanied by unprecedently large and expansive unemployment insurance benefits and cash transfers to households. These public supports gave workers more breathing room than ever before to be choosy about which jobs they took. These policy choices are why wages grew so fast so early in the pandemic recovery.
(graphic by Peggy_Marco at Pixabay)