Black and brown workers saw the weakest wage gains over a 40-year period in which employers failed to increase wages with productivity

by nyljaouadi1
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Key takeaways:
  • Wage growth for typical Black and Hispanic workers fell far short of growth for white workers over the past 40 years.
  • Increasing income inequality overall and racial discrimination in the labor market both play a role in limiting wage gains for Black and Hispanic workers.
  • Women’s median wages have increased since 1979 but still lag those of men. Gains among women have not been equally shared, with white women seeing the largest wage increases.
Policy recommendations:
  • Create “high-pressure” labor markets by running the economy hot through expansionary macroeconomic policies; prioritizing low unemployment will help spur job growth as well as wage growth, especially for Black workers.
  • Prioritize anti-discrimination enforcement.
  • Pass the Raise the Wage Act and the Richard L. Trumka PRO Act. These would have a range of positive benefits for workers across the board, and especially for women, Black, and Hispanic workers.

Increasing income inequality has been at the forefront of economic policy conversations in the United States since at least the 2008 financial crisis. The roots of that inequality stretch back much further, though. Growing employer opposition to unions and the shift from manufacturing toward finance as a major growth industry over many decades has resulted in a separation between worker pay and productivity that has persisted to this day.

There has been growing concern about the wage stagnation faced by the typical American worker, and increasing attention paid to the need to rectify this—to ensure that workers reap the gains associated with their increased productivity.

By the numbers

Wage growth by race/ethnicity, 1979–2020

  • White workers: 30.1 %
  • Black workers: 18.9%
  • Hispanic workers: 16.7%

The productivity–pay gap

  • Productivity growth, 1979–2020: 61.7%
  • Typical worker wage growth, 1979–2020: 23.1%

However, there has not been as much attention paid to the distinct divisions that exist even among the generally undercompensated working class. While the typical worker has not seen their fair share of wage increases relative to the increase in productivity over the past 40 years, Black and Hispanic workers saw even smaller wage gains relative to their white counterparts.

These racial disparities in pay add another dimension to conversations about gaps between pay and productivity, and about income inequality in general. While policies designed to link the typical worker’s pay more closely with productivity are necessary to reduce income inequality overall, the persistence of disparities even within the working class shows us that targeted policies will be required in addition if we want to achieve the goal of true equity across the board.

Closing wage gaps for the vast majority of undercompensated workers is not a zero-sum game. The right combination of progressive class-based policies targeting income and wage inequality, alongside anti-discrimination policies targeting race-specific gaps, can have powerful effects on raising all workers’ pay.

Key takeaways of this post include:

  • The typical worker’s wages rose only 23.1% from 1979 to 2020, while productivity increased 61.7%. For Black and Hispanic workers, wage growth was even more dismal, at 18.9% and 16.7%, respectively.
  • Skyrocketing income inequality as a whole has mechanically increased measured racial gaps, and clamping down on concentrated redistribution at the top levels of the income bracket will play a large role in raising all workers’ pay.
  • Given that Black workers face a “double penalty” due to a combination of wage inequality and employer discrimination, policies targeting racial gaps need to be combined with progressive class-based policies.
  • Women’s median wages have increased since 1979 but still lag behind those of men. Gains among women have not been equally shared, with white women seeing the largest wage increases.
  • A powerful multiracial coalition that draws attention to the positive-sum solidarity behind closing the pay–productivity gap can put pressure on policymakers to achieve this long overdue pay raise for the vast majority of U.S. workers.

Trends in pay/productivity over the past 40 years

Over the past 40 years, declining union density across the country has coincided with a separation between growth in wages and growth in productivity. This represents a concrete shift in the balance of power between employers and management versus the typical worker. While productivity gains created the potential for pay increases, most wage gains since the 1980s have gone to the highest-paid employees. While worker productivity grew by 61.7% between 1979 and 2020, workers’ median wages grew by only 23.1% (Figure A). Meanwhile, CEO pay has skyrocketed compared with the pay received by the typical worker; the ratio of CEO-to-typical-worker compensation was 351-to-1 in 2020, and realized compensation for CEOs grew by 1,322% between 1978 and 2020.

Workers’ wages across the board have failed to rise on pace with productivity: Productivity growth compared with typical worker wage growth and wage growth by race/ethnicity, 1979–2020

Year Typical worker White workers Black workers Hispanic workers Productivity
1979 0.0% 0.0% 0.0% 0.0% 0.0%
1980 -0.6% -0.3% -1.4% -1.1% -2.7%
1981 -1.7% -2.7% -3.9% -5.3% -0.9%
1982 -2.1% -1.1% -4.6% -4.5% -1.8%
1983 -1.9% -1.9% -4.2% -5.4% 1.1%
1984 -1.4% -0.7% -4.4% -4.3% 3.6%
1985 0.1% -1.1% -4.5% -4.8% 5.2%
1986 0.8% 1.9% -2.4% -4.9% 7.7%
1987 1.9% 1.6% -2.2% -4.9% 7.0%
1988 0.5% 2.2% -0.3% -6.1% 8.6%
1989 0.3% 1.9% -3.0% -7.8% 9.4%
1990 0.2% 2.1% -2.4% -8.7% 9.7%
1991 -0.6% 3.6% -3.5% -10.0% 10.5%
1992 0.4% 2.2% -2.8% -9.2% 14.8%
1993 1.9% 0.7% -3.5% -10.0% 15.3%
1994 0.8% -0.6% -4.9% -12.1% 16.2%
1995 -0.6% 1.1% -4.3% -13.3% 16.4%
1996 -2.3% 2.0% -4.5% -10.9% 17.8%
1997 -0.3% 3.9% -2.4% -11.6% 19.6%
1998 3.3% 7.5% 2.4% -8.0% 22.2%
1999 5.9% 9.2% 5.0% -6.7% 24.9%
2000 6.5% 10.5% 4.7% -6.6% 26.3%
2001 8.1% 13.8% 5.3% -2.1% 27.7%
2002 9.8% 14.8% 8.1% -1.4% 31.5%
2003 9.9% 15.6% 10.4% -2.7% 35.9%
2004 11.1% 16.1% 11.2% -4.8% 39.6%
2005 9.5% 13.3% 7.0% -4.7% 41.8%
2006 9.9% 13.5% 7.9% -2.4% 42.5%
2007 10.1% 14.0% 6.0% -0.5% 43.4%
2008 9.2% 14.8% 5.6% -0.3% 41.6%
2009 11.6% 16.9% 10.0% 0.3% 46.8%
2010 10.9% 16.1% 9.4% -1.8% 51.0%
2011 8.2% 13.8% 6.0% -4.3% 49.5%
2012 6.9% 14.5% 3.2% -4.5% 49.9%
2013 7.4% 13.8% 5.5% -4.5% 51.0%
2014 7.5% 13.8% 3.3% -2.6% 52.1%
2015 9.2% 17.0% 4.1% 0.2% 54.8%
2016 11.2% 17.9% 8.7% 4.1% 55.0%
2017 12.1% 19.5% 6.8% 8.0% 56.2%
2018 14.0% 20.0% 5.2% 6.4% 57.8%
2019 15.1% 22.1% 10.5% 10.4% 59.6%
2020 23.1% 30.1% 18.9% 16.7% 61.7%
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