Wages rise, but inequality worsens, especially by sex and race
Black-white age gap widens, while men with college degrees get paid more than women with advanced degrees
By Ted Cox
The latest study on U.S. wages finds pay finally increasing for workers, but not in a way that addresses gaps in inequality by race or sex.
Economic Policy Institute Senior Economist Elise Gould released the new report “The State of Working America: Wages 2018” last week. Working from the latest data from the Current Population Survey, it offered some encouraging news.
Inflation-adjusted wages finally grew for most workers last year. But the EPI added: “Gould finds that while some workers saw modest wage growth last year, large gaps by gender, race, wage, and education level remain — and some of these gaps are increasing.”
According to the EPI, the study found that median wages — the midway point by population count between top and bottom wage earners — rose 1.6 percent last year. What’s more, “from 2017 to 2018, relatively fast wage growth continued at the top,” but upper-middle-class workers at the 20th and 30th percentiles “saw the strongest wage growth.”
Gould applauded states that have increased the minimum wage, finding — as the Illinois Economic Policy Institute has — that it serves to increase wages. ILEPI also found that strong unions help to increase wages across the board by state.
“Low-wage workers in the 21 states (and the District of Columbia) that increased their minimum wage in 2018 experienced stronger wage growth than low-wage workers in the states that didn’t,” Gould said. “Simply put, policy matters.”
But the study immediately cautions that wages for the very top earners might have outgrown the data compilation for the Current Population Survey, which doesn’t distinguish between anyone earning more than $2,885 a week “in order to preserve the anonymity of respondents.” According to the EPI: “Because this amount hasn’t changed or been updated for inflation in 20 years, it has become harder to uncover wage levels at the top of the wage distribution and the extent of top-end wage growth.”
Even at that, the study found wage inequality persisting and even worsening over the long run by race and sex. According to the EPI: “Wage growth since 2000 was faster for white and Hispanic workers than black workers. Black-white wage gaps were larger in 2018 than in 2000.” It added that, among African-American workers, “only college- and advanced-degree holders had higher wages than in 2000, but their wage growth was significantly slower than white and Hispanic workers with those same degrees.”
“Since 2000, wage growth has been strongest for the highest-wage workers, continuing the trend in rising wage inequality for the past four decades,” Gould said. “Additionally, many working people, particularly working women and black workers, are still facing persistent and, in some cases, worsening wage gaps.”
The study also found, in no uncertain terms, that “men with only a college degree are paid more on average than women with advanced degrees.”
Gould tempered optimism stemming from President Trump’s roaring economy, writing, “Although the unemployment rate continued to fall, and participation in the labor market continued to grow over the last year, most workers are experiencing moderate wage growth and even workers who have seen more significant gains are just making up ground lost during the Great Recession and slow recovery rather than getting ahead.”
The data cut both ways, finding that workers with only a high-school diploma made gains on their college-educated colleagues, at a time when many well-educated young adults are struggling to pay off college loans. “The wages of those with a high-school diploma rose faster than the wages of those with a college degree over the last two years, narrowing the gap between college and high-school wages,” Gould wrote. “As a result, the college wage premium — the regression-adjusted log-wage difference between the wages of college-educated and high-school–educated workers — fell from 50.6 percent to 48.4 percent between 2016 and 2018.”
Again, however, African Americans were more likely to feel the impact of not having a college degree, as the study found: “From 2017 to 2018, wage growth was strongest for those with an advanced degree in all racial/ethnic groups, while wages fell most for black workers with less than a high-school diploma.”
The study found American employees are working harder, but the profits are increasingly going to businesses and corporations and the very top earners: “From 1979 to 2017, productivity grew 70.3 percent, while hourly compensation of production and nonsupervisory workers grew just 11.1 percent,” Gould wrote. “Productivity thus grew six times faster than typical worker compensation.
“A natural question that arises from this story is just where did the ‘excess’ productivity go?” Gould added. “A significant portion of it went to higher corporate profits and increased income accruing to capital and business owners. But much of it went to those at the very top of the wage distribution.”