Where Should the Overtime Salary Threshold Be Set? Health policy issues an economic perspective pdf country has suffered from rising income inequality and chronically slow growth in the living standards of low- and moderate-income Americans. This disappointing living-standards growth—which was in fact caused by rising income inequality—preceded the Great Recession and continues to this day.
Fortunately, income inequality and middle-class living standards are now squarely on the political agenda. But despite their increasing salience, these issues are too often discussed in abstract terms. Ignored is the easy-to-understand root of rising income inequality, slow living-standards growth, and a host of other key economic challenges: the near stagnation of hourly wage growth for the vast majority of American workers over the past generation. Countering that by generating broad-based wage growth is our core economic policy challenge. With a group of simple charts, this paper brings the challenge we face into sharp focus, and lends clarity to the steps we must take to meet it. It should not be surprising that trends in hourly wage growth have profound consequences for American living standards. After all, the vast majority of Americans rely on their paychecks to make ends meet.
For these families, the bulk of income comes from wages and employer-provided benefits, followed by other income sources linked to jobs, such as wage-based tax credits, pensions, and social insurance. Wage-related income also accounts for the majority of total income among the bottom fifth of households. Wage stagnation for the vast majority was not created by abstract economic trends. Rather, wages were suppressed by policy choices made on behalf of those with the most income, wealth, and power. In the past few decades, the American economy generated lots of income and wealth that would have allowed substantial living standards gains for every family.
The same is true looking forward: Overall income and wealth will continue to grow. The key economic policy question is whether we will adopt policies that enable everyone to participate in a shared prosperity, or whether the growth of income and wealth will continue to accrue excessively and disproportionately to the best-off 1 percent. The first policy choice should be to quickly restore full employment. The Federal Reserve Board can do this by not raising interest rates and slowing the recovery in the name of fighting inflationary pressures until wage growth is much, much stronger. Congress and the president can pursue the return to full employment by making public investments that can create both jobs and future productivity growth. After this, policymakers should support those labor standards that can restore some bargaining power to low- and moderate-wage workers in coming years.
That means policy actions such as passing a higher minimum wage, expanding rights to overtime pay, providing paid sick leave, protecting the labor rights of undocumented workers, and restoring the right to collective bargaining. Policymakers should reject trade treaties that provide corporations greater rights and sap our manufacturing job base. This figure shows that the stakes of rising inequality for the broad American middle class are enormous. The figure compares the income growth of the middle three-fifths of American households since 1979 to their income growth had there been no growth in inequality.
Data show average income of households in the middle three-fifths. Josh Bivens, Elise Gould, Lawrence Mishel, and Heidi Shierholz, Economic Policy Institute, 2014. Copy the code below to embed this chart on your website. The data below can be saved or copied directly into Excel. The data underlying the figure. The figure shows that in the three decades following World War II, hourly compensation of the vast majority of workers rose 91 percent, roughly in line with productivity growth of 97 percent.
9 percent while productivity increased 74 percent. This breakdown of pay growth has been especially evident in the last decade, affecting both college- and non-college-educated workers as well as blue- and white-collar workers. This means that workers have been producing far more than they receive in their paychecks and benefit packages from their employers. Net productivity” is the growth of output of goods and services less depreciation per hour worked.