A Fair Wage for a Day's Work Ended in the '70s, See Chart

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40 Years Of Workers Left Behind (CHART)

Brian BeutlerMay 2, 2012, 5:42 AM

Economic fairness is one of the persistent themes of the 2012 election, and in that spirit the liberal Economic Policy Institute is revisiting the plight of the U.S. worker over the last several decades.

Many of the institute’s findings, which will be presented in greater detail in the forthcoming edition of “The State of Working America,” will be familiar to economists who study income inequality. But they provide a stark illustration of the fact that the vast majority of workers have been closed out of the country’s gains for nearly 40 years.

Particularly striking is the fact that for years leading up to the 1970s, productivity gains were broadly shared, as theory predicts. Then the linkage abruptly broke. What explains the shift?

“The big shift is really in the ’80s, which I would attribute to [Fed Chairman Paul] Volcker’s recession in 1980-82, which killed workers,” said Dean Baker, co-founder of the Center for Economic and Policy Research, who has conducted similar studies. “A high dollar in the mid-80s amplified this effect. You also had the anti-union policies of the Reagan administration.”

Since then, public policy has exacerbated the problem, according to EPI President Larry Mishel. “The continuing growth of the wage gap between high and middle earners is the result of various laissez-faire policies (acts of omission as well as commission) including globalization, deregulation, privatization, eroded unionization, and weakened labor standards,” he writes. “The gap between the very highest earners — the top 1 percent — and all other earners, including other high earners, reflects the escalation of CEO and other managers’ compensation and the growth of compensation in the financial sector.”

This isn’t a global problem, either. Some major economies — the UK and Canada — have experienced similar shifts, but others, including France and Italy, did not, according to Baker.

The consequences of not restoring the link — and, thus, a rising standard of living for most workers — are grim, and point to either persistent sluggish growth or recurring asset bubbles. But to accomplish this, Mishel argues, will require divisive policy shifts impossible in the current political climate. “It is hard to see how reestablishing a link between productivity and pay can occur without restoring decent and improved labor standards, restoring the minimum wage to a level corresponding to half the average wage (as it was in the late 1960s), and making real the ability of workers to obtain and practice collective bargaining.”