‘Lost Decade’ for American Workers

The Economic Policy Institute has confirmed something most workers already know – wages have stagnated in the past decade.

 But why?

An excerpt from the 12th edition of EPI’s forthcoming The State of Working America, says  the ongoing erosion of unionization and the resultant decline in worker bargaining power has inhibited unions ability to set norms or labor standards that raise the wages of comparable nonunion workers.

 The EPI report states that the share of the American workforce represented by unions declined from 1973 to 2011 from 26.7 percent to 13.1 percent. 

 The EPI report characterizes the last decade as a “lost decade” for wage growth.

According to the Institute, the median worker’s real hourly compensation (including wages and benefits: rose 10.7 percent between 1973 and 2011.  But most of this growth occurred in the late 1990s. Since 2002 and 2003, real wages and compen­sation have stagnated for most workers—college graduates and high school graduates alike.

(By contrast, average Chief Executive Officer  compensation rose 725%  between 1978 and 2011, according to a study earlier this year by  EPI) 

 The EPI report documents some of the benefits of unionization for workers: 

  •  The union wage premium—the percentage-higher wage earned by those covered by a collective bargain­ing contract—is 13.6 percent over­all (17.3 percent for men and 9.1 percent for women).
  • Unionized workers are 28.2 percent more likely to be covered by employer-provided health insurance and
  • Unionized workers are 53.9 percent more likely to have employer-provided pensions.

 In addition to wage stagnation, the EPI states the “lost decade” is characterized by increased wage inequality between workers at the top and those at the middle, and by the continued divergence between overall productivity and the wages or compensation of the typical worker.

 De-unionization can explain about a third of the entire growth of wage inequality among men and around a fifth of the growth among women from 1973 to 2007, according to the EPI.

The EPI report attributes the erosion of bargaining power to a harsher economic context for unions because of trade pressures, the shift to services, and ongoing technological change. However, ana­lysts also point to  employers’ militant stance against unions and changes in the application and administration of labor lawss.

The EPI is a non-profit, non-partisan think tank founded in 1986 to study the needs of low income and middle income workers..

* The  full EPI report is scheduled for released on September 11, 2012.