The Policy Choices That Suppressed American Wages (with Josh Bivens and Larry Mishel)

Episode Summary

Executive Summary: The episode argues that wage stagnation and rising inequality over the last 40 years were not inevitable outcomes of technology or globalization, but the result of deliberate policy choices that weakened worker bargaining power. EPI economists Larry Mishel and Josh Bivens identify excess unemployment, union suppression, and trade/globalization rules as major drivers, and argue the trend is reversible through pro-worker policy.

Main Topics: Market humanism and wage outcomes: The episode frames markets as human-designed systems and wages as shaped by policy, not natural forces, using wage stagnation as a key example. The productivity-pay gap: Speakers quantify the long-term divergence between productivity growth and median worker compensation, showing how gains went disproportionately to capital and top earners. Policy-driven wage suppression: EPI argues that unemployment policy, anti-union actions, and trade rules intentionally or predictably reduced worker bargaining power over decades. Debunking the skills-gap and automation narratives: The conversation rejects explanations that blame workers’ skills, technology, or automation for inequality, arguing these do not fit the data. The minimum wage and labor standards: The discussion highlights the failure to raise the minimum wage, weaken overtime protections, and other labor standards as major contributors to low wages. Reversibility through middle-out policy: The guests argue that because the causes were policy choices, the damage can be reversed by strengthening worker power, labor law, and full employment policy.

Key Arguments: Wage stagnation was not an accident; it was the product of repeated policy decisions that shifted bargaining power from workers to employers and capital owners. From 1979 to 2017, productivity rose far faster than median compensation, meaning workers did not share in the gains they helped create. Excess unemployment—whether through slow recovery policy or Federal Reserve tightening—reduced workers’ ability to demand higher pay. Declining union density lowered wages directly for union members and indirectly for nonunion workers by removing sector-wide wage pressure. Trade policy and globalization were structured to expose frontline U.S. workers to global competition while protecting profits and elite professions. The minimum wage being frozen for long periods devastated low-wage workers and contributed heavily to inequality at the bottom. Automation and skills-gap explanations are incomplete or false because they do not explain weak wage growth for college graduates or the huge surge at the top. Because the causes are policy-based, they can be reversed through full employment, stronger labor law, higher wage floors, and worker-protective standards.

Data Points: Productivity growth net of depreciation (1979–2017): 56% - Growth in output per worker compared with stagnant pay growth Median hourly compensation growth (1979–2017): 13% - Growth for a typical worker over the same period Productivity-compensation gap: 43 percentage points - Difference between productivity growth and median worker pay growth Median hourly compensation in 2017: $23.15 - Typical worker pay level in the analysis period Counterfactual hourly compensation if productivity gains were shared: $33.10 - Estimated 2017 compensation if workers received full productivity gains Lost hourly compensation: About $10/hour - Shortfall for the typical worker due to wage suppression Annualized loss for a full-time worker: Roughly $20,000/year - Based on 2,080 work hours per year Annualized loss for a two-worker household: Over $41,000/year - Household impact of the wage gap Average unemployment rate (1979–2019): 6.2% - Post-1979 period of higher tolerated unemployment Average unemployment rate (previous 30 years): 5.2% - Earlier period with tighter labor markets Estimated wage effect of unemployment: 0.3 to 0.5 percentage points per 1 point unemployment - Impact on wage growth for the median worker Top 1% wage growth since 1979: 165% - Shows strong gains at the top despite weak growth for typical workers Top 0.1% / top 1,000 wage growth since 1979: 340% - Even larger gains among the very highest earners Policy explanation coverage: At least 3/4 of the divergence - EPI claims it can quantify most of the pay-productivity gap through policy choices

Pivotal Quotes: "Wage stagnation did not just happen. It was the result of decades of policy choices that weakened worker bargaining power and shifted more of the economy's gains to the top." — Greg: Intro framing of the episode’s central thesis "The outcome of each of these decisions was to redistribute leverage and bargaining power in labor markets away from typical workers and towards capital owners and top business management." — Josh Bivens: Explaining the mechanism behind wage suppression "This was intentional, actually." — Larry Mishel: On the high-unemployment, anti-union, and import-surge period of the early 1980s

Implications: Listeners are told inequality is policy-made, not inevitable. That means stronger unions, full employment, better wage floors, and labor protections can restore shared prosperity if political pressure sustains them.