Raising the Median Wage: Policies That Target the Middle Class
The median wage is a lot like what Mark Twain supposedly said about the weather: Everybody talks about it but nobody does anything about it.
This is ironic, because politicians are always going on about how much they want to help the middle class, and some of them actually mean it. But it’s harder than you think.
As you see in the figure above, the median, or 50th percentile, real hourly wage for men is lower than it was decades ago. The median female worker has gained more over time, but her progress stalled over a decade ago. And the current recovery has not been good at all to the median wage earner.
The confluence of three recent events led me to think about this median wage challenge. First, there was the “Fight for $15” action this week, wherein low-wage workers and their advocates staged what they claimed was the largest-ever such mobilization, one that spanned the globe, with protests in Greece, Canada, Brazil and Hong Kong.
Second, at the polar opposite end of the wealth scale, House Republicans have been busy trying to solve the problem that often seems to deeply vex them: the richest Americans aren’t rich enough. So they’re trying to repeal an estate tax that only hits estates worth more than $5.4 million per individual and $10.9 million per married couple. Such a repeal would provide an average tax break of about $3 million each for about 5,400 estates while increasing the deficit by $270 billion over the next decade.
Third, while these constituents are fighting for the bottom and the top, politicians continue to invoke the importance of helping the middle class, as newly anointed candidate Hillary Clinton did in Iowa earlier in the week.
The challenge here is that, politics aside, we know which policies will help the lowest-wage workers and the richest estates. What’s missing is a clear agenda on what will boost the median. So here are some ideas designed to meet that goal:
* Full employment: Tight labor markets provide middle-wage workers with the bargaining power they lack when job markets are slack, as they have been, remarkably, 70 percent of the time since 1980. Employment is growing at a decent clip and we’re headed in the right direction, but we’re not there yet. That means there’s still a role for accommodative monetary policy (keeping interest rates low at the Federal Reserve) and growth-oriented fiscal policy (e.g., an infrastructure investment program).
* Trade deficits/manufacturing jobs: We’ve run large trade deficits for decades in this country and that’s cost us millions of better-than-average factory jobs and made it harder to get to full employment (without offsetting bubbles in other sectors). Achieving a better balance between our exports and imports would thus help middle-class workers through both of those channels (more jobs in the tradable-goods sector and tighter job markets). That means taking actions against competitors who manage their currencies to subsidize their exports to us and tax our exports to them.
* Strengthen collective bargaining: While traditional unions in the private sector are down to only about 7 percent of the workforce, the power of collective action was most recently demonstrated by the low-wage workers and their advocates noted above. Moreover, there’s a strikingly negative correlation over time between the decline in union density and the share of income going to the top 10 percent (see Figure 32 here). The decline of unions and the ensuing loss of bargaining power is thus a clear factor in middle-class economic insecurity. That means going after state “right-to-work” laws (which undermine bargaining units by allowing for free-riders) and the sharply uneven playing field for those who want to form a union.
* Mid-market employment: There’s an incorrect notion that all the middle-class jobs have dried up — we’re now a nation of derivative traders and low-end service workers who serve them their food and dry-clean their suits. Wrong, says economist Harry Holzer, who has dived deeply into these waters and found growing demand for mid-level jobs in certain occupations. What’s missing is a) enough labor demand to boost the wage offers in these jobs (see “full employment” above) and b) the necessary skill sets. That means developing “a new set of education and training policies and practices” that specifically targets mid-level growth occupations.
* Work/family balance: In our workforce, those who most need flexibility at work are often the least likely to get it. A single-parent in a low-paying, hourly job with shaky child care has the least ability to deal with a scheduling hiccup, while a denizen of the top 1 percent with Cadillac child care can typically take off whenever he or she needs to. I’d also put gender pay equity under this rubric (note median wage gender gap of 17 percent in the figure above). That means paid sick leave, robust maternal and paternal leave policies, worker-centered scheduling, rid the tax code of any discrimination against caregivers, and equal-pay-for-equal-work legislation.
* Help with the middle-class budget: Sweeping cuts in the federal income tax, not to mention repealing the estate tax, do little to nothing for the middle class because their federal tax liability is low (to be clear, I’m talking about the actual middle-class whose median income is in the mid-$50’s; also to be clear, they pay payroll taxes and state taxes, so let’s keep it real here). However, targeted measures that help them pay for budget-busters will directly improve their living standards. That means protecting and extending refundable credits to help pay for child care and college tuition.
* Promote upward mobility for those who aspire to the middle class: A robust agenda targeting the median wage should also promote opportunities for upward mobility by those who want to move up the economic ladder but are facing an increasingly steep climb. Policies in this space include reducing the trend toward residential segregation by income class (which leaves the least well-off stuck in places that underinvest in public goods), equalizing access to quality educational opportunities, and recognizing the negative life-cycle impacts of child poverty. That means protecting and strengthening safety net measures like the Earned Income Credit and SNAP (food stamps) that have been shown to have positive long-term impacts, access to quality pre-K and affordable higher ed, apprenticeship programs for the hard-to-employ, and “fair chance hiring” for job seekers with criminal records.
To be clear, put me down with the low-wage workers fighting for higher minimum wages and against those who would repeal the estate tax. But importantly, let’s not just talk about helping the middle class. Let’s talk about real ideas to that target the median wage.
Update: @NickHanauer very appropriately tears me a new one for leaving “raising-the-overtime-threshold” off of this list. That’s especially ironic (and boneheaded) because:
–Ross Eisenbrey and I wrote the paper that helped start the recent movement to raise the threshold below which salaried workers get time-and-a-half pay.
–Raising the threshold to around $980/week has the potential to boost the pay of six million middle-wage earners, so this is a big deal.
–Unlike much of what I wrote about above, the salary threshold can be raised by an administrative rule change, and the Obama administration is planning to do so.
So…my bad…all’s I can say is a mind is a terrible thing to lose.
***
This has been reposted from The Washington Post.
