Ending Hunger in America, 2014 Hunger Report Full Report | Page 86

had decreased in value by nearly one-third,100 and with it so did the purchasing power of
minimum wage workers.
The rise of income inequality in the United States is fundamentally about the divergence
between productivity growth and wage growth. The U.S. economy has grown much larger since
the late 1960s. So has income inequality. This was not an inevitable outcome. See Figure 2.8.
In the first few decades after World War II, living standards improved for everyone because
productivity and wages grew at the
same rate. But in recent decades,
Figure 2.8 Too Many Americans are More Productive But Not
the gains from productivity growth
Higher-Paid
have gone almost exclusively to the
top earners. Nowhere does income
Real federal minimum wage compared to what the minimum wage would
inequality come into sharper focus
be if it had been indexed to productivity since 1968
than at the bottom of the income
distribution, where the minimum
$20
Minimum wage indexed to productivity $18.67
wage sets the floor. If the min$18
imum wage had kept pace with
$16
productivity growth, it would now
$14
be $18.67 an hour in 2012 dollars.101
$12
Had wages and productivity risen
$10
Real Minimum Wage $7.25
at the same rate for everyone, as in
$8
the past, the poverty rate in 2007
$6
would have been 44 percent lower
$4
than it was.102
$2
This divergence between pro$0
ductivity growth and wage growth
1948
1956
1964
1972
1980
1988
1996
2004
2012
is frequently attributed to differences in educational attainment.
Source: Heidi Shierholz (2013), “Lagging minimum wage is one reason why most Americans’
wages have fallen behind productivity,” Economic Policy Institute. Author’s analysis of Total
This is true to some extent—betterEconomy Productivity data from the Bureau of Labor Statistics Labor Productivity and Costs
educated workers have always
program. Minimum wages are from the U.S. Department of Labor Wage and Hour Division and
deflated using the CPI-U-RS.
commanded higher wages—but the
relationship between differences
in educational attainment and the rise of income inequality has been greatly exaggerated.
There is more inequality within the group of workers with college degrees, for example,
than there is between college-educated workers and everyone else. In the middle fifth of the
income distribution, where there are plenty of workers with bachelor’s degrees, master’s
degrees, and PhDs, the average annual earnings in 2007 would have been $18,897 higher if
productivity and wage rates had continued to rise in tandem.103
Low-wage workers are on the whole better educated today than when they were receiving
their fair share of productivity growth. See Figure 2.9. One way to do the right thing for all
workers across the income distribution would be to start distributing the gains from productivity growth more fairly. There has been sufficient economic growth for everyone to
benefit. From 2002-2011, for example, productivity increased by 16.1 percent—yet the inflation-adjusted compensation (wages and benefits) of both high school graduates and college
graduates fell.104
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