Why are salaries stagnating in recent years?

In the last thirty years, hourly wages have gotten into a state of stagnation. This stagnation is an exception to the late 1990s. The failure of wages to increase has affected the incomes of most families and is the leading cause of income disparity in the current generation. The gender gaps, as well as the racial gaps, are also closing in at a disappointing rate which makes it harder for the less privileged in these groups to make decent wages. The low-wage employees are not the only ones facing this problem as the effects of the stagnation get felt by even those in the middle class. What then, has led to this impasse that threatens to cripple our economy?

Abandonment of full employment

The macroeconomic policymakers were of the belief that seeking full-time-jobs would lead to meager unemployment rates which would, in turn, spark inflation in the economy. How wrong they were! Research shows that the high percentages of unemployment in the economy lead to the occurrence of wage inequality. The high unemployment rates reduce the number of wages that those at the bottom receive, thanks to the top competition. Since employees are willing to accept low rates in exchange for a job, the wages stagnate. Another issue that has led to this problem is the cutting back on government spending. With less money going around, people are unwilling to spend money in uncertain economic situations. The benefits that workers get from their employers in the form of insurance and other services have reduced, thanks to the cutting back on spending. Wage growth can happen if full employment gets restored and the government spends more money on the economy.

Reducing union density

Workers’ unions strengthen them and enable them to fight for fair wages. There was a time when unionization got seen as a danger to the economy, but this perception has changed. What unions do is that they work with employers towards raising the wages of the low-income as well as the middle-income earners. This type of increment which does not aim at high-wage earners prevents the increase of income disparity. The dwindling of unionization is leading to a high rate of disparity between the middle-income and the high-wage earners, showing that more money is getting directed towards profits rather than wages. The reduced bargaining power of unions is making the raising of salaries a hard task. There is a need for favorable labor laws which give the workers the rights to unionize, demand better wages and to boycott when need be.

Labor market policies and business practices

Such changes affect the wage growth, and they have led to the stagnation of wages over the last few decades. Such a move is that of the lowering of the value of the federal minimum wage which resulted in workers getting paid less than what people in the previous eras received. Other changes that have weakened the growth of salaries include the erosion of the right of workers to earn extra money when they work additional hours and wage theft. Other problems that are causing the stagnation of wages include the unleashing of the top one percent where the CEOs of companies as well as other senior executives have found means to increase their salaries at rapid rates within a short time as well as globalization policies. At this rate, much needs to be done to normalize the rates at which the living wages increase. New laws need to be put in place to help curb the problem of income disparity so that the economy can achieve stability.