Another Look at the State of the American Wage

One economist argues against the idea of stagnation

Federal Reserve
At Bloomberg Opinion, one economist argues against the conventional wisdom.
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By Tobias Carroll / May 18, 2019 8:33 am

For decades, politicians have used stagnating wages of the American worker as a talking point. It’s an argument that Donald Trump made in his 2018 State of the Union address (though he’s of the opinion that things have improved since he took office), and it’s one of the most enduring arguments that Elizabeth Warren has made since launching her own presidential campaign. To state the obvious: Trump and Warren are not exactly two political figures who agree on much— and yet, here we are.

In an article for Bloomberg Opinion, economist Michael R. Strain (the director of economic policy studies at the American Enterprise Institute) argues that American wages are far better than many politicians and economists would believe. Strain’s argument has to do with the period of time generally selected in order to demonstrate meager increases in wages over time. Strain cites “the relatively poor performance of wage growth during the 1970s and 1980s,” and contends that using, for instance, 1990 as a starting point allows for a healthier picture of the country’s wages.

Another element of Strain’s argument concerns purchasing power. “How do you compare the price of a car in 2019 with one in 1973, given the significant improvements in automobiles?” he asks. “How do you compare the price of a laptop in 2019 with one in 1973, given that none existed in the 1970s?”

Even though his argument may seem contrarian at first, Strain’s conclusions are ultimately not too far removed from those of the political thinkers he’s implicitly criticizing. “Americans have high expectations for wage and income growth, and we shouldn’t be satisfied with the gains we’ve enjoyed over the past three or five decades,” he writes. “We need better policies that allow workers — particularly those at the bottom — to command higher pay.”

Evidently, it doesn’t take a belief in stagnation to believe that things are perfect as they are.

Editor’s Note: RealClearLife, a news and lifestyle publisher, is now a part of InsideHook. Together, we’ll be covering current events, pop culture, sports, travel, health and the world.

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