The lack of wage growth is one reason why many consumers feel that the broader economic recovery hasn’t reached their wallets. The problem has divided academics and fueled political debate on Capitol Hill and across the country, turning an increase in the minimum wage, for example, into a central issue in the midterm elections.
What the Social Security actuaries failed to foresee in 1983, when Social Security was last projected to be in long-term balance, wasn’t the Boomer retirement, but rather the fact that the dismal real wage growth of the previous decade.
The priority has to be jobs now, rather than any deficit reduction. On top of lowering unemployment, policy should also restore the bargaining power of low- and middle-wage workers. This means aggressively increasing the minimum wage; it means reestablishing the right to collective bargaining for higher wages; it means guestworkers should have full rights to the same labor market protections as resident workers; it means paying attention to job quality and wage growth.
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