Labor Day 2015 By the Numbers

As millions of workers enjoyed a well needed day off this past Labor Day, the Economics Policy Institute (EPI) reminds us that about one out of four private sector workers (24 percent to be exact) will not be enjoying pay time off; a similar number (23 percent) get no paid vacation time at all.

While this overall lack of paid holidays and vacation time is quite telling (especially compared to our international peers, who more or less universally mandate paid time off), access to paid time off varies dramatically between workers by their pay. As the chart below shows, only 34 percent of private-sector workers at the bottom of the wage distribution receive paid holidays and only 39 percent receive paid vacation. Among the top 10 percent of workers, meanwhile, 93 percent receive both paid holidays and paid vacation.

The following chart shows just how dramatic this inequity is.

Lack of leisure time is not the only thing beleaguering America’s working class. Another EPI study, published right on time for Labor Day, gives a rundown of how 2015 is looking for laborers. Unsurprisingly, the diagnosis remains grim.

  • Unemployment rates remain too high overall, and far too high for African Americans, Hispanics, and young graduates.
  • Wages have continued their 35-year trend of broad-based stagnation.
  • The buying power of the minimum wage continues to erode each year that policymakers refuse to raise it.
  • Declining collective bargaining is harming workers’ wage prospects.
  • Far too many workers have to contend with unpredictable schedules and no paid leave.

Here are a few more highlights from the EPI paper, which I highly recommend you read in its entirety. 

On the problem of unemployment, there are considerable regional, racial, and generational disparities.

The African American unemployment rate only recently dipped below 10 percent for the first time in seven years. In August it was 9.5 percent, and the Latino unemployment rate was 6.6 percent, compared with 4.4 percent for whites and 3.4 percent for Asians. According to data averages for the second quarter of 2015 (April–June), African American unemployment is lowest in Tennessee (6.9 percent), but that is about even with the highest white unemployment rate (7.0 percent in West Virginia). Black unemployment is highest in the District of Columbia (14.2 percent), and Hispanic unemployment is highest in Connecticut (12.7 percent).

There is also a severe unemployment and underemployment problem for young workers, particularly young minorities and high school graduates, according to EPI analysis of data reflecting the 12-month average from April 2014 to March 2015. Approximately 19.5 percent of young high school graduates (those ages 17–20) are unemployed, and about 37.0 percent are underemployed (they either want a job, or have a job that does not provide the hours they need). For young college graduates (those ages 21–24) the unemployment rate is 7.2 percent, and the underemployment rate is 14.9 percent. Almost a quarter—23.0 percent—of young black college graduates are currently underemployed, compared with 22.4 percent of young Hispanic college grads and 12.9 percent of white college grads.

The picture is bleakest for young high school graduates, who are a majority of young workers (52.7 percent of young people between the ages of 17 and 24 have a high school degree or less). Among young black high school graduates, 51.3 percent are underemployed, compared with 36.1 percent of young Hispanic high school grads and 33.8 percent of white high school grads.

With respect to wages, rates of stagnation are not just bad by historical standards, but seem poised to remain so for some time:

In the last year (August 2014 to August 2015), average hourly earnings have risen, but only by 2.2 percent, far below any reasonable wage target. And wages for production/nonsupervisory workers (a group comprising 80 percent of the private-sector workforce) rose even more slowly, at 1.9 percent over the year. Meanwhile, CEOs are making 300 times more than typical workers; the CEO-to-worker compensation ratio, which stood at 20-to-1 in 1965, was 303-to-1 in 2014.

Wage stagnation is a long-term trend. Between 2002 and 2014, inflation-adjusted hourly wages for the bottom seven deciles (i.e., 70 percent of the American workforce) fell.

Comparing 2014 with 2007 (the last period of reasonable labor market health before the Great Recession), hourly wages for the vast majority of American workers have been flat or falling. Even when including the value of benefits such as health insurance and pension coverage, pay has stagnated or declined for the vast majority since 2007. And ever since 1973, hourly compensation of the vast majority of American workers has not risen in line with economy-wide productivity. Our nation’s output of goods and services per hour worked (productivity, net of depreciation) grew 72.2 percent from 1973 to 2014, while the inflation-adjusted hourly compensation of the typical worker rose by just 9.2 percent.

While all workers are affected to some degree, those without degrees are hit the worst.

Workers with only high school diplomas in particular are being left behind. The average young high school graduate who does not enroll in further schooling makes $10.40 an hour, which has declined 5.5 percent from the $11.01 they made in 2000. The average wages of young college graduates—those between ages 21 and 24 who are not enrolled in further schooling—are 2.5 percent lower than they were 15 years ago. In 2015, young college graduates had an average hourly wage of $17.94, which translates into an annual income of roughly $37,300 for a full-time, full-year worker. In 2000, the average hourly wage of a young college graduate was $18.41.

In light of the stagnant and declining real value of wages, an increase in the federal minimum wage would be both warranted and feasible, based on historical experience.

The real (inflation-adjusted) value of the federal minimum wage in 2014 was 24 percent below its peak value in 1968. If the minimum wage had kept pace with price increases since 1968, by 2014 it would have stood at $9.54—about 32 percent higher than its actual level.

Over the past four decades, much of the growth in inequality in the bottom half has come from the declining value of the federal minimum wage. Infrequent or inadequate increases in the federal wage floor created a significant gap between the hourly wages paid to low-wage workers and the wages paid to typical or middle-wage workers.

In fact, a stagnating minimum wage has left low-wage workers facing a longer climb to reach the middle class. (The declining inflation-adjusted value of the minimum wage is the main cause of growth in wage inequality between low-wage workers and middle-wage workers since 1979, particularly among women.)

Nearly a third (30 percent) of working women—roughly 20 million—would get a raise under a proposal to increase the federal minimum wage from $7.25 to $12 per hour by 2020 and then “index” it to median wages. The gains are even more substantial for working women of color, 37 percent of whom—8.6 million—would see their pay increase.

Raising the federal minimum wage to $12 per hour—which would affect one in four workers—would primarily benefit older workers. Nearly 90 percent of workers who would be affected are at least 20 years old, and 37 percent are at least 40 years old.

Granted, there wouldn’t need to be any government policy concerning wages if companies would share a cut of their growing profits to employees, or if more workers came together and took collective action, as they once did.

The single largest factor suppressing wage growth for middle-wage workers has been the erosion of collective bargaining. The decline of collective bargaining through its impact on union and nonunion workers can explain one-third of the rise of wage inequality among men since 1979, and one-fifth among women.

The states where collective bargaining eroded the most since 1979 had the lowestgrowth in middle-class wages. Specifically, the 10 states that had the least erosion of collective bargaining saw their inflation-adjusted median hourly compensation grow by 23.1 percent from 1979 to 2012, far faster than the 5.2 percent growth of the 10 states suffering the largest erosion of collective bargaining—a gap in compensation growth of 17.9 percentage points.

One reason for the decline in collective bargaining is right-to-work (RTW) laws, which weaken unions by depriving them of the funding they need to be effective. Workers in non-RTW states are more than twice as likely (2.4 times) to be in a union or protected by a union contract.

In RTW states, both union and nonunion workers have lower wages. Wages in RTW states are 3.1 percent lower than those in non-RTW states, after controlling for a full complement of individual demographic and socioeconomic factors as well as state macroeconomic indicators. This translates into RTW status being associated with $1,558 lower annual wages for a typical full-time, full-year worker.

Other sobering observations include the prevalence of irregular schedules; the lack of stable, long-term employment; and the decline of once-standard benefits such as healthcare and paid maternity leave. Little wonder why the majority of U.S. workers (70 percent) report hating their jobs. With most working people struggling to get by, and getting little in return for their hard work, subsequent rates of stress, anxiety, and life dissatisfaction are at an all time high.

Perhaps more companies should take a queue from these global leaders in providing a positive, life-affirming, and productive workforce. In a society with as much abundance and productive capacity as ours, there is no reason why so many people should suffer just to scrape by.

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