Wage growth since 1979 has not been stagnant, but it has definitely been suppressed

We recently released our annual report assessing wage growth in the U.S. economy. We highlighted that strong and broadly shared wage growth since 2019 contrasted sharply with much slower and unequal rates of growth before that year. This report’s release is also a good time to be explicit about a judgement we’ve made in recent years at EPI to stop referring to the entire post-1979 period as one of “wage stagnation.”

The reason for this change is straightforward: Many interpret “stagnation” to mean “literally zero growth,” and cumulative wage growth for typical workers since 1979 has definitely cleared the absurdly low bar of zero.

To be clear, relative to any reasonable measure of the economy’s potential to deliver broadly shared wage growth or relative to previous historical periods, the post-1979 period has been terrible for typical workers.

In a follow-up post we’ll provide a bit more detail supporting our contention that typical workers’ wage growth has been unforgivably slow relative to reasonable benchmarks. One short reason is that all the wage growth since 1979 happened in just two episodes when the unemployment rate was allowed to stay low for extended periods (the late 1990s and post-2014—with wage growth really accelerating in the past five years of this period for lower-wage workers). Growth in the other two-thirds of years in this post-1979 epoch really has been essentially stagnant. But these two episodes happened and were obviously good for workers and good for knowing that tight labor markets should be a key target of policymakers.

Dropping “wage stagnation” as a descriptive term for the full post-1979 period doesn’t mean we think the wage problem for American workers has been solved. Wage growth in the post-1979 period has been slow and unequal, largely as a result of intentional policy decisions. This policy-induced wage suppression has stifled growth in living standards and generated inequality. The last five years saw rapid and welcome progress reversing some of these trends—but it will take a long time to heal the previous damage, even if the post-2019 momentum can be sustained, which looks very unlikely at the moment.