Income and Wages

Employment Policy Foundation: Income Gap Moderating IN U.S. (SUMMARY)

Less than a year ago John Sweeney, the AFL-CIO president, remarked on the "perverse prosperity" of the United States, in which the "poor get poorer" and real wages fall. Also, Sweeney lauded European countries for maintaining real wages and keeping inequality in check.

Since then, newly released data show that once the U.S. economic expansion began in earnest in 1993, average incomes have been rising more rapidly for the lowest fifth of American families than for any other group.

  • If the trend continues, it will moderate the income gap between those at the top and bottom of the income distribution.

  • In addition, Robert Lerman of the Urban Institute has demonstrated that wage inequality by race and gender categories narrowed during the last decade, even as it widened by educational attainment.

  • The combined effect, according to Lerman, was that across all workers there was no increase in wage inequality during the period.

Furthermore, measures of workers' wages or wage inequality do not show the high unemployment and slow job growth across Europe. The average "standardized" unemployment rate of countries in the Organization for Economic Cooperation and Development (OECD) stood at 10.1 percent in February 1998, while the U.S. rate was 4.6 percent (see figure). And the U.S. rate has fallen dramatically since 1993, while European rates have remained stubbornly high.

Experts say these and other measures of labor market performance show American workers are better off than organized labor's criticisms suggest.

Source: "Would Working Americans Really Be Better Off, If Only The U.S Were More Like Europe?" E-Mail Trends, June 8, 1998, Employment Policy Foundation, Suite 1200, 1015 15th Street, N.W., Washington, D.C. 20005, (202) 789-8685.

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