Income inequality in the United States has reached unprecedented levels, promoting skepticism among those trying to achieve the “American Dream.” Implementing progressive policies that enhance workers’ leverage could reverse decades of stagnant wage growth, particularly for lower-income individuals.

In a media briefing on June 21, hosted by Ethnic Media Services, a panel of experts discussed the reason for income inequalities and how policies can amend these issues.  

Speakers

  • Dr. Michelle Holder, Associate Professor of Economics at John Jay College, City University of New York
  • Dr. Michael Reich, Professor of Economics and Chair, Center on Wage and Employment Dynamics at the Institute for Research on Labor and Employment, University of California at Berkeley
  • Dr. Heidi Shierholz, President, Economic Policy Institute
  • Dr. Austin Clemens, Senior Fellow, Washington Center for Equitable Growth

“When I think about the American dream, I think about people being able to get ahead, being able to have a house that they can afford, a reasonable vacation in the summer, a secure retirement, being able to send their kids to a decent school,” said Heidi Shierholz. “We absolutely have the money and the ability to make that happen, and it is up to policymakers to do the kinds of things that make that dream possible, to give workers leverage, to make sure we have the safety net that people need to have security. It’s a policy choice, as to whether we do that or not.”

The Plight of Gig Workers

Dr. Michael Reich highlighted the challenges faced by over 10 million gig workers in the U.S., many of whom drive for ride-share apps or deliver meals. These workers, predominantly immigrants, are often misclassified as independent contractors, earning less than $7 per hour despite working 12-14 hours a day.

“Why is the pay so low? How did the companies get away with this? Well, one reason is that many of the drivers, especially the immigrants, do lack the skills or connections to get better jobs. and so they’re kind of a captive labor force,” said Reich.

Minimum Wage and Workers’ Rights

Companies use algorithms to help them figure out which drivers can be lowballed for a ride. Drivers get pitted against each other, and they race to be the cheapest option. The companies individualize their pay and give more ride offers for cheaper for those that are more desperate. This individualization is not equal pay for equal work. Reich advocated for the reclassification of drivers as employees with standardized pay and benefits.

Both Shierholz and Reich have testified before Congress to raise the federal minimum wage to $15 per hours, benefiting 27 million workers. Reich noted that independent contractors currently lack the right to unionize, but several states, including Massachusetts, are considering laws to support collective bargaining for gig workers.

Wage Gaps

Dr. Michelle Holder emphasized the need for policymakers to tackle wage inequalities based on gender and race. According to data from the Bureau of Labor Statistics, the median annual earnings for white workers working full time were $59,000, while Black workers earned a median of $48,000, meaning Black workers made 81 cents for every dollar earned by their white counterparts. Black women earned just 73 cents to the dollar, and Latina women earned the least, at 57 cents to the dollar compared to white men.

Holder highlighted that while some of the wage gap can be attributed to women having fewer years in the workforce, lower educational levels, and lack of access to high-paying job networks, discrimination also plays a significant role. She pointed to effective state-level policies like pay transparency laws, which require employers to post compensation ranges for job listings, and laws that prohibit asking job applicants for salary history, as effective measures to reduce wage gaps.

The Decline of Intergenerational Mobility

Intergenerational mobility, the idea that children should out-earn their parents by age 35, has been declining for decades, noted Dr. Austin Clemens. While 90% of young adults in the 1940s and 50s out-earned their parents, this figure has dropped to just 50% for those born in the 1980s and later.

The high-wage professions continue to grow, where as “we see much weaker growth for people working in blue collar jobs,” said Clemens. Interestingly, immigrants exhibit higher upward mobility than native-born Americans, with this trend holding true over the past two centuries of migration. 

“First-generation parents, because of discrimination, because they’re in a new country, might struggle to earn an income that’s commensurate with their abilities and their talents,” Clemens explained. “But their children tend to fare quite well because immigrants tend to pick places where there are good jobs, and good prospects for education. And so that has a very positive effect on second-generation immigrants.”

Strengthening the Labor Force

Clemens also stressed the importance of legislation that facilitates unionization and holds employers accountable for ensuring equitable wage growth. He suggested that the Federal Reserve should consider lowering interest rates to sustain the robust job market, which would benefit low-wage workers.

“Any legislation that makes it easier to unionize, that makes it easier to hold employers accountable, are extremely important for giving us a more equitable distribution of wage growth,” Clemens noted, adding that the U.S. currently has an excellent labor market that should be preserved against the fear of inflation. 

The Federal Reserve have the power to cut interest rates, allowing the job market running hot. People at the lower end at the wage spectrum would enjoy a huge benefit from this.

Shierholz dismissed concerns that technology would eliminate good-paying jobs. “When an employer adopts productivity-enhancing technological change, they can create goods and services more cheaply. When they can create goods and services more cheaply, then people have money left over to make new purchases on goods and services that they otherwise wouldn’t have been able to make, and that generates more jobs,” she said.