Wage Growth Lagging Behind Productivity in the U.S.

From 1979 to 2024, U.S. productivity surged by 80.9%, while hourly wages only increased by 29.4%. This disparity has left many middle-income families feeling financially constrained, as evidenced by two-thirds of households believing their incomes can't keep up with the cost of living. Essential policies influencing wage growth are at the forefront of this debate. The Federal Reserve aims for maximum employment and price stability, but higher unemployment may inhibit wage growth. Analyzing historical data shows a cumulative unemployment rate significantly above the natural rate since 1979, suggesting an unfavorable environment for middle-class wage increases. Meanwhile, the decline in job mobility further complicates the economic landscape, with only 1.6% of job seekers relocating for work in 2023, compared to 29% between 1986-1997. The growing burden of housing costs and potential barriers such as occupational licensing add to the dilemma, as unions see declining membership and weaker bargaining power. The political implications are clear: both parties acknowledge the challenges but propose different solutions for the middle class. Kamala Harris focuses on strengthening unions and boosting domestic manufacturing, while Trump emphasizes economic growth through tax cuts and tariffs. These contrasting strategies underscore the intricate relationship between policy and wage growth, highlighting the need for targeted interventions to help the middle class regain financial stability.