The expectation of rising living standards, with each generation doing better than the one before, has long been a given. More recently, that expectation has diminished—and with good reason. One of the best measures economists use to determine Americans’ economic advancement is whether wages are rising, broadly and consistently. After adjusting for inflation, wages are only 10 percent higher in 2017 than they were in 1973, with annual real wage growth just below 0.2 percent. The U.S. economy has experienced long-term real wage stagnation and a persistent lack of economic progress for many workers.

The economic forces that underlie wage growth—that is, the increase in pay going to typical workers—essentially encompass all aspects of the economy. Wages depend on how productive workers are, the share of economic output that is channeled to compensation, and the division of wage and non-wage compensation (including benefits like health insurance). Workers’ productivity, in turn, depends on the human and physical capital used in the production process, as well as how efficiently labor and capital are used.

Economic and policy changes are both important for the division of economic gains. In the next chapter we explore the roles of technological progress, globalization, and changing returns to education in driving some of these wage trends over the long run. We also examine declines in the rate of union membership and the real minimum wage, focusing on how these developments have affected the level and distribution of wages

Read the full article about wage growth by Jay Shambaugh, Ryan Numa, Patrick Liu and Greg Nantz on Brookings.