America's low.wage path

Abstract

The economic performance of the United States is sometimes viewed as very successful, especially in comparison to Europe. After all, unemployment has been lower than in Europe and job creation has been higher. The relative superiority of job creation in the United States is frequently exaggerated, however, by comparisons of the absolute numbers of jobs created - a flawed measure because the size of the labor force has been relatively stagnant in Europe while growing in the United States. Moreover, it is infrequently recognised that U.S. job creation in the 1980s was actually inferior to that of the 1970s.

Nevertheless, the bigger fault with the claim of U.S. economic superiority (and the implied superiority of "flexible", deregulated labor markets and laissez-faire policies) is that it ignores the deterioration in the standard of living of most Americans over the last 15 years. This paper reviews recent income and wage trends in the United States and finds that widespread income problems have been a continuing feature of the U.S.economy in the early 1990s (continuing through the first half of 1995, the latest data) and will likely continue into the foreseeable future.

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