Radical and rising economic inequality is no secret — and now, thanks to new research from the Economic Policy Institute, neither is its price tag nor its cause. There’s never been a study quite like this — one which places specific, real dollar amounts on every trickle-down policy American politicians have embraced. The study’s authors, Larry Mishel and Josh Bivens, explain how their work reveals that the massive upward redistribution of income our nation has suffered these past four decades can largely be attributed to policies intentionally designed to suppress the wages of American workers.
Lawrence Mishel is a distinguished fellow at EPI after serving as president from 2002-2017. In the more than three decades he has been with EPI, Mishel has helped build it into the nation’s premier research organization focused on U.S. living standards and labor markets.
Twitter: @LarryMishel
Josh Bivens is the director of research at EPI. His areas of research include macroeconomics, fiscal and monetary policy, the economics of globalization, social insurance, and public investment.
Twitter: @joshbivens_DC
Middle-class pay lost pace. Is Washington to blame? https://www.nytimes.com/2021/05/13/business/economy/middle-class-pay.html
Identifying the policy levers generating wage suppression and wage inequality: https://www.epi.org/unequalpower/publications/wage-suppression-inequality/
Website: https://pitchforkeconomics.com/
Twitter: @PitchforkEcon
Instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
Speaker 1:
Although the Rand research showed us how much inequality has increased, it didn’t explain why it increased.
Speaker 2:
What Rand found is that over the past 40 years had inequality remained at the same levels of inequality, the bottom 90% would have earned $50 trillion more.
Speaker 3:
Basically we found that the why was the direct and measurable effect of a bunch of very specific policy decisions made along the way in recent decades.
Speaker 4:
From the home offices of civic ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer, the best place to get the truth about who gets what and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures.
Nick Hanauer:
All right, Goldy, anyone who has a beating pulse or who has listened to our podcast knows that inequality is a thing and that there’s a lot of it. We’ve gone over, for instance, the Rand report, which showed this giant gap between what the median worker does earn and would have earned if they had been held harmless by the last 40 or 50 years of neoliberal economic policy. But what we’ve never really done a great job of is explaining why that is. Like, what happened to create that giant sort of hole in everybody’s pocket books?
David Goldstein:
And to reiterate what Rand found is that over the past 40 years, had inequality remained the same, levels of inequality between distributions, remained the same. The bottom 90% would have earned $50 trillion more over the past 40 years than they did. In 2019, it would have been two and a half trillion dollars more income going to the bottom 90%. And so a lot of the inequality we’ve seen, this radical rise of inequality is due to this massive upward redistribution of income and therefore also a redistribution of wealth over the past 40 years.
Nick Hanauer:
Yeah. And so, although the Rand research showed us sort of how much inequality has increased, it didn’t explain at all why it increased, what factors drove that giant gap between the earnings of the wealthiest and everybody else. But now our friends at the Economic Policy Institute have a new research report that does explain all that. And they’ve done this amazing job of showing what policy choices over the last 45 years contributed to this, the inequality that we now have. And in particular, their research shows that the sort of dominant narratives that people have believed that inequality was caused by a skills gap, or it was called caused by automation or globalization. None of those things really are true. At the end of the day, it was all a matter of domestic policy choices enacted by both Democrats and Republicans that suppressed wages for the majority of citizens. And so it’s fantastic research and it’ll be fascinating to have them talk about it.
Larry Mishel:
Wow, I’m Larry Mishel. I’m a economist at the Economic Policy Institute and glad to talk about our recent report, which explains wage suppression over the last four decades as a product of the policy decisions made on behalf of the rich and corporate America.
Josh Bivens:
And I’m Josh Bivins, I’m the research director at EPI, and I’m a macroeconomist by training and have been looking at the issues of inequality pretty much since I was hired by EPI about 19 years ago.
David Goldstein:
So guys in the last 40 years, we’ve seen a significant divergence between productivity growth and wage growth. So let’s start with having you guys classify the scale of that divergence. What are the stats?
Larry Mishel:
As many people know that in the ’50s and ’60s and early ’70s, when the economy got larger, as the pie grew, as productivity grew, there was a corresponding growth in the wages and benefits of a typical worker, but that broke down in the late 1970s, such that there was a lot of growth in productivity, but not much growth at all. And the median hourly wages and benefits for the typical worker. We measured that in the following way. We note that between 1979 and 2017, that the productivity growth net of depreciation grew 56%. That’s a fair amount, but the median hourly compensation, that the compensation of a typical worker only grew 13%. That’s a 43 percentage point difference. And that is basically what I think has been taken from the working class and distributed to the upper earners in the wage scale and to corporate America.
David Goldstein:
Wow, okay. So, is there a non percentage way to characterize how much working people gave up in wages over that time period?
Larry Mishel:
Absolutely. There is. So the median hourly compensation in 2017 was $23.15. We calculate that if workers had actually received the full benefits of the growth of productivity, their hourly compensation for a typical worker would have been $33.10, but basically that’s $10 higher. So there’s $10 an hour that was lost to the typical worker because they didn’t benefit from the growth in productivity the way that workers used to in the ’50s and ’60s. Now $10 an hour is a lot. That’s the equivalent of roughly $20,000 a year for a worker who works full-time and full year, someone who works 2080 hours a year.
Josh Bivens:
And so for a two worker household, that’s over $41,000 a year. That’s huge.
Larry Mishel:
Yeah, this is not peanuts. You know, if this has really mattered, and we think that this is what needs to be explained, that wage inequality has essentially … and income inequality overall, and the problems that the working class has faced is really linked to this lack of connection between what workers are paid and the rising productivity. It was not the fact that the economy didn’t grow or the productivity didn’t grow. The problem is that whatever growth there was, the pie expanded, but it didn’t get to the vast majority. And that’s what really matters. And that’s what we seek to explain.
David Goldstein:
So wait, you’re telling me that a rising tide does not actually lift all boats?
Larry Mishel:
Yeah. It turns out that it may have been true back in JFK’s time, but definitely not true in the last 40 years.
David Goldstein:
So certainly the listeners of this podcast are keenly aware of the degree to which in one way or another, working and middle class people have been left behind by the economy. And I know you’re familiar with the Rand research. I think that the thing that we really want to zero in on in this interview and the thing that’s so groundbreaking about your research is not the how much, but the why.
Larry Mishel:
I think that’s what we think the real contribution is. So we’ve got the wedge between how much productivity grew, what was the potential for people to have had wage growth over that time period versus the actual wages they had. And then see if we can start filling in that wedge with very identifiable causes. And we were able to. Basically we found that the why, the reason why that wedge developed, the reason why wages pulled away from productivity in that time period was the direct and measurable effect of a bunch of very specific policy decisions made along the way in recent decades. The outcome of each of these decisions was to redistribute leverage and bargaining power in labor markets away from typical workers and towards capital owners and top business management.
And this research is kind of all sitting out there. It’s a bunch of great work done by smart people. But what we did in this paper is put it together and highlight just what it means and scale each individual bit of research against that overall wedge that we measure between pay and productivity. I sort of think of it a little bit like the fable of the blindfolded people, all touching one part of an elephant and trying to describe what it looks like. We combined all these descriptions and came out with, I think, a pretty accurate and convincing picture of what the combination of all these intentional policies look like in terms of their effect in suppressing wage growth.
David Goldstein:
Okay. So what are they? Let’s punch through some of them.
Nick Hanauer:
Yeah, let’s start at the top with what are the policies that have had the biggest effect?
Larry Mishel:
The sort of three biggies are, one is sort of what I would call either the intentional engineering or the toleration of excess unemployment for most of the past 40 years. And that comes in two variants. One variant is the economy gets into a recession and policymakers are just way too … they don’t try hard enough to get us out of it, don’t try hard on us to get us to full recovery. I think that’s the really good description of sort of what happened over the past 12 years after the great recession, just no urgency at all, and trying to use fiscal policy to get the economy back where it was.
I think in an earlier period, the real culprit was the Federal Reserve. Basically they would see a recovery start to happen, unemployment would start to fall, and then in the name of fighting inflation, but often like a completely phantom inflation and inflation in their models, but one that had not appeared in the real world yet. They would engineer, by raising interest rates, higher unemployment to really zap workers’ bargaining power in the labor market. So that engineering and toleration of excess unemployment, that’s a really big one.
Second really big one is just the all-out assault on workers right to bargain collectively in deformed unions that has happened over that period, leading to a much smaller share of workers who are in unions. And this has two effects, obviously. One is people who were once in a union and now aren’t, so they no longer get that union wage premium mechanically, but then also just big sectors of the economy that once had their wages influenced by the unionized part of the sector. So you had a bunch of non union workers who actually lost out because their sector was no longer unionized. There’s no longer that threat effect on their own employers, even if they were never union, maybe they always had to pay slightly better wages. So that de-unionization effect is another biggie.
And then the effect of globalization on the terms we did it, which is the terms of trade agreements that basically put frontline workers in the United States in complete competition globally with the labor markets around the world, but carved out a bunch of protections for corporate profits and very highly paid professionals. Those three things combined are a really big chunk of the story, like well over half of the overall divergence we find. And then we’ve got a host of policies along the way as well, basically employers waking up every day to find a standard or institution that actually provided a little bull work to employees’ power in the labor market. They tried to focus on like a laser and take out-
David Goldstein:
The fact that these policies individually and collectively work to suppress wages over 40 years, that wasn’t incidental. It wasn’t like, “Oh, we were doing this for this other reason. And oh, by the way, unfortunately it happened to suppress wages.” You basically conclude that well, that’s kind of the intent of these policies, which is to suppress wages. Right? Explain why, like with the Federal Reserve’s actions, why it is that they were so eager to pull back the economy when unemployment started to drop.
Larry Mishel:
Yeah. We’re pretty confident in the intent here for a couple of reasons. One, on the easy issues, like the fact that the minimum wage was just throttled for almost decades at a time as inflation just battered its purchasing power, or the assault on unions. I mean, there’s obviously a group of employers who just make higher profits because minimum wages are lower or they don’t have to deal with a unionized workforce. I think the slight puzzle is why did many all the way, even on the center left, why were they okay with some of these policies? And I think even in that case, the predicted distributional effect of these changes was never in dispute or in doubt. Like you lowered the minimum wage, low wage workers do worse. You block the ability to form unions, unionized workers, and the people who work in those sectors, they’re going to make less.
The claim that was always that yes, there’s going to be some regressive distributional outcome, but these are frictions that keep the economy from operating more efficiently. And as these frictions are removed, aggregate growth is going to leap forward so much that people are actually going to be better off. Like their relative slice of the pie might shrink, but their overall amount of the pie will grow because of this aggregate growth. And in that case, they’ve just failed miserably. We’ve actually had slower growth. At the same time, we’ve had a lot less equal growth. I think the case of the Federal Reserve is the one that doesn’t fit this perfectly. Like I think it’s the one policy where I think you could quibble a little bit with the intent, but I think the dynamic is still there. I mean, everybody knows that all else equal, low unemployment is good.
And with the sort of last hired first fired dynamic in labor markets where historically discriminated against workers are the last ones to see gains for really low unemployment, everyone knows that low unemployment, it’s not just good, it’s also progressive. And so there must’ve been some justification for why aren’t we trying to maximize how low we can make unemployment go. And their argument in real time would have been well, the 1970s showed us that inflation is a genie that’s always trying to storm out of the bottle. And if we ever let it get a foothold in the economy, we’re going to have to engineer a really bad recession. So we have to keep unemployment at this pretty high level all the time to keep that inflation genie in the bottle. But I think it sort of fits in the overall rubric of all of them. It’s like, yes, this is bad for some workers, but it’s going to be good because it’s going to unleash overall growth. And in every case that overall growth argument has turned out to be a huge failure as well.
Josh Bivens:
Yeah. Although the donor class did really well.
Nick, you saw a lot of growth over the last few decades didn’t you?
Nick Hanauer:
Yeah, exactly. I just think that if you peel back some of the layers of the onion on the politics of all this, there was a group of people who are really, really, really, really benefiting from this arrangement and were encouraging it. And I guess if I had to guess, it’d be charitable to the folks at the Federal Reserve, it certainly is true that people were not tracking carefully the distributional effects of this way back. Inequality, to a certain extent, snuck up on a lot of policymakers. Certainly they should have been paying more attention, but all of a sudden it’s a lot worse.
David Goldstein:
I don’t think you need to be charitable Nick. I mean, Larry, correct me if I’m wrong, but wasn’t Volcker pretty blunt about his objectives at the time in early ’80s about bringing down wages and crushing union stability to force wages up? He saw rising wages as the major force behind inflation.
Larry Mishel:
Thank you for bringing that up, Goldy, yes. And one of the biggest leap forwards in inequality and wage suppression was actually the period between 1979 and 1985, where we had very high unemployment, a huge surge of imports and a big crushing of unions. And so that was intended actually. The high interest rates helped in fact, to fuel the import surge to so, because through the change in the dollar. So yeah, this was intentional and in every recovery, they always wanted to shoot it at wages whenever they seem to pick up and it used to be the model was, take away the champagne bowl before the party ever gets started.
Nick Hanauer:
Right. They didn’t wait to see the inflation start to rise?
Larry Mishel:
No, no. And there’s been a huge change. I think we should acknowledge how things have really changed very much for this current administration and for the current administration of the Federal Reserve Board. They are really dedicated to getting fast to low unemployment and caring about both inequality and racial equity. And it’s really a remarkable turn, especially for the head of our Federal Reserve Board that was nominated by a Republican, to tell you the truth.
David Goldstein:
Yeah, no, that’s true. So let’s talk about unemployment because you point out how much more unemployment we’ve tolerated over the past 40 years than we did during the previous 30. What did those numbers look like? And what type of impact did they have?
Josh Bivens:
So basically there’s a couple of ways you can look at it, but take 1979 to 2019. So even before COVID, we’ll take that crazy spike in unemployment out of the equation. Over that period, unemployment averaged about 6.2%. If you look at the 30 years before that, it averaged about 5.2%. So like a full percentage point higher in the second period. And if you even take official estimates of the natural rate of unemployment, that’s supposed to be the unemployment rate below which you’d get accelerated inflation. So it’s supposed to be kind of like your long run target. Even that sort of, and I think these measures are too conservative anyway, but take them as given for a second, the natural rate of unemployment estimated by CDO is about 5.2%. So even based on a too conservative target, we consistently missed that by a full percentage point over that period. And basically I’d say for the median worker, every percentage point of unemployment is going to slow their wage growth by about 0.3 to 0.5 percentage points, which may not sound like a lot, but basically it means they could have had wage growth about double what they had over that entire period if we had just done this one thing, get unemployment down by a percentage point on average over the period.
David Goldstein:
Yeah. I mean, it’s not a lot in one year, but compounded over 10. It’s a lot, right?
Larry Mishel:
It’s a loss of 10% over the 40 year period.
David Goldstein:
Yeah, yeah.
Larry Mishel:
And it’s the single largest factor we estimate. And it’s about almost a fourth of the divergence between pay and productivity.
David Goldstein:
Yeah. So can I ask a slightly more technical question guys? So when you did your economic analysis and you were trying to figure out when you were doing your analysis of why, what factors led to this wage suppression, how did you think about things like the minimum wage? So let me clarify my question because if the minimum wage had tracked productivity gains over the last 45 years, it would be in the $22 range, wouldn’t it? Plus or minus, right?
Larry Mishel:
Yep. That’s about right.
Josh Bivens:
Yeah.
David Goldstein:
Okay. And you know, clearly if the minimum wage was not $7.25 An hour today, or $2.13 cents plus tips for tipped workers, but $22 plus tips, we’d have a very different economy. And the minimum wage would have contributed mightily to workers’ wages keeping up with productivity gains. So how, like when you do your analysis, how do you rank the minimum wage as one policy in the scope of how much people got screwed by, do you know what I mean? Like how did you …
Larry Mishel:
Absolutely, absolutely.
David Goldstein:
It’s a hard question to pose, but I think you get my intent.
Larry Mishel:
I think it’s a very straightforward question. If you want to pick one policy that’s very identifiable that it’s a choice that clearly hurt workers, it would be the failure to raise the minimum wage. And we look at two things. So one of the things we do is we try to account for how does the typical or median worker do? That’s the worker who earns more than half the others and less than half the others, right? Where we think the minimum wage had its biggest impact is that we think it devastated the bottom third. And it accounts for all, basically most of, or all of the inequality that emerged between a low wage worker and a middle wage worker, because that mostly happened in the 1980s when the minimum wage was frozen, inflation was high. And basically by the end of the 1980s, the minimum wage was not affecting anybody’s wage.
So it is huge for that. Some people might think that the minimum wage if it had been indexed, productivity would have really affected the median wage. And that would be a different thing. But what we think are the largest are the ones that Josh talked about, which were the corporate globalization, erosion of unions, the excessive unemployment, and those by themselves basically sabotage the wages of the typical worker by at least $5 an hour, explains more than half of the divergence. And we also look at issues like workers being misclassified as independent contractors instead of workers, the erosion of the overtime threshold, which I know you’ve been focused on. There’s the issue of the fissuring of the economy where big companies contract out all sorts of work so that they can basically take the profits and the wages from the supplier chain and bring it to the bigger company. When you account for all those, we think we can account for at least three fourths of the entire divergence.
And then there’s other things that we look at where we don’t have a quantitative measure, like the fact that we have left undocumented workers without any worker rights, the fact that there’s forced arbitration agreements affecting more than 50% of the workforce. We don’t know what the wage impact of those things are, but we know they matter. So, we think pretty confidently that we can quantify the vast majority of what happened and then there’s stuff we can’t quantify, which can easily explain the rest so that what people need to appreciate, what we hope that listeners can appreciate, is that this didn’t happen by accident, that this was the intentional result of policy decisions. It was enabled by our economics profession, which was wedded to a neoliberal model that seemed dismissive of the needs in terms of workers, and that created the inequality.
And what this means is that what has happened, didn’t have to happen. It means that it doesn’t have to happen going forward. Going forward, if people are organized politically, put pressure on the policymakers and they get policymakers to pay attention to increasing the power of people individually and collectively in the labor market, these would be the employers, then we can ask shared prosperity going forward. And I’m happy to report that I think that that is kind of the agenda that we’re seeing from this administration, which is very different than every administration that I’ve observed in my adult lifetime. And my first vote for president was in 1972. So it’s been a really long time without feeling like anybody in power in Washington, DC really wanted to focus on workers getting a better deal.
David Goldstein:
I’m confused though, Larry, because my understanding was that if American workers, these lazy American workers just taught themselves how to code, we wouldn’t have any of this inequality, but you looked at that right? The so-called skills gap?
Larry Mishel:
Yeah. There is a conventional wisdom that says that it was technology and automation that led to employers needing more skilled workers. Workers weren’t skilled enough, therefore they were left behind. And so it’s really all about automation, which is something that you can’t affect, nor would you want to affect. And the fact is that even the proponents of that had provided the evidence that the over the last 25 years, it’s clearly not plausible.
I’ll give you a couple reasons why. One is that this theory is supposed to work by raising the wages of people with a college degree relative to other people. But in fact, that didn’t happen so much over the last 25 years. It happened very little. The wages of college graduates didn’t do very well in the 2000s. We know that automation itself actually didn’t happen very fast in the last 10, 20 years. In fact, it could be seen as being slower than at any time in the last 150 years, based on a lot of metrics, like how much computer equipment, software is invested in the workplace. That was very, very slow.
David Goldstein:
Yeah. Why invest in capital equipment when you’re paying poverty wages?
Larry Mishel:
Exactly.
David Goldstein:
No incentives.
Larry Mishel:
But also this automation thing ignores what happened to the top 1%. the top 1% saw their wages rise by 165% since 1979. The top 0.1%, the top one thousandth, their wages were up 340%. So these are the people that were just good at using computers? No, that wasn’t it. They’re the executives who raked it in. It’s the finance sector who raked it in.
David Goldstein:
Well, I can tell you that if in our office, the person who was most skilled at using computers had the most money, it wouldn’t be Nick.
Nick Hanauer:
That’s for sure. Yeah. I think that there are a couple of prevailing orthodoxies that this research contravenes. One of them is this skills gap or what we call educationism, which is this dumb idea that if you’re poor it’s because it’s the teacher’s unions fault or something like that, that you didn’t get enough education. And the other is automation and globalization, that if we didn’t have this pesky global economy, everybody would still be rich. I think you guys can speak to this. One of the reasons we know that’s not true, is there are lots of countries in the world that are part of the global economy and they have not suffered the kind of economic inequality that we have, right? They had different arrangements.
Larry Mishel:
Well, the U.S. really stands out in the degree to which way does it become more unequal and the degree to which they share of income going to labor has fallen. So we really stand that. It’s not really true that it’s happened all across advanced nations. It very heavily happened in the United Kingdom. And it very heavily happened in the United States. And they both were subject to these neoliberal policies.
Josh Bivens:
Right, right. Absolutely.
David Goldstein:
So the big news coming out of this report as I understand it is that the rising and radical inequality we’ve had over the past 40 years is the result not of structural changes in the underlying economy, but in deliberate policy choices that we made that intentionally suppressed wages and disempowered workers. That’s the bad news. We’ve had 40 years of bad policy choices. This brings us to the good news. If you can make bad policy choices, then you can also make good policy choices. I’m wondering Josh, what might we do to reverse this trend and set things right?
Josh Bivens:
I think you’re exactly right. The good news is this is reversible. It would actually be much worse news if this really was just sort of the sad outcome of technological change, doing stuff to the deep structural parameters of the economy. That’d be tougher to lean against. This one, we just know all the levers we can start pulling that actually restore some leverage or bargaining power to typical workers. To start with, stop with keeping unemployment at excessively high levels in the name of fighting phantom inflation. Actually wait until you see inflation become problematic before you start going at it. I think Larry mentioned this before. I think we’ve made huge progress on that front. I think Jerome Powell has been really stubborn that you are not going to bully him into raising interest rates based on hand-waving about inflation. He’s going to see it before he does it. And if he can stand his ground on that, that’ll be a huge win.
I think we also see lots of support, much greater, more vocal, and even more institutional support for a pretty fundamental reform of labor law coming from the Biden administration than we saw in the Obama administration. And I think that reflects a couple of things, but I think one of the things it really does reflect, and this is sort of good news, and $5 will get you a lot today, but I do think there’s been an intellectual shift on this as well from a lot of the center left policy wonk class. I think in 2008, if you surveyed that class and asked them about inequality, they would have mostly told you technology story and said, institutions matter is a little bit of a sideshow. And of course we want to do things to help unions, but that’s because they’re our special interest friends and-
Nick Hanauer:
Yeah, they’re our donors.
Josh Bivens:
Exactly, but it doesn’t move the dial. We know what moves the dial is these deep, long running trends. And now I think they’ve been convinced by the evidence that, oh, no, this is not special interests, nothing. This is the story. This is how you roll back inequality. And so I think that’s been a big shift and hopefully that will matter going forward.
Larry Mishel:
Can I add some things to this about what’s going on with Paul, because Josh is exactly right, but also consider what the Biden administration did with their very first piece of legislation. People paid attention to what are the components of that, but they seem to miss that it was a huge bit of spending and that is expected to quickly drive us to unemployment as low as three and a half percent by the end of 2022. That’s a real commitment. It’s a real commitment in the face of a lot of moderates and conservatives saying, “Oh no, you can’t do that. You’re going to stimulate the economy too much.” But what the administration did was said, “Well, there may be a risk, but we’re taking the risk. We want to make sure that the risk is workers are going to be okay and better. And if something else happens, okay.”
And then Josh is right. There’s a real tension to worker power through unions. There’s a tension to raise the minimum wage, there’s attention to worry about the misclassification of gig workers that want to change the overtime threshold. They’re going to do every which policy you can to change labor standards in support of workers, they’re doing. They’re mandating a high minimum wage on federal contractors. All those kinds of things is very intentional to reverse all the things we identified. There are policies that are being proposed. Some by executive action, some have been passed, some could be passed. The biggest limitation I see is the fact that there’s not enough progressive votes in the Senate, and it’s not the intentions of the administration. And I think that people in the center left have to look in the mirror and say, “Why is it we don’t have more people there? Because we really need them.”
David Goldstein:
Yeah Every time President Biden says he’s building the economy from the middle out, my heart flutters.
Larry Mishel:
Sure, sure.
David Goldstein:
Every time President Biden says “middle out,” an angel-
Larry Mishel:
Yes, exactly.
David Goldstein:
Let’s close up with our usual question. Nick, you want to ask it?
Nick Hanauer:
Sure. Why do you guys do this work?
Larry Mishel:
Oh. Since I was a young man, I’ve thought that there was an imbalance of power, mostly rooted in what’s happening in the workplace and to workers, and that it is bad for our democracy, it’s bad for the workers, it’s bad for the nation. And I put my shoulder to the wheel many years ago. I spent many years as a trading economist. I helped build up the progressive think tank that’s the Economic Policy Institute since 1987. And it’s basically to get shared prosperity for everybody in low income and middle income wages and income. And I think we may see something that I never expected to see. And I think we might see some positive results.
Nick Hanauer:
No, I agree. I agree.
Larry Mishel:
Josh, you got to go.
Josh Bivens:
All that. I got into this because life is so unbelievably unfair and our economy is even more unfair than that. And as privileged as I am, I suffer a lot. I distress all the time about what’s going to happen to my family economically. It is the number one thing I think about. And I am in a better position than like 98% of Americans and 99.9% of people in the globe. So yeah, life is just super unfair and it does not have to be. It can be better for people. And so that’s why I do this work.
Nick Hanauer:
Okay guys. Well, this has been fantastic. Congratulations again, on the research, and we will talk to you soon again I hope.
Larry Mishel:
Well, thank you very much.
Josh Bivens:
Yean thanks so much for this.
David Goldstein:
So Nick, when you wrote about the Rand report, you referred to this upward redistribution of income is the $50 trillion elephant in the room. And I was struck how Josh also made an elephant metaphor in talking about his report, the fable of the elephant, where you have the blind people feeling the elephant and one feels the trunk and another its toe another its tail or its ear. And they can’t quite figure out that between them, that it’s an elephant because they’re all feeling their individual parts. And that’s a great metaphor for the difference between these two reports. Rand gave us this big picture of what happened and EPI has just pieced together that elephant for us.
Nick Hanauer:
That’s that’s right. These things, the elements that they put together were understood in some circles, but the real trick here is to put it all together and paint a bit of a broad picture of what actually happened to the economy over the last 45 years. It’s very instructive.
David Goldstein:
Right, and to be clear, what they found that they could actually assess down to a percentage, a dollar value, how much of these policies cost median workers. And the big takeaway is that there were a series of intentional policy decisions that were made in Congress, by executive action in the White House, in state legislatures around the country, and in corporate board rooms that have ended up suppressing wages and creating … they could account for about three quarters of this gap in income between median workers and the top 1%.
And it turns out had we not made those policies, those intentional policies to suppress wages, the median worker would be making about $10 an hour more than they are now. And as we said, for a two worker family in a household, that would be over $41,000 per household, which in the end, Nick, is not much different than what the Rand report felt.
Nick Hanauer:
Yeah. It’s very, very similar.
David Goldstein:
Yeah, where we talk about it, nearly a doubling of household income.
Nick Hanauer:
Yes, exactly.
David Goldstein:
So in the next episode of Pitchfork Economics, we get to talk to a fascinating guy, a very wealthy guy from Denmark, who is the founder of Millionaires for Humanity, Djaffar Shalchi, who’s going to talk about how the American dream is actually found in Denmark.
Speaker 4:
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