Our Economy Can Afford Better Pay for All Workers

Chuck Sheketoff

Earlier this week, U.S. Treasury Secretary Timothy Geithner visited Portland for a series of events. In a speech at the Portland City Club, Geithner rightly cited a “long period of stagnation in real median income” as one of the nation’s most pressing economic challenges (listen to Geithner's April 25 speech here (.mp3)).

Indeed, over the past three decades the income of the typical Oregonian has not just stagnated, but actually eroded. This is explained in part by the fact that the typical Oregonian has seen his or her hourly earnings — their paychecks — also erode over the past three decades.

But as the Economic Policy Institute’s (EPI) new report The Wedges Between Productivity and Median Compensation Growth shows, our nation and our state can afford better wages for all workers.

Why? Because while wages for most workers have stagnated or eroded, worker productivity has zoomed upward. Productivity is the output of goods and services per hour worked. Productivity growth, EPI explains, “provides the basis for the growth of living standards.”

There was a time in our nation’s history when the typical worker’s wages rose in tandem with productivity as shown in this graph from the EPI report.

The decades following World War II saw the rise of a strong middle class. But starting in 1973, wages began to stagnate, even as productivity continued to climb.

While EPI’s report is technical and provides a great deal of data to pore through, the main point to take away is this: the “divergence of pay and productivity has meant that many workers were not benefitting from productivity growth—the economy could afford higher pay but it was not providing it.”

That statement especially rings true in Oregon during the past decade. As OCPP showed in If Economic Growth Assured Well-Being, Oregonians Would be Thriving, from 2001 to 2010, Oregon led the nation in productivity growth:

In 2001, a typical Oregon worker produced about $57,000 of goods and services in today’s dollars. By 2010, productivity had increased to about $76,000. This translates to a growth in productivity of 32 percent — over three times the national increase of 9.8 percent over the same period.

No other state saw a greater increase in worker productivity.

The growth in worker productivity provides the basis for workers to enjoy better wages here in Oregon (and the nation). We have the resources to fix the pressing problem — stagnant median income — that Treasury Secretary Geithner cited.

How do we ensure that Oregonians' productivity gains benefit all workers? We need to lower the unemployment rate by creating private and public jobs. We need to invest in education and training of Oregonians so they can get those jobs. We need to improve investments in public structures — the kind of investments that promote the common good and that, as Secretary Geithner noted in an OPB interview following his speech (at 5:08 of .mp3), only governments can and will make. And we need a more robust unionized workforce, which raises wages and benefits for all workers.

The real challenge is, do we have the political will to do those things and get income and wages for the typical Oregonian back on track with Oregon’s stellar gains in productivity?

Chuck Sheketoff is the executive director of the Oregon Center for Public Policy. You can sign up to receive email notification of OCPP materials at www.ocpp.org.

By Chuck Sheketoff April 27, 2012 Posted in open discussion.