I would like to make the case today that the wage-setting mechanism in the U.S. labor market is massively broken. Four decades of flawed policy decisions have systematically eroded the bargaining power of workers, while simultaneously concentrating the political power and wealth of large corporations and the wealthy.1
The result is a labor market where—contrary to neoliberal economic equilibrium models—actual wage levels for most workers reflect generations of accumulated systemic racism, sexism, and occupational segregation; where the federal minimum wage is egregiously inadequate, leaving too many workers below a decent and adequate standard of living; where workers’ ability to join in union and bargain collectively has been eroded; and where highly profitable corporations remunerate their executives lavishly, but choose to pay poverty wages to their front-line and production employees.
This labor market outcome is not just unfair and inhumane for workers and their families trapped in low-wage jobs. It is also inefficient, in that it rewards a short-term business model characterized by high turnover and overreliance on government safety net programs. It contributes to slower growth and growing inequality, especially along race and gender lines. And during the pandemic, we saw vividly that those workers most at risk of contracting the virus on the job were also disproportionately those earning at or near the minimum wage.VIDEO: Our deeply broken labor market needs a higher minimum wage: EPI testimony for the Senate Budget Committee | Economic Policy Institute