While protests by minimum wage workers have received national spotlight in recent years, the insidious problem of wage inequality can be seen throughout the lower and middle class.
In 2000, the median household income in America was $54,841, as reported by the U.S. Census Bureau (numbers reported in 2011 constant dollars). By 2011, the median household income had fallen to $50,054.
Part of the static state of wages can be attributed to the recession and limping economy. But the resulting rise in unemployment and fall in pay did not create the problem — both just exacerbated a pattern of flat wages for the bottom two-thirds of wage earners that has existed for the last three decades.
President Barack Obama addressed the issue in a July 2013 speech, acknowledging that though postwar America enjoyed a boom in the middle class, “over time, that engine began to stall.”
“The link between higher productivity and people’s wages and salaries was broken. … So the income of the top 1 percent nearly quadrupled from 1979 to 2007, but the typical family’s incomes barely budged,” Obama said.
Wages Remain Static While Productivity Soars
A report from the Economic Policy Institute found that from 2002 to 2012, wages have remained largely flat for 70 percent of Americans. The same report, however, found that workers’ productivity over the same period of time had risen significantly.
“The weak wage growth over 2000-2007, combined with the wage losses for most workers from 2007 to 2012, mean that between 2000 and 2012, wages were flat or declined for the entire bottom 60 percent of the wage distribution (despite productivity growing by nearly 25 percent over this period),” Lawrence Mishel and Heidi Shierholz wrote in the report.
So if growth has taken place, but the vast majority of Americans haven’t benefited from it — who has?
“[T]he fruits of overall growth have accrued disproportionately to the richest households. Corporate profits, on the other hand, are at historic highs,” according to the report. “Income growth has been captured by those in the top 1 percent, driven by high profitability and by the tremendous wage growth among executives and in the finance sector.”
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Wage Slaves: The Overqualified and Underpaid Generation
Combine this wage inequality with still-recovering unemployment rates and huge numbers of college graduates flooding the job market, and the result is that the average American worker is overqualified and underpaid. A competitive job market means that the advantage lies with hirers, not workers.
For workers, learning how to settle is the M.O. of the decade, as finding compensation that matches their level of education, experience and expertise has become increasingly difficult. But each generation is coming up against its own set of challenges in the fast-paced workplaces of today.
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Workers in this age group (late 40s to mid-60s) might face age discrimination as an obstacle to equal pay. In a recent survey of New York City residents ages 50 and up conducted by AARP, 26 percent of respondents said that since passing the age of 50, they had not been hired because of their age.
Similarly, 24 percent said that they had been passed over for a promotion or a raise due to their age. Nearly half — 46 percent — said they are “extremely to very concerned about age-discrimination in the workplace.”
With wages staying stagnant over the last decade, many baby boomers are scrambling to put retirement plans in place despite earning lower pay at this stage in their career than they might have originally counted on. Many are finding themselves unemployed due to job cuts, or asked to retire at an earlier age than they wished to.
Workers in the generation just younger than boomers (early 30s to mid-40s), Gen X might find that the advancements they have planned for in their career simply aren’t happening. With boomers postponing retirement or looking to reenter the workforce to supplement their income, Gen X is finding that the positions they would typically have been promoted or hired into are no longer available.
Still, with decades of experience more than Generation Y and decades of work ahead of them that baby boomers don’t have, Generation X might have the most leverage to secure fair compensation.
Generation Y and Millennials
When it comes down to who is the most underpaid and underemployed, millennials take the cake. With a job market saturated with recent graduates, unemployment and underemployment are rampant.
In the 20 to 24 age range, the unemployment rate is 13.3 percent; for 25- to 29-year-olds, the number is 8.9 percent, according to the Bureau of Labor Statistics. These are the highest unemployment rates of any age group over 20.
With the average level of student debt surpassing $26,000, graduates will have a hard time paying this off; a recent Gallup Poll found that 41 percent of college graduates are working jobs that they say don’t requite a college degree.
This combination of high unemployment and underemployment means that this age group has a lot of competition, and fewer opportunities. Companies have the upper hand here, getting their pick of a number of bright and qualified candidates, while offering lower starting salaries.
How to Combat Unfair Compensation
The job market is not slanted in workers’ favor, and hasn’t been for decades. But that is even more reason for the employees and job seekers alike to be proactive in seeking higher wages.
“When qualified candidates are underpaid, in most cases, this is something that the candidate has allowed to happen,” said Kent Lee, CEO of career development service Perfect Resume. “Companies are always looking for ways to do more with less; that includes the salaries they pay their workforce. In other cases it might involve giving more job duties to staff and not paying them more for the increased work responsibilities.”
This is the tightest spot to be in. “The hiring company has all the leverage in this situation,” Lee said, pointing out that it might try to offer a less competitive salary, knowing the candidate would be more willing to take a low figure in return for regular paychecks. “The key for the candidate in this situation is patience. If you don’t want to be underpaid, then don’t accept a job that does not pay you what you believe you are worth.”
Employed But Underpaid
For those who are employed but think they could be earning more, the situation is certainly preferable to being unemployed. Figure out the fair market wage for your position, duties and experience, then start actively looking for new job opportunities that are offering that level of pay. “In this case, the employee has the leverage, because he already has a job,” Lee said.
With less urgency, you can likely afford to wait for the right offer. “If you love working for your current employer, you can use this new job offer as leverage to receive a salary increase; or, if you prefer, you can leave the company for this new opportunity. In either case, congratulations, because now you are no longer underpaid!” Lee said.
It took decades and the Great Recession for American workers to end up in wage slavery; it will likely take years for things to improve, as well. But with this problem on the national radar, hopefully we can start taking steps to help bolster pay. For now, be proactive and seek better opportunities to step up your income.
Photo credit: ITU Pictures