Boosting wages for U.S. workers in the new economy Ten essays on worker power, worker well-being, and equitable wages January 2021 equitablegrowth.org The Washington Center for Equitable Growth is a non-profit research and grantmaking organization dedicated to advancing evidence-backed ideas and policies that promote strong, stable, and broad-based economic growth. Equitable Growth examines whether and how economic inequality—in all its forms— affects economic growth and stability, and what policymakers can do about it. We work to build a strong bridge between academics and policymakers to ensure that research on equitable growth and inequality is relevant, accessible, and informative to the policymaking process. And we have the support and counsel of a steering committee comprised of leading scholars and former government officials. Members include Atif Mian, Alan Blinder, Lisa Cook, Karen Dynan, Jason Furman, Hilary Hoynes, John Podesta, and Robert Solow. Since our founding in 2013, we have funded the work of more than 250 schol- ars and built a broader network through our working papers series, events, and convenings. By supporting research and bringing these scholars together to exchange ideas, we have learned a great deal and advanced a broad range of evidence-based policy approaches to addressing economic inequality and delivering broad-based economic growth to communities and families. Cover illustration: David Evans Boosting wages for U.S. workers in the new economy 1 Contents Foreword 3 Overview 5 Worker power 6 Worker well-being 8 Equitable wages 9 Worker empowerment matters for all policies 11 Worker Power 12 Strategic enforcement and co-enforcement of U.S. labor standards are needed to protect workers through the coronavirus recession 13 Transforming U.S. supply chains to create good jobs 31 Boosting wages when U.S. labor markets are not competitive 47 Collective bargaining as a path to more equitable wage growth in the United States 57 Worker well-being 70 U.S. labor markets require a new approach to higher education 71 Public investments in social insurance, education, and child care can overcome market failures to promote family and economic well-being 87 Targeting business tax incentives to realize U.S. wage growth 100 Equitable Wages 111 Washington Center for Equitable Growth | equitablegrowth.org 2 Addressing gender and racial disparities in the U.S. labor market to boost wages and power innovation 112 Place-conscious federal policies to reduce regional economic disparities in the United States 131 Sovereignty and improved economic outcomes for American Indians: Building on the gains made since 1990 147 Acknowledgments 165 About the authors 168 Boosting wages for U.S. workers in the new economy 3 Foreword By Jean Ross, Bernard and Anne Spitzer Charitable Trust The anemic wage growth that has characterized the U.S. economy for decades has deep structural causes that defy easy solutions. For decades, the benefits of econom- ic growth have gravitated toward those at the very top of the income ladder, contrib- uting to growing and increasingly dangerous economic inequality. While we Ameri- cans might value shared prosperity as a society, it will remain an elusive goal without comprehensive action to combat stagnant wages. Policy choices have led us to where we are today, and transformative new policies will be required to make real progress. The Bernard and Anne Spitzer Charitable Trust is honored to support the Wash- ington Center for Equitable Growth and the Institute for Research on Labor and Employment at the University of California, Berkeley in the development and pub- lication of this book, Boosting wages for U.S. workers in the new economy, which makes an important contribution to the advancement of our vision of a more equitable and sustainable economy. As the report notes, for decades, two ideas for lifting the wages of low- and mid- dle-income workers have been prevalent: raising the minimum wage and enhancing education. While research confirms that both are necessary and have important effects, the evidence also suggests that they are not nearly sufficient to overcome the enormous forces in the U.S. economy that exert downward pressure on wages. Those forces are so strong that even in the extraordinarily tight labor market that existed just prior to the coronavirus recession, wages barely budged. It is clear that structural changes are needed—no single intervention will solve the problem of wage stagnation. This volume includes 10 commissioned essays by forward-looking scholars that outline a wide-ranging set of ideas for tackling this problem. The approaches presented are not confined to traditional labor or human capital issues, but generally fall under three categories: Increasing worker power, which has been weakened dramatically with the decline in union membership resulting from both government policy and employer practices Washington Center for Equitable Growth | equitablegrowth.org 4 Improving worker well-being, not only by improving access to education but also by repairing and strengthening the social programs that support families Addressing the wage disparities that exist between White workers and Black and other workers of color, between men and women, between employees from different firms, and between workers in different geographic areas This project brings together a set of labor scholars ranging across multiple disci- plines—economics, sociology, management, and law—all of whom are diverse not only in race and gender, but also in the kinds of colleges and universities where they write, teach, and conduct their research. And they are diverse in another way: They are at varying points in their careers. This is a collection of established experts and rising stars with ambitious ideas and a range of perspectives. Equitable Growth and the Institute for Research on Labor and Employment creat- ed a rigorous process to develop the project. They provided authors with feedback on their original drafts in terms of both content and presentation. They convened a half-dozen workshops, all conducted virtually amid the pandemic. And they brought together academics in the relevant fields, policy experts in Washington and elsewhere, and advocates working in the policy arena to make change. I hope you will agree that the results are outstanding. The project is designed to provide policymakers throughout the new Congress and the new administration with an actionable agenda for transforming the U.S. econo- my by raising wages, reducing inequality, and producing shared prosperity. —Jean Ross is senior program officer at the Bernard and Anne Spitzer Charitable Trust. Boosting wages for U.S. workers in the new economy 5 Overview By Kate Bahn, Washington Center for Equitable Growth, and Jesse Rothstein, University of California, Berkeley Broad structural change is needed to boost wages in a U.S. economy that is more equitable to produce strong, sustainable economic growth The U.S. labor market is shackled by decades of wage stagnation for the majority of workers, persistent wage disparities by race, ethnicity, and gender, and sluggish economic growth. The steady increase of income inequality since the 1970s leaves generations of U.S. workers and their families unable to cope with the daily costs of living, let alone save for emergencies or invest in their futures—conditions that have left many families ill-prepared for the “stress test” of the coronavirus recession. These labor market ills particularly affect women and workers of color due to de- cades of gender inequality and structural racism erecting barriers to opportunities. There is increasing evidence that broad structural inequality leads to a misalloca- tion of talent and the undervaluation of different types of work, which contributes to anemic economic growth and slower productivity gains. Creating an economy that works for everyone and serves those who are historical- ly marginalized requires addressing underlying economic structures that form the foundation for U.S. labor market policies. These unequal structures entrench barri- ers to opportunity based on race, ethnicity, and gender, and exacerbate the power imbalances that allow employers to undercut wages and allow gains of growth to accrue to the few while stifling a robust, dynamic U.S. economy. Existing efforts to address wage stagnation and persistent disparities tend to be limited to two narrow approaches: minimum wages and educational investments. Both are critically important, but neither are sufficient to overcome the unequal structures in the U.S. labor market. Minimum wages reach only the bottom of the wage distribution, while increasing education as a response to stagnating or falling Washington Center for Equitable Growth | equitablegrowth.org 6 wages at each education level amounts to asking workers to run faster on a treadmill, making little progress against the overall deterioration of worker compensation. This book, a joint effort of the Washington Center for Equitable Growth and the Institute for Research on Labor and Employment at the University of California, Berkeley, presents a series of essays from leading economic thinkers, who explore alternative policies for boosting wages and living standards, rooted in different structures that contribute to stagnant and unequal wages. The essays cover a variety of strategies, from far-reaching topics such as the U.S. social safety net and tax policies to more targeted efforts emphasizing laws governing American Indian tribal