Government policy and employer practice have suppressed employee compensation for decades

The Economic Policy Institute recently published a study that carefully evaluates the experience of employees over the past several decades to determine why employee compensation has remained stagnant while employee productivity has continued to increase. The study, “Identifying the policy levers generating wage suppression and wage inequality,” concludes that this dynamic of employers getting more (company profits) for less (pay to employees) results from avoidable factors. Contrary to the assumption that automation and other technological changes have caused the suppression of employee compensation and today’s extreme economic inequality, the study by the Economic Policy Institute shows that deliberate policy choices by political leaders and government agencies as well as the dominant business practice have created the current situation.

In particular, the empirical analysis of the past 40 years by the Economic Policy Institute shows that the present problems exist because of government policy allowing excessive unemployment and weakened labor protections – including inadequate responses to employee misclassification, employer wage theft, workplace safety violations, the decline of minimum wage standards in real dollars, and the dilution of union rights. In addition, the employer practice of using increasingly expansive non-compete and anti-poaching restrictions, forced arbitration of employment disputes, and joint employer schemes have unfairly held down employee compensation. The study by the Economic Policy Institute also shows that the negative impact of government policy and employer practice has been the greatest for women and people of color.

Given the groundbreaking findings of the Economic Policy Institute, key agencies need to move forward with broadening workplace rights and robustly enforcing them. Those agencies include the United States Department of Labor, the United States Equal Employment Opportunity Commission, the National Labor Relations Board, and the Occupational Safety and Health Administration. Within the scope of their work, each such agency and legislators at all levels of government must help to restore the balance in power between employers and employees. To that end, according to the Economic Policy Institute, public officials and agencies need to focus on the labor market rather than the product markets to secure widely shared economic growth – and to do so quickly.