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The Age of Flat Wages

David Callahan

Yesterday I wrote about why a tight labor market may not return any time soon to raise wages. But here's another scary thought: What if tight labor markets no longer push up wages like was once the case?

This is not a purely speculative thought. Consider new research from EPI which finds that wages have been flat for the past decade. During the period from 2000 to 2007, wages barely budged. But that period also saw unemployment fall dramatically, moving below 5 percent in mid-2005 and continuing downward to 4.4 percent in mid-2007. 

During the 1990s, rates that low led to big wage gains for workers near the bottom. But that didn't happen in the Bush years. A big reason is the quality of jobs has declined, with more new jobs being in retail and restaurants. Another reason is that, in various ways, employers have gotten better at paying workers the minimum possible when labor markets are tight.

All of which raises ominous questions about the future: Even if we can pull out of today's slump and tighten labor markets, what if we can't escape the Age of Flat Wages?