Improving the Fortunes of America’s Working Class

Abstract

The prosperity of America’s working class depends on trends in their employment and earnings, but also on the social protection and income supplements they receive as a result of government policy. Since 2000, working-class wages climbed slowly once we account for the increase in consumer prices. Nonetheless, the total personal income of lower- and middle-income families increased considerably faster than their wages. As documented in the article, the income gains were in part the result of rising fringe benefits from employers and even more the result of rising government subsidies for health insurance and social protection. The article recommends a range of policies to increase the pace of working-class income gains, including macroeconomic policies that increase the duration of economic expansions, reforms in labor law to improve workers’ bargaining power, boosting the minimum wage, and revising occupational training of non-college-educated workers to boost their earning power.