A strong economy is one that works for everyone, including both young and experienced workers, children and families, lower-wage and high-wage earners. The economic security of these workers depends on reliable access to opportunities that offer good incomes and that allow workers to share in the benefits of economic growth. With the right set of policies in place, realizing this vison of broadly shared prosperity is well within our reach (read more about effective policy options for jump-starting wage growth).
Unfortunately, for many workers – both nationally and here in Massachusetts – the last thirty-five years have been less about opportunity and advancement, and more about the struggle to simply stay afloat. Since the 1970s, wages have been close to stagnant for most workers (see chart below). During the current economic recovery (since 2009), wages for low, median and high wage workers actually have declined (see chart below). Given that wages are the principal source of income for most working families, the weak growth – and more recently, the outright decline – of wages over the last three decades presents us with the core problem we now must address. It will not be easy, but it is possible to reverse these troubling trends.
Due in significant part to policy choices adopted over the last several decades, wage stagnation is now woven into the structure of our national and state economies. But that has not always been the case. For three decades following WWII, real median wages in the U.S. grew at a healthy annual clip, raising living standards and expanding opportunity for millions of American working households. During these post-war years, wages grew in lock-step with gains in overall productivity: as workers delivered more and better products with each hour of their work, these productivity gains fueled corporate profits and lead to higher hourly wages for workers (see chart below). The powerful and beneficial connection between productivity and wages, however, was broken during the 1970s. Reconnecting these two - making sure that wages again grow as productivity rises – has become one of, if not the, central economic challenge of our time.
One of the effects of weak wage and income growth is that many working families cannot make meaningful headway toward raising their standard of living. For some low-income families this means they cannot work their way out of poverty. We see this dynamic revealed in the data: during the first four years of economic recovery (2010-2013) from the Great Recession, the poverty rate in Massachusetts has remained stubbornly high. The Census data show that the overall poverty rate in Massachusetts stood at 11.9 percent in 2013, a level that is statistically indistinguishable from levels going back to 2010. The last year in which the data indicate a clear difference in the poverty rate from 2013 levels is 2009, when the Massachusetts rate stood at 10.3 percent.
A related and still more troubling outgrowth of stagnant wages and income is revealed by the U.S. Census data on childhood poverty in the Commonwealth. In 2013, 16.0 percent or almost 1 in 6 Massachusetts children lived below the poverty line. This is up from a rate of 12.8 percent at the start of the national economic recovery in 2009 and 13.9 percent in 2010 (there is no statistically significant difference between the 2013 rate and the rates in 2012 or 2011).
Despite the concerning national and state level trends in wages, incomes and poverty rates, Massachusetts families have some positives working in their favor. Massachusetts has the best educated workforce in the nation and the highest median wage (see chart below and the Education & the Economy section of this report).
By 2017, Massachusetts also will have the highest statewide minimum wage in the nation (see the Wages & Income section) and has recently enacted a statewide earned paid sick time policy, both of which will improve the pay and quality-of-life for hundreds of thousands of low wage workers.
Building on these successes, there is much more that can be done - at both the state and federal levels - to help boost wages, reduce poverty, and improve economic security and opportunity for workers and their families. With such policies in place, we can begin to reverse the damaging trends of the last three decades. In time, we can rebuild a strong economy, one marked not by wage stagnation and extreme inequality, but instead by broadly shared prosperity.________________________________________________________________________________________________
In addition to covering issues of wages and poverty, the various sections of The State of Working Massachusetts discuss the jobs situation in our state, the impact of wages on incomes, and the important role education plays in all of these areas. Throughout the report, we present data available from the U.S. Census Bureau, U.S. Department of Labor, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics and others. We invite you to read more about all of these topics and to explore the many other issues we cover and reports we provide on the MassBudget website.