Pandemic-era policies reversed the trend toward a widening income gap. Now those gains are under threat

By | May 29, 2023

Politico reports:

For the past three years, low-income workers have made historic gains in wages even after inflation, reversing the trend of advances for upper-income workers and stagnating pay for laborers that dominated the previous four decades, according to a POLITICO analysis of data from the U.S. Labor Department.

The gains were the product of a series of dramatic changes in the structure of the labor market and government policies to aid the economy during the pandemic. Fueled by the resulting worker shortage, for example, one of the lowest tiers of earners — people making an average of $12.50 per hour nationally — saw their pay grow nearly 6 percent from 2020 to 2022, even after factoring in inflation. That’s significantly bigger than what low-wage workers got during the entire administration of President Barack Obama, following the Great Recession.

At the same time, price spikes have eaten away raises for the highest-earning employees, leading their inflation-adjusted income to drop roughly 5 percent over the past couple of years. The result, according to one new paper: One-quarter of the 40-year growth in the yawning gap between higher-income workers and lower-income workers has disappeared in just a few years. [Continue reading…]

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