The top 1% was the only group to see real wage gains from 2020 to 2021, report says

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Inequality in the U.S. deepened in 2021, with the country’s top 0.1% experiencing a 18.5% jump in earnings from the previous year, according to a new report from the left-leaning Economic Policy Institute. 

The bottom 90% of earners, meanwhile, swallowed an overall loss of 0.2% in inflation-adjusted earnings in the same period.

That tracks with a 40-year-long trend of wages for the top 1% and 0.1% rising by 206.3% and 465.1%, respectively, between 1979 and 2021, while wages for the bottom 90% grew by a far more modest 28.7%. 

Consistent positive wage growth for workers was concentrated in tighter labor market periods, including “the five years leading up to the pre-pandemic labor market peak in 2019,” the report said.

This year, some low-income workers have even experienced wage gains that outpaced inflation, the Economic Policy Institute said. But such wage growth is likely to evaporate further as the Federal Reserve hikes interest rates to tamp down rising consumer prices, increasing unemployment rates and potentially causing a recession, some at the EPI have argued. 

Related: The Fed’s rate hikes have succeeded in one way — they’ve reduced wealth inequality, analysis finds

“The highest earners have amassed a growing share of total wages, while the bottom 90% has continued to fall further behind,” Elise Gould, an EPI senior economist and co-author of the report, said in a statement Wednesday. “This growing inequality isn’t inevitable — it is a result of decades of deliberate policy decisions to reduce workers’ bargaining power.”

By analyzing wage trends in the most recent earnings data from the Social Security Administration, the Economic Policy Institute found that in 2021, even as the labor market recovered from pandemic shocks, “the only group to experience real wage gains between 2020 and 2021 was the top 1% of the earnings distribution.” Even the 90th to 95th percentiles of earners saw losses of 2%, the EPI said.  

“In 2021, the bottom 90% of workers earned only 58.6% of total earnings, while the top 5% earned 29.9%,” the researchers wrote. “That is, a group of workers that is 18 times as big in size earned only about twice as much as the much smaller group.”

The EPI attributed rising inequality to policies that have chipped away at worker power, including a stagnant federal minimum wage, a lack of enforcement surrounding wage theft, and a reduction in worker bargaining power, among other factors.

“To stem inequality and see healthy wage growth for the vast majority of workers, we need to use all the tools in our toolbox to reverse these policy trends — including prioritizing full employment, strengthening and enforcing labor standards, and removing obstacles to workers forming unions,” the EPI said. 

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