- Since the 1970s, US wage growth has stalled, with the top 1% seeing most of the gains.
- It’s resulted in a “quiet fleecing” of the American worker, according to data analyzed by the Economic Policy Institute.
- As the Federal Reserve acts to cool inflation, it could ultimately make the problem worse.
As the country debates the merits of “quiet quitting,” it’s another phenomenon — “quiet fleecing” — that should have workers’ attention.
It’s the reason millennials are worse off than their parents’ generation, buying a home has gotten further out of reachand many are struggling to afford basic health care. At the same time, the US has roughly nine times as many billionaires as it had in 1990.
Coined by the Economic Policy Institute, “quiet fleecing” describes decades of stagnant wage growth in the US despite rising productivity and costs of living. In theory, workers’ wages rise in tandem with their productivity, or the output they provide to a company. And for workers to benefit from those raises, they should outpace inflation. Up until the 1970sthat was roughly the case in the US. But then something changed. The wages of the 1% began to outpace economic growth and inflation, while the pay of the average worker fell behind.
Despite producing more than ever, American workers are sharing in less and less of the wealth created by the US economy as the pockets of corporations and billionaires get fatter than ever.
“For much of the last 40, 50 years it’s been close to zero wage growth or compensation growth for typical workers,” EPI economist Elise Gould told Insider. “Those trends in hourly wage growth have profound consequences for American living standards and how well people in this country are able to make ends meet. And I think that the growing economy has not universally translated into broadly shared prosperity.”
While the “quiet quitting” trend is based on the idea that workers should not have to go above and beyond at their jobs, one could argue that they have been doing so for the last 40 years and still continue to see their share of the economic deteriorate foot. If governments and unions can’t turn things around, or the Federal Reserve steers the economy into a downturn, “quiet fleecing” will persist — and workers will continue to lose.
“Quiet fleecing” means lower wages and fewer ways to get ahead, while an elite few thrive
From the worker’s perspective, the “quiet fleecing” phenomenon looks like decades of wages that haven’t kept up with the rising costs of healthcare, housing, and food. At the same time, CEOs were paid over 350 times as much as the typical worker in 2020, and corporations are reporting record profits. And the pandemic has only exacerbated this inequality.
It could be why more workers are getting vocal about quiet quitting, “acting their wages,“or joining the Great Resignation.
“Workers have had to work more hours to get ahead because their hourly wages have grown very slowly over this longer time period,” she said. “I think that there’s been a reevaluation for some workers in the pandemic of what they wanted from their jobs.”
It could also fuel more labor organizing. There have been roughly 180 strikes in the first half of 2022, up from 102 in the same period last year.
“When it becomes so hard to make ends meet on the wages that they have, some people are seeing, maybe there’s a better way.”
Gould attributes several factors to the rise of “quiet fleecing” over the past decades—including stagnant minimum wages, the decline of unions, and the growing pay gap between CEOs and their employees.
“Smaller and smaller pieces of the pie are coming to the vast majority of workers and their families in this country,” she said.
She also points to the Federal Reserve’s past prioritization of low inflation and its allowance of excess unemployment, both of which have hurt workers’ bargaining power. As the Federal Reserve raises interest rates to combat today’s surge in inflation, she’s concerned that a resulting economic slowdown would ultimately have the same effect.
“One of the threats of allowing the unemployment rate to rise is that not only you could have millions of people lose their jobs, but also workers — even who have their jobs — lose some of that leverage to be able to build up their wages, because they’re less scarce,” she said.
While many low-income workers have received pay bumps over the past few years, they could be disproportionately impacted by a weakened labor market. These workers are not only the most likely to see job losses when unemployment ticks up, Gould says, but the most likely to “require a very tight labor market” to see wage growth.
While the Federal Reserve is aware of these risks, it may think some of this “pain“is needed to slow inflation. But Gould thinks directing this pain at the labor market would be counterproductive.
“I think that it’s really important to know where the inflation is coming from. It’s not coming from the labor market,” she said. “Wage growth has not been beating inflation. So if anything, wage growth is actually pulling down on inflation.”