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Why aren’t average workers making more money in the Trump era?

President Donald Trump speaks at a reception commemorating

President Donald Trump speaks at a reception commemorating the 35th anniversary of the attack on Beirut Barracks in the East Room at the White House in Washington on Oct. 25, 2018. Credit: AP / Manuel Balce Ceneta

Despite a strong economy, booming stock market and plentiful job openings, wage growth is weak. In July, Federal Reserve Chair Jerome H. Powell testified before the Senate Banking Committee that “In the last five years or so, labor share of profits has been sideways. This is very much akin to the flattening of the median income over the last few decades.” He noted that the share of national income going to workers had fallen “precipitously” for more than a decade.

Trump administration officials tout a rise in the average earnings of all employees - not the average workers, whose earnings have declined under the Trump administration, according to the Bureau of Labor Statistics data for “median workers” (mid-wage workers). These officials also tend to gloss over inflation. Recently the inflation rate has outstripped small wage growth, driving up the cost of food, energy, housing and health care. The average real wage in July was $10.76 an hour. According to statistics developed by the Brookings Institution, earnings for workers have dropped to 62 percent of the overall economy, down from 66 percent in 2000.

The Trump administration’s actions have been hostile to the welfare of workers. Its tax cut legislation bestowed large benefits on corporations and the wealthiest segments of society. The tax cut is projected to cost $1.2 trillion over the next 10 years. Most benefits from it and from the strong economy have been realized by high-paid workers, large corporations and stock market investors.

America now faces a federal deficit of $779 billion for the year that ended Sept. 30. With such a strong economy and record low unemployment, the fiscal deficit could be reduced by reasonable and frugal tax and spending policies. Yet, congressional Republicans propose offsetting the budget deficit with cuts to Social Security, Medicare and Medicaid - an additional burden to the average worker.

Other factors contribute to low wages for the typical worker. Upward mobility is a myth. Many young Americans are moving downward - not able to achieve what their parents achieved. A major academic study found that of children born in 1970, only 61 percent achieved more than their parents, of those born in 1980, only 50 percent did.

Dwindling union membership means diminished bargaining power for workers and fewer regular pay increases. Wages even remain stagnant for those low-wage workers who stay in their jobs long-term and for mid-level workers. Another important contributor to low pay is the rising costs of employer-provided health care. These costs fall most heavily on low-paid workers.

The typical Walmart worker - of its 2.3 million workers - made less than $19,200 last year. That amounts to less than $11 an hour for a full-time worker. Some small progress has been made recently by large retailers such as CVS, Cosco, Target and Amazon. Amazon, for example, recently raised its hourly rate to $15.

Walmart’s Chief Executive, Douglas McMillon, received $22.8 million in a pay raise last year. In 2017, in America’s top 350 publicly held corporations, the CEO-to-worker compensation ratio was 312 to 1. Top executives in these companies saw their pay surge to an average $18.9 million in that same year, and the average Wall Street salary rose 13 percent, with average annual compensation in the finance industry rising to $422,506.

Other more fundamental economic forces contribute to stagnant wage growth. Changes in real wages depend on how much workers produce. In the last 10 years, productivity growth has been extremely low - in the 1 to 2 percent range. Some of that is attributed to low investment by business and government. Most is caused by worker productivity levels. And most of America’s rapid job growth has been in low-productivity jobs in industries such as leisure and hospitality.

A fundamental restructuring of the world economy is occurring. Productivity is largely realized in big money-makers such as Apple, Google and Facebook. These companies employ only about 230,000 people worldwide. Ten percent of firms account for 80 percent of corporate profits. It is technologies and intellectual property, not people, that are now driving productivity.

Ultimately, persistent, stagnant wage growth spawns a lowering standard of living for most Americans. It shrinks the middle class and deprives our children of the promise of the good life that earlier generations realized.

Perry L. Weed, attorney and founder/director of the Economic Club of Annapolis. His e-mail is