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Rising wage inequality and sluggish hourly wage growth for the vast majority of workers have been defining features of the American labor market for nearly four decades, despite steady productivity growth. The U.S. economy of the last several years has been no exception. Although the unemployment rate continued to fall and participation in the labor market continued to grow over the last year, most workers are experiencing moderate wage growth and even workers who have seen more significant gains are just making up ground lost during the Great Recession and slow recovery rather than getting ahead.

This report analyzes data from the Current Population Survey (CPS) and details the most up-to-date hourly wage trends through 2018 across the wage distribution and education categories, highlighting important differences by race and gender. By looking at real (i.e., inflation-adjusted) hourly wages by percentile, we can compare what is happening over time for the lowest-wage workers (those at the 10th and 20th percentiles) and for middle-wage workers (those at or near the 50th percentile) with wage trends for the highest-wage workers (those at the 90th and 95th percentiles).

The data show not only rising inequality in general, but also the persistence, and in some cases worsening, of wage gaps by gender and race. What also stands out in this last year of data is that, while wages are growing for most workers, wage growth continues to be slower than would be expected in an economy with relatively low unemployment. Given this slow wage growth, policymakers should not presume that the economy has already achieved (or even surpassed, as some claim) full employment. Instead, policymakers should try to keep labor markets as tight as possible for as long as possible to see if wage growth lost during the Great Recession can be clawed back, and to see if wage disparities by gender and race can be reduced.

New in this report: Accounting for “top-coding” in the CPS

The CPS is one of the best measures of hourly pay because it allows researchers to analyze differences across the wage distribution and by demographic characteristics. However, for confidentiality reasons, the CPS “top-codes” weekly earnings: All workers who report weekly earnings above $2,884.61 (annual earnings for full-year workers above $150,000) are recorded as having weekly earnings of exactly $2,884.61, to preserve the anonymity of respondents. This top-code amount of $2,884.61 hasn’t changed or been updated for inflation in 20 years and, as a result, a growing share of workers are assigned this weekly earnings value rather than having their actual wages reported. Because these workers’ actual wages are masked by the top-code, it has become harder to uncover the extent of top-end wage levels and growth. Other data, such as data from the Social Security Administration, illustrates that wage growth is far more concentrated at the top than can be illustrated using the CPS, with growth at and within the top 1 percent exhibiting growth orders of magnitude faster than at the 95th percentile. In the most recent year of data, the top-code is assigned to more than 5 percent of weekly earnings for male workers in the CPS; with no adjustment, this would compromise our 95th-percentile hourly wage estimates. For the purposes of this report, we use what we think is an acceptable proxy for wage growth at this percentile, as described in the “Methodological considerations” section of this report.

Summary of key findings

Below is a summary of the key findings of this report. These findings are outlined in greater detail in subsequent sections of the report.

Considerations and cautions when using the Current Population Survey (CPS) to measure wages in a world of growing inequality. Regarding stagnant top-codes, month-to-month volatility, and the data sample, we find that:

Top-coding of weekly earnings is catching an increasing number and share of workers as inequality continues to climb, making it increasingly difficult to obtain reliable measures of 95th-percentile wages, particularly for male workers and white workers. Therefore, caution should be exercised when examining recent wage levels and trends for these workers.

Because the CPS exhibits a fair amount of year-to-year volatility, one-year changes in wages by decile in the CPS—while providing new and valuable information—should be taken with a grain of salt.

Caution should be exercised when making comparisons with prior-year versions of this report, as the data sample has changed; notably, the analysis here includes all workers 16 years of age and older to be both consistent with other Bureau of Labor Statistics analyses and reflective of a growing number of workers ages 65 and older in the labor market.

Wage inequality. From 2000 to 2018, wage growth was strongest for the highest-wage workers, continuing the trend in rising wage inequality over the last four decades.

Since 2007, the labor market peak before the Great Recession, the strongest wage growth has continued to be within the top 10 percent of the wage distribution.

From 2017 to 2018, relatively fast growth continued at the top (2.7 percent at the 95th percentile), but the 20th and 30th percentiles saw the strongest growth at 4.8 percent and 3.7 percent, respectively. Median wages grew 1.6 percent over the year.

Wage inequality by gender. While wage inequality has generally been on the rise for both men and women, wage inequality is higher and growing more among men than among women.

Because of their relatively high wages, particularly at the top of the wage distribution, men are far more likely to be affected by the top-code in recent years, making it more difficult to accurately assess 95th-percentile wage levels and wage growth.

From 2017 to 2018, men at the 95th percentile saw large wage gains, while those at the middle and very bottom of their wage distribution experienced downright wage losses. Since 2000, men’s wages at the 95th percentile grew 42.0 percent, more than twice as fast as at the 90th percentile (17.1 percent), while the median man’s wage barely budged, rising only 0.8 percent over the entire 18-year period.

Women have experienced more equal wage growth since 2000, and their wage growth from 2017 to 2018 was relatively more broadly shared as well, with stronger growth among the bottom 30 percent than among the top 20 percent. Since 2000, wage inequality has grown less among women compared with men.

Gender wage gap. The “gender wage gap” refers to the historically persistent difference between what men and women are paid in the workplace. While significant gender wage gaps remained across the wage distribution, the gender wage gap at the median continued to shrink over the last year, with a typical woman paid 84 cents on the typical man’s dollar in 2018 (or, facing a 16 percent wage gap).

The gender wage gap at the 10th percentile remains the smallest across the wage distribution and it has narrowed since 2000; it is currently at 5.9 percent.

As inequality among men has continued to increase, it is not surprising that the gender wage gap at the top grew significantly and that 95th-percentile women are paid 33.6 percent less in 2018 than 95th-percentile men.

The regression-adjusted average gender wage gap narrowed slightly from 2000 to 2018 and is currently at 22.6 percent. This measure accounts for differences in educational attainment, age, and other potentially relevant characteristics for wages, and reports the gender wage gap remaining after these statistical controls are used.

Wage growth in states with minimum wage increases. From 2017 to 2018, wages of the lowest-wage workers grew more in states that increased their minimum wage in 2018.

On average, in the 29 states without minimum wage increases in 2018, the 10th-percentile wage rose 1.6 percent; in states with minimum wage increases in 2018 (including the District of Columbia), the average 10th-percentile wage rose by 2.1 percent.

The differential is larger when looking across recent years with many minimum wage increases: Between 2013 and 2018, when 26 states and D.C. experienced at least one minimum wage increase, the 10th-percentile wage grew much faster in those states (and in D.C.) than in states without any increase (13.0 percent vs. 8.4 percent).

In both comparison periods, both men and women at the 10th percentile saw greater wage growth in states with minimum wage changes versus those without.

Wage growth by race/ethnicity. At every decile, wage growth since 2000 was faster for white and Hispanic workers than for black workers.
Over the last 18 years, wage growth for white and Hispanic workers has been about four times faster than that of black workers in the 20th through the 70th percentiles of their respective wage distributions. The 60th and 70th percentiles of the black wage distribution remain below their 2000 levels.

Because of their higher wages, the 95th percentile white wage has to be imputed using the same method as described for male workers. Regardless of measurement, between 2017 and 2018, the strongest wage growth among white workers was at the 95th percentile, while white workers at the 10th percentile experienced downright declines. White wages grew across the wage distribution since 2000.

Over the entire period from 2000 to 2018, Hispanic workers experienced relatively more broadly based wage growth, with strong growth at the top as well as at the median and at the bottom. From 2017 to 2018, however, Hispanic workers’ wages faltered, with outright declines (or stagnation) for the top half of the wage distribution.

Racial/ethnic wage gaps. Wage gaps by race/ethnicity describe how much less African American and Hispanic workers are paid relative to white workers. Throughout the wage distribution, black–white wage gaps were larger in 2018 than in 2000; conversely, Hispanic workers have been slowly closing the gap with white workers in the bottom 80 percent of the wage distribution.

The regression-adjusted black–white wage gap (controlling for education, age, race, and region) has become larger over the last year (EPI 2019d).

While the Hispanic–white wage gap has remained fairly constant over the last 18 years (12.3 percent in 2000 compared with 11.8 percent in 2018), the black–white gap was significantly larger in 2018 (16.2 percent) than it was in 2000 (10.2 percent). In 2000, the regression-adjusted Hispanic–white wage gap was larger than the regression-adjusted black–white wage gap. By 2018, the reverse was true.

Wage growth by education. From 2000 to 2018, the strongest wage growth occurred among those with advanced degrees, those with college degrees, and those with less than a high school diploma.

Over the last year, the strongest wage growth occurred among those with some college and those with advanced degrees, a reversal from 2016 to 2017, when wages fell among these workers.

The wages of those with a high school diploma rose faster than the wages of those with a college degree over the last two years, narrowing the gap between college and high school wages. As a result, the college wage premium—the regression-adjusted log-wage difference between the wages of college-educated and high school–educated workers—fell from 50.6 percent to 48.4 percent between 2016 and 2018.

Between 2000 and 2018, the college wage premium rose slightly, from 47.0 percent to 48.4 percent over that whole period. The growth in the college wage premium was nowhere near fast enough to explain the total rise in wage inequality over that time.

For the first time in this recovery, workers with some college just reached their 2000 wage level in 2018.

Wage growth by education and gender. Since 2000, wage growth for those with a college or advanced degree was faster for men than for women, while wage growth for those with a high school diploma or some college was faster for women than for men.

In general, the women’s wage distribution by educational attainment is more compressed; that is, the wage differences between workers of different levels of education are not quite as large for women as they are for men.

While there has been a slow narrowing of gender wage gaps since 2000 for those with high school diplomas and for those with some college, gender wage gaps were wider than in 2000 among those with less than high school, those with college degrees, and those with advanced degrees.

At every education level, women are paid consistently less than their male counterparts, and the average wage for a man with a college degree is higher than the average wage for a woman with an advanced degree.

Wage growth by education and race/ethnicity. From 2000 to 2018, wage growth for white and black workers tended to be faster for those with more education than for those with less education.

Average wages grew faster among white and Hispanic workers than among black workers for all education groups from 2000 to 2018.
Among black workers, only college- and advanced-degree holders had higher wages than in 2000, but their wage growth was considerably slower than wage growth for white or Hispanic workers with those same degrees.

From 2017 to 2018, wage growth was strongest for those with an advanced degree in all racial/ethnic groups, while wages fell most for black workers with less than a high school diploma.

Black–white wage gaps by education were larger in 2018 than in 2000 for all education groups, while Hispanic–white wage gaps were narrower for workers with less than high school or high school diploma levels of education. At nearly every education level, workers of color were paid consistently less than their white counterparts.

https://www.epi.org/publication/state-of-american-wages-2018/

Balance of Report - This is a long, detailed report. Graphs, charts etc., near to information overload. Good reference to bookmark and read from time to time.

Yes, I know the image shows 2017 and the article is about 2018 and the image is from a different source as well.