Biden Urges Action on Stagnant Wages
Source Charles Brown
Date 10/04/22/09:12

Biden Urges Action on Stagnant Wages
By Edward Luce
Financial Times

The US must restore the broken link between
productivity growth and wages if it is to ensure a
politically sustainable recovery, Joe Biden, the US
vice-president, said on Tuesday.

Mr Biden, who is in charge of Barack Obama's "middle
class task force" said the last US economic cycle,
which began in 2001 and ended in 2007, was the first in
history that left median incomes where they were at the

Yet, over the same period, the growth in productivity,
which had traditionally fed through into wage growth,
hit record levels. Mr Biden said that addressing what
economists call "median wage stagnation" would be a
priority for the Obama administration now that the US
economy was moving out of recession.

"The middle class needs to get its fair share again,"
Mr Biden told the Hamilton Project, a group within the
Brookings Institution that focuses on restoring "broad-
based growth". "The system is not going to work if they
do not believe they're getting a fair share
commensurate with the effort they put in?.?.?.?We are
going to make sure that we don't just build the same
old economy on top of the one that just collapsed."

Mr Biden admitted that the administration did not yet
have clear answers on how to address what many
economists believe is a long-term structural problem in
the US economy. Some have emphasised the need to invest
more in education, even though many white-collar
workers with college degrees also suffered from
stagnant pay during the last cycle.

Others, particularly on the left, say the US should
restore strong bargaining rights to the unions and so
help shift income back from capital to labour, which is
at its lowest level since the 1920s. Mr Biden called
for stronger "collective bargaining rights" but gave no
indication of when the White House would push

Economists say that the gap between productivity and
wages has turned into a chasm since the last recession
began in 2007. Real wage growth between the last
quarter of 2008 and the last quarter of 2009 was
negative while productivity rose by 5 per cent.

Mr Biden said on Tuesday that the sooner wage
stagnation could be addressed the better.

"The choices we make at the beginning of the expansion
are going to determine where we're going to end up -
assuming the expansion continues," he said.

Copyright The Financial Times Limited 2010

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