Wages Are Rising for Low-Skill Workers, Driving Down Poverty and Inequality

Income inequality and poverty are falling, thanks to rising wages for workers in low-skill jobs. A lot of low-wage work is, in fact, becoming middle-wage work.

The shift stems—at least in part—from low unemployment, which means companies of all sorts must compete harder for workers. And they’re doing that by offering things like higher wages, better benefits, and bonuses.

Annie Lowrey detailed this half-decade wage compression in The Atlantic last week:

After a brutal few decades in which low-wage jobs proliferated and the American middle class hollowed out, the working poor have started earning more—a lot more. Many low-wage jobs have become middle-wage jobs. And incomes are increasing faster for poorer workers than for wealthier ones, a dynamic known as wage compression.

As a result, millions of low-income families are experiencing less financial stress and even a modicum of comfort, though the country’s surging rents and rising pace of inflation are burdening them too. The yawning gaps between different groups of American workers—Black and white, young and old, those without a college degree and those with one—have stopped widening and started narrowing. Measures of poverty and income inequality are dropping.

I hesitate to call this the “Great Compression,” given that earnings disparities remain a dominant feature of the American labor market and American life. (Plus, economists already use that term to refer to the middle of the 20th century.) But it really is a remarkable trend, a half-decade-old “Little Compression” that policy makers should do everything in their power to extend, expand, and turn great.

Alas, Lowrey sees a role for much government intervention to extend this trend.

Meanwhile, her colleague Conor Friedersdorf offers a more market-friendly solution to making life easier for lower-wage workers:

What’s needed next is enough new construction of houses, condos, and apartment buildings to bring costs down. All we have to do is stop preventing real-estate developers from erecting them.

The New York Times also took a look at poverty this week—albeit through a much less hopeful lens.

In “Why Poverty Persists in America,” sociologist Matthew Desmond noted that progressives today often blame poverty on cuts to government spending on anti-poverty programs since the Reagan era. But this is a myth:

Throughout Reagan’s eight years as president, anti-poverty spending grew, and it continued to grow after he left office. Spending on the nation’s 13 largest means-tested programs — aid reserved for Americans who fall below a certain income level — went from $1,015 a person the year Reagan was elected president to $3,419 a person one year into Donald Trump’s administration, a 237 percent increase.

Much of this increase was on account of health care spending. But excluding Medicaid spending from the equation still yields a 130 percent increase in federal anti-poverty programs between 1980 and 2018.

“There is no evidence that the United States has become stingier over time,” wrote Desmond. “The opposite is true.”

One might look at this and conclude that simply throwing more and more money at the problem won’t work. Progressives, meanwhile, will surely decide we just need to spend even more.

In any event, Desmond didn’t suggest the problem is lack of funding for anti-poverty programs, but government using these funds for things unrelated to material well-being. “Arizona has used welfare money to pay f