This Labor Day, Americans Need Much More than a Day Off — They Need a Raise
For many American workers, Labor Day represents a well-deserved day off to celebrate with family and friends. But to properly honor workers, what they really need is better pay.
By Tom Kalil, Chief Innovation Officer, Schmidt Futures, & Maria Flynn, President and CEO, JFF
This Labor Day, while we celebrate the spirit and dedication of the American worker, it’s time to recognize that a day off no longer does enough justice. Despite an improving economy and rising productivity, many Americans are increasingly seeing their contributions met with flat or declining real wages and a smaller and smaller slice of our national income. Even with the prevalence and influence of technology in many industries, the backbone of the US workforce is human capital.
Last year, while CEOs received a 17.6 percent increase in compensation, the typical worker saw only a 0.3 percent bump. This jarring difference brings home the reality that we need change. Simply put, Americans need higher wages. Inflation-adjusted wages for the average worker have risen by only 3 percent since the 1970s — and have actually declined for the bottom fifth of workers ages 25 to 54. Minimum wage has not kept up with the cost of living. Perhaps most striking, the share of national income going to the middle class has dropped precipitously over the last four decades.
In essence, wage stagnation is creating “two Americas.” The Federal Reserve’s recently published Report on the Economic Well-Being of US Households in 2017 details how one America benefits from a growing economy. Meanwhile, the second is left behind with “disparities in economic well-being and outcomes common among minorities, those with less education, and those living in lower-income neighborhoods.” This isn’t a partisan issue. US Senator Marco Rubio (R-FL) wrote in his book, American Dreams: Restoring Economic Opportunity for Everyone, that “stagnant wages are a real concern to millions of Americans.”
Having both served as senior officials inside and outside of the federal government under both parties, we witnessed countless efforts to articulate the issues. Identifying and scaling solutions designed to raise the wages of American workers is the defining domestic issue of our generation. It is time to move to action.
Our leaders in the public and private sectors must now go beyond the traditional thinking that effective workforce development is simply about “training and placement” and aggressively respond to the wage challenge at hand. They can look for guidance to companies like Marlin Steel, which pays workers more for every new skill they learn and use on the job, and Aon, who is working with companies to provide more opportunities for work-based learning and career advancement. SVAcademy is bridging businesses with postsecondary institutions and students, especially from California State University–Long Beach. SVAcademy students who are alumni of the university receive an average of $76,000 immediately after graduation, in career paths that typically make over $100,000 after three years.
We applaud these innovators, and to spur further ideas for change, our organizations are calling on a diverse array of stakeholders, including entrepreneurs, community organizations, researchers, policymakers and most importantly workers themselves, to join our bold national $1 Billion Wage Gain Challenge. This challenge focuses on one tangible metric: raising the annual wages of at least 100,000 US workers by $10,000 or more by 2021. In doing so, we intend to identify, spotlight, and accelerate effective and promising ways to meaningfully increase annual incomes and expand the middle class. Applications open September 24 and close November 25.
The competition is supported by Schmidt Futures, and will be complementary and connected to its efforts in the Alliance for the American Dream. Schmidt Futures works to advance society through technology, inspire breakthroughs in scientific knowledge, and promote shared prosperity. As a venture facility for public benefit, Schmidt Futures drives discovery through investment in people, platforms, and partnerships.
In the same way that ambitious entrepreneurs seek to create a “unicorn” — a startup worth $1 billion — we believe that entrepreneurs should aspire to create a unicorn for the middle class with a wage gain of $1 billion.
In order to address our wage crisis with the tenacity it deserves, we need to support new ideas that require development and piloting as well as provide the capital and partnerships that can bring already proven solutions to scale. Only then can we truly honor Labor Day by carving a path toward an inclusive economy that works for everyone.