Brief #21—Economic Policy

Policy Summary
Throughout his time in office, Donald Trump has never shied away from touting the economic growth that the country has seen during his presidency. He’s boasted about job growth and the healthy stock market and G.D.P. It doesn’t stop there, though Trump has continuously touted the benefits of the global trade war brought on by his administration’s tariffs, despite overwhelming evidence to the contrary.

The numbers and statistics that Trump hasn’t been touting, though, tell a different story. Income inequality, according to reports, has reached its highest point since the 1920’s. The Economic Policy Institute, a liberal think tank recently published a report that found that the CEO of a typical large American company is paid a salary roughly 312 times larger than that of its typical worker. While the average pay of the CEOs of the 350 largest firms in the U.S. increased by 17.6% this past year, that of their workers increased by only 0.3%.

Further data published by the Bureau of Employment Statistics indicates that the past fiscal year has brought a clear slump in real wages for American workers. Between 2014 and 2015, during Barack Obama’s final years in office, wages rose considerably, a trend that continued through to 2016. Average inflation-adjusted hourly pay began to decrease early in Trump’s presidency, though and this past June saw wages hit their lowest point since 2013.

This data also indicated that the slight economic growth and decreasing unemployment rates have given rise to a slight increase in nominal wages, which have risen 2.7% during the past year. While it is not an inherently negative thing for them to have risen, it is not an indicator of sustainable economic growth, nor of future positive trends. Even with this increase, most American workers still are not receiving the share of economic output that they should be. It should also be noted that nominal wages by themselves cannot generate a higher standard of living for the workers receiving them. We are currently seeing the prices of goods and services rise at a higher rate than that of nominal wages, creating more problems for workers.

All evidence and data presented by the EPI points to the conclusion that the increase in CEO pay is not due to an increase in productivity on the part of the executives benefitting. EPI co-founder and economist Robert Reich emphasizes this concept in his 2015 book Saving Capitalism, where he addresses the flawed concept that someone’s productivity level is dictated by their salary. Worker productivity may be increasing but if it is, American workers as a whole are not enjoying the benefits of the economic growth that they are helping generate but are being forced to watch excess profits be turned over to the CEOs of their companies. History has seen many policymakers, including those at the Federal Reserve, cite weak productivity as a primary reason for slow economic growth but considerable evidence points to the contrary, indicated that it is more likely due to the CEOs who use their power to set pay to grab more and more profits.

The central problem involving the slow growth of nominal wages is that when the prices of goods and services rise at a higher rate, workers have increasingly less buying power. The recent hike in prices is likely a further consequence of the trade war, which has resulted in the prices of many important goods being raised while more and more workers are laid off.

Furthermore, we have seen economic inflation give rise to a spike in oil prices which has only caused further problems for the workers whose wages aren’t rising quickly enough. The demand for oil continues to grow throughout the global economy, but the supply does not, primarily due to events in Russia, Venezuela and the Middle East. This hasn’t been helped by President Trump pulling the U.S. out of the Iran nuclear deal, which has led to further conflict and higher oil prices.

The current state of income inequality in the United States that has been dubbed the ‘Trump Slump’ can be summed up with a simple equation-when we combine an economy overwhelmed by steep inflation with nominal wages that are not rising quickly enough to keep pace, we are left with a workforce whose overall real wages are stagnate.

President Trump, so far, has implemented no policies to help spur wage growth or reduce inflation. All the while, corporations are gaining more and more power and influence while worker unions are losing theirs. All this points to the overwhelming conclusion that any economic growth that the United States has enjoyed Trump is not sustainable.

Resistance Resources

  • The Economic Policy Institute is a liberal think tank that researches and analyzes economic policies and proposals.
  • Strike Debt is an activist group that works to help citizens resist debt and fighting for economic justice.
  • Fight For $15 is a union-led group dedicated to increasing the minimum wage to $15 per hour.


This Brief was submitted by USRESIST NEWS Analyst Samuel O’Brient Contact

Photo by Allef Vinicius

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