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Shrinking Paychecks: Hillary Clinton Takes On 2016's Toughest Economic Question

One of the key economic issues to watch in this election will be how candidates deal with mammoth forces like technology and globalization. "All of these trends are real, and none, none is going away," Hillary Clinton said Monday.
Jewel Samad
AFP/Getty Images
One of the key economic issues to watch in this election will be how candidates deal with mammoth forces like technology and globalization. "All of these trends are real, and none, none is going away," Hillary Clinton said Monday.

In a Monday speech, Hillary Clinton focused on a trend that millions of Americans know all too intimately: declining incomes.

The Clinton campaign is calling the phenomenon of stagnant wages "the defining economic challenge of our time," and as debates and primaries draw ever closer, it's becoming clear that jump-starting Americans' wages is going to be the defining challenge of the election. Candidates are furiously trying to differentiate themselves on how to deal with unstoppable phenomena.

A Recent, Scary Problem

The median U.S. household earned $51,939 in 2013. That's down by nearly 9 percent from the 1999 peak of nearly $56,900.

This decline in incomes isn't just about the Great Recession. Over a longer time frame, workers' share of the U.S. economic pie has shrunk. This is something economists call the "labor share" or "wage share" of the economy. Consider the following chart, which shows labor's share of economic output over time (the Federal Reserve has indexed the data in such a way that 2009 equals 100, but the point is more the direction than the numbers). That has been declining over the longer term as well.

Knowing what's behind this problem shows just what makes it hard to combat: Some of the biggest factors behind that shrinking labor share are also genies that are hard to put back into the proverbial bottle.

Why Are Workers Losing Money?

There are a lot of explanations for that shrinking labor share of income, but one popular one is that the Great Recession exacerbated longer-term trends that were already at work. That recession hangover still hasn't gone away. Employment is still pretty low right now, and when there's that much slack in the labor market, it's harder for workers to negotiate for higher paychecks. In addition, plenty of workers who are working part time want more hours. The labor market is healing, but there's still enough remaining slack that employers have the leverage.

Still, even once the U.S. is at full employment, longer-term factors could continue to eat away at workers' paychecks. One of the most commonly blamed factors behind the shrinking labor share is technology. Many jobs that can be routinized — scanning groceries and taking money, keeping a schedule and filing away documents, analyzing legal documents — are increasingly done by machines, threatening workers like store clerks, secretaries and paralegals. And while it's true that technology helps create jobs, many of those in the "gig economy" Clinton referenced Monday are low-paid and benefit-free — think Uber drivers and TaskRabbits.

Another factor is globalization. Increasing trade has its benefits and drawbacks — cheaper goods but the loss of some jobs to other countries, for example. A growing financial sector is also considered a potential cause behind the shrinking labor share, as businesses invest in capital instead of labor.

To the extent that these forces are indeed shrinking Americans' incomes, one of the key economic issues to watch in this election, then, will be whether and how candidates deal with these mammoth forces. They're all trends that would be remarkably difficult to roll back: You can't un-integrate an increasingly globalized world, you can't rewind technological progress, and shrinking the U.S. financial system would be, at the very least, a monumental undertaking.

As Clinton herself said of technology and trade, "All of these trends are real, and none, none is going away." Throughout her speech, she framed the challenge as one of dealing with new economic forces that prior presidents (like her husband) never even considered.

Clinton didn't outline specific policies in her speech, though she did advocate for unions, better paid leave policies and tougher regulations on Wall Street, among other things. At the same time, she blasted her Republican opponents' policies that are likewise aimed at helping the American economy: Marco Rubio's tax reform plan, Scott Walker's anti-union policies in Wisconsin and Jeb Bush's recent claim that he wants Americans to work longer hours as part of his bid to grow the economy by 4 percent. (The Bush campaign has said he meant part-time workers should get more hours if they want them.)

"He must not have met very many American workers," Clinton said. "They don't need a lecture. They need a raise."

The Important Things Clinton Left Out

Clinton may have come out swinging against her conservative opponents, but she also toed a careful line, stopping short of creeping too far into class warfare territory.

It's true that she blasted Rubio's tax plan as benefiting the wealthy too much, and she also advocated closing tax loopholes that the wealthy take advantage of. But she also made it clear that she still wants the richest Americans, as well as the poorest, to continue prospering.

"The measure of our success must be how much incomes rise for hard-working families, not just for successful CEOs and money managers," she said, adding, "I want to see our economy work for the struggling, the striving, and the successful."

It's that all-encompassing inclusiveness that some on the left have criticized for nearly six months now, since the Center for American Progress released its report on "inclusive prosperity," considered an economic blueprint for a Hillary Clinton administration. Critics like Robert Reich (labor secretary under Bill Clinton) have said the more important (and controversial) issue she needs to tackle is income distribution.

That's one area where Hillary Clinton's rhetoric stands in stark contrast to her most visible Democratic opponent right now, Vermont Sen. Bernie Sanders. While Clinton wants inclusive growth, Sanders says that maybe growth isn't all that important if not everyone shares in it, as the Washington Post's Jim Tankersley writes.

One other big area Clinton left out Monday: the Trans-Pacific Partnership, one of the areas where Sanders most often attacks her. The closest she came was a vague call for setting a "high bar" on trade deals. She has been notably quiet on TPP, the massive and controversial trade deal the Obama administration is negotiating right now. Many on the left, including unions, hate the deal, saying it will hurt American workers' paychecks. In a speech about that very topic, it was an important omission, and her supporters and opponents alike will assuredly continue to watch closely to see exactly what she thinks about this hot economic topic.

Copyright 2021 NPR. To see more, visit https://www.npr.org.

Danielle Kurtzleben is a political correspondent assigned to NPR's Washington Desk. She appears on NPR shows, writes for the web, and is a regular on The NPR Politics Podcast. She is covering the 2020 presidential election, with particular focuses on on economic policy and gender politics.