Wages Grew in 2020 Because Low-Wage Workers Experienced the Brunt of the Job Losses

Wages grew historically fast in 2020 primarily because over 80% of the 9.6 million net jobs lost in 2020 were held by the lowest 25% of wage earners, according to a new EPI report. Meanwhile, the highest-wage workers gained nearly a million jobs, skewing average wages upward.

Overall, less than 75% of low-wage workers were still working in 2020 compared with over 90% of high-wage workers. The report authors--EPI senior economist Elise Gould and research assistant Jori Kandra--explain why wage growth looks the way it does and how this recession has disproportionately hit the more vulnerable workers and their families.

"Wage growth in 2020 is neither a cause for celebration nor a reason to inject fears of economic overheating into policy debates. Faster wage growth between 2019 and 2020 is largely a result of the changing composition of the workforce," said Gould. "It is not an accurate indicator of the amount of economic devastation and pain experienced by millions of workers and their families in 2020, nor is it an indicator that workers found themselves in a better bargaining position. It is indicative, however, of increasing inequality where those at the top have largely been spared from the recession while those at the bottom have been absolutely devastated."

The extreme wage growth between 2019 and 2020 due primarily to the compositional effect of large and disproportionate job losses among low-wage workers demonstrates that the pandemic recession was an atypical recession. A previous 2020 EPI report on wages found that in only 10 of the last 40 years did most workers see any consistent positive wage growth.

"Most workers are still suffering from a relatively weak bargaining position that prevents them from securing pay raises sufficient to make up for decades of slow wage growth," said Kandra. "There are numerous ways policymakers can restore bargaining power to workers during the recovery from the pandemic, including raising the minimum wage to $15 by 2025 and passing the Protecting the Right to Organizing Act."

This report is the first in a series of reports examining the effects of the COVID-19 pandemic on the labor market and the living standards of workers and their families. The next report in this series will examine which types of jobs were lost in the pandemic recession and will uncover not only industry differences, but also important distinctions between occupations within those industries--with the heaviest job losses in occupations employing Black and Hispanic workers as well as white women workers.