The paychecks of typical workers have not grown nearly as fast as overall economic growth over the past four years.

In June 2024, two thirds of middle income households believed that their income was falling behind the cost of living.

I think that many Americans feel the financial struggle because their household budget and their household balance sheets are facing so much pressure.

Every time I check my local mom group on Facebook, I see requests or people asking where they can get some financial assistance to pay utilities or assistance with rent.

And it's concerning because these people are working full time jobs and they just can't make things work right now.

The issue of wage trends, wage suppression, I mean, it just could not be more central to what has happened to the middle class over the past couple of decades.

So what exactly is keeping the middle class from earning a higher paycheck?

I think people think inflation is a policy problem, but wages are my problem.

And it turns out wages are not just your problem.

Wages are entirely a policy and political variable.

The main goal of policymakers at the Federal Reserve is to ensure maximum employment while keeping prices stable.

They rely on various economic data to guide their decisions, including the natural rate of unemployment.

Economists produce this thing they call the natural rate of unemployment.

It's like the lowest unemployment can go without generating inflation.

Throughout history, the natural rate of unemployment has hovered between 4.5 percent and 5.5 percent.

And then we look at actual unemployment and how often it is above that estimate of the natural rate versus below.

And if you look at the years since 1979, we have spent far more time with actual unemployment well above that estimate of the natural rate.

Between 1949 and 1979, the actual unemployment rate was cumulatively 15.3 percent below the natural rate of unemployment.

In contrast, the unemployment rate was cumulatively 35.7 percent above the natural rate of unemployment between 1979 and 2017.

This has real world consequences for the American middle class because wages tend to grow faster during periods when unemployment is low.

The Economic Policy Institute estimates that just a one percentage point drop in unemployment leads to wage growth of 0.4 to 0.9 percentage points for workers near the median of the wage distribution.

The best bargaining chip any employee has to getting wage growth is going to the boss and saying, I'm going to go somewhere else unless I make more money.

And that's just not a credible threat when unemployment is high.

The only people whose wages are not very affected by unemployment are like the 90th and 95th percentile.

Like they don't need super low unemployment to get some consistent wage growth.

But the middle class absolutely does.

This means the Federal Reserve's policy decisions that result in higher than necessary unemployment might be creating conditions that actively hold back wage growth for middle class Americans.

Location could be another factor.

There are other reasons for why we've seen less growth in the middle than, say, at the other parts of the distribution.

Another one is just that people don't move as much as they used to.

The share of Americans on the move has declined over the years from more than 20 percent in 1948 to just 8.7 percent in 2022.

Between 1986 and 1997, almost 29 percent of job seekers relocated for new jobs.

That number has fallen to just 1.6 percent in 2023.

Location plays a crucial role in wages.

Despite the surge in remote work during the COVID-19 pandemic, wages for remote and hybrid jobs haven't grown nearly as much as salaries for full-time in-office roles, with some research estimating that remote workers could earn up to 30 percent more if they came into the office five days a week.

Decades ago, when I was a worker living in sort of a lower opportunity area, I would move to a higher productivity city like maybe a San Francisco or New York City or Los Angeles.

And as a result, I'd be able to capture higher wages, gain more skills and then move up the income distribution.

Now there's a lot less people moving across areas to capture those opportunities.

Real reason behind that is astronomical housing costs that are due to excessive regulations at local levels.

Home prices hit a record high in June 2024, with existing homes selling at a median price of $426,900.

In line with typical seasonal trends, home prices declined in July and August, but still set new records for those months.

The overwhelming number of jobs in the U.S. are in places that have really not seen much construction of housing.

Some economists also argue that globalization has played a pivotal role in stalling wage growth for middle-income Americans.

The expansion of trade with countries that have much lower wages, I think that was always going to provide quite a bit of pressure on the U.S. middle class because so much of that trade runs through like the manufacturing sector, which is where a lot of middle-class jobs have been.

Between 1995 and 2013, trade with lower-wage nations like Mexico and China reduced wages for workers without a four-year degree by roughly 5.6 percent, or about $2,000 per year for workers at the median wage.

However, whether globalization is actually to blame has long been debated, with some research suggesting it has had a minimal impact on wage and income inequality.

It's not just that we did it.

We also did it on terms set by trade agreements that really, you know, people call them free trade agreements.

They weren't.

They were basically exercises in selective protectionism.

Who gets protected?

Who doesn't?

Middle-class workers were not protected.

Corporations, especially corporations like software companies, drug makers, Hollywood, were all protected in these trade agreements.

So, like, it's not just the natural flow of globalization.

It's how policy shaped how it happened and who got protected and who didn't.

Regulatory policies can limit the power workers have within the labor market.

We've seen this huge decline in the share of workers who are represented by a union in the U.S. economy.

In 1983, roughly one in five Americans were in a union.

By 2023, that number had dropped to one in 10.

Full-time salaried union workers made about 15.9 percent more compared to non-union workers in 2023.

Single worker going to the boss and saying, you need to give me a raise or I'll leave.

That's that's not there's not a lot of force behind that threat.

When you've got a union doing it, there's a lot of force behind that threat.

And you look at countries that look like us.

So they've experienced the same globalization shocks like the UK, Canada, Germany.

Their unionization rates have fallen a bit since the peaks, but nowhere like the U.S. fall.

And then if you just sort of look at the facts on the ground over the past 30 to 40 years in the U.S., there's just been clearly been a growing employer hostility to union organizing efforts.

Among U.S. employers involved in unionization efforts, more than four out of 10 have been charged with violating federal laws during their union election campaigns.

And one out of five campaigns involved the charge that a worker was illegally fired for trying to organize a union.

Just the number of registered unfair labor practices that are firing people trying to organize a union have risen a lot.

And one thing that's happened to enable that is, I mean, one, there's been a change in management norms, I think, but also like all of the penalties for doing that, just like they're not adjusted for inflation often.

They've always been pathetically low.

Like if you fire a worker for trying to organize a union, the penalty you face is you have to pay them back the whole legal process grinds out and they come back to your company.

But then you're allowed to deduct any wages they made in the meantime at another job they got.

And so firing workers trying to form a union is just a pretty small cost of business.

And it pays off great because unions really do raise wages.

And that's not something employers want.

The decline of union membership isn't the only roadblock for growing the middle class workers' income.

So in many cases, you'll have policies at a local level and a firm specific level that cut off wage growth.

There's occupational licensing in different areas of the country, which can make it harder to start a new career.

While estimates vary, between a fifth and a third of all American workers are required to have a license to work.

A study found that jobs in states requiring a license earn about 8 percent more compared to the same jobs in states that don't.

However, just a 10 percent increase in licensed workers with similar skills is estimated to reduce all workers' wages down by 1.6 to 2.3 percent.

Economists estimate that eliminating occupational licensing can reduce earnings inequality within occupations by 2 to 4 percent.

While licensing might appear to be necessary for some professions with health and safety concerns, researchers found no statistical difference in health and safety quality outcomes between states that require licensing compared to states that don't.

To be a hairstylist in some places, for instance, you need a license from the state to actually do that.

So there's a lot of these types of occupations that really are not dangerous and don't need state licensing to be made safe.

But nonetheless, we have these licenses in place probably to protect the incumbents and make it harder for new entrants to come in, sort of do their own business or start this new career field and thereby increase their wages.

I think as important as the middle class is economically, and I think it's incredibly important, it is just the entire game for, I think, politics.

Both political parties in the United States recognize the economic pressures facing U.S. families.

There's different visions on how to intervene effectively.

I was raised as a middle class kid, and I am actually the only person on this stage who has a plan that is about lifting up the middle class and working people of America.

For Kamala Harris, strengthening wages is about two things.

It's about boosting the industries where wage workers work.

So she wants to build on the Biden administration's infrastructure investments to onshore domestic manufacturing and construction and boost those domestic industries.

She also has a huge focus on strengthening union protections.

She wants to raise the minimum wage, end taxes on tips, which is a policy that Trump first proposed and she later echoed.

Trump's proposals to strengthen wages for the middle class, in many ways, it mirrors what Harris has proposed, which is to onshore domestic manufacturing and construction.

He has proposed doing so by instating a hardline tariff policy.

Former President Trump publicly denounced globalism during his time in office, blaming the financial struggles faced by many Americans on it.

We're doing tariffs on other countries.

Other countries are going to finally, after 75 years, pay us back for all that we've done for the world.

He's faced some backlash from economists about how this could threaten to reheat the consumer price spikes that are just beginning to cool.

But he sees it as a long term strategy to bring domestic jobs back to the U.S., boost manufacturing in the U.S.

So in some ways, this is his plan to grow the U.S. economy as a whole and let the effects sort of ripple into the middle class as a result.

Another major difference is in the candidates' proposed tax policies.

I have a plan to give startup businesses $50,000 tax deduction to pursue their ambitions, their innovation, their ideas, their hard work.

I have a plan, $6,000 for young families for the first year of your child's life to help you in that most critical stage of your child's development.

She has proposed offsetting the costs of her tax relief proposals by increasing corporate tax hikes and tax hikes on the wealthy.

She's proposed increasing the corporate tax rate to 28 percent.

She wants to increase the tax rate on long term capital gains also to 28 percent.

Everybody knows I'm an open book.

Everybody knows what I'm going to do, cut taxes very substantially and create a great economy like I did before.

So in 2017, we had the Tax Cuts and Jobs Act, which substantially lowered the corporate tax.

And there's varying degrees about how much people believe that translated into higher wages.

But there's a pretty strong consensus that lowering the corporate tax actually increased worker wages.

Some research has estimated that the 2017 tax cut led to a $750 increase in annual pay for full time employees in 2017 dollars.

Opposing research argues that the earning gains were concentrated in the top 10 percent, with no changes in earnings for the bottom 90 percent.

Trump's framing of boosting the middle class by boosting the economy as a whole doesn't offer sort of the targeted approach that Harris has brought to her economic platform.

Her policy page is consistently drawing back to the middle class, saying how, you know, her tax relief programs will benefit the middle class specifically.

Trump is focused on growth and growing the U.S. economy as a whole and letting the success of that policy trickle down to the middle class.

Policy matters so much in generating like the wage income that is the lifeblood of the middle class.

I think a lot of people just haven't made that connection between the wages I earn and what is the policy environment.

When they think policy, they think direct benefits that come from the government.

But a lot of what the government does conditions how fast their wages grow in the labor market.

And yet the connection hasn't been made on how policy affects them and the most important way they earn income in the labor market.

I'm not hopeful that the presidential platforms themselves will solve the woes of the middle class, but nor do I think the federal government is in the front seat on solving them anyway.

But they are taking it seriously.

I mean, hopefully those problems will be made more transparent.

We'll shine a light on them.

And then through a combination of federal action, state and local action, that we will see some of these improvements that we need in terms of less regulation and some targeted support where it makes sense to help middle class families thrive.