Between 1979 and 2024, productivity in the U.S. soared by 80.9%, while hourly pay grew by just 29.4%, according to research by the Economic Policy Institute.

This trend has often been referred to as wage stagnation. But more recently, some economists have suggested that deliberate policy decisions have actively suppressed workers’ wage growth.

One reason might be the unreasonably high rate of unemployment in the U.S.

“Economists produce this thing they call the natural rate of unemployment,” explained Josh Bivens, the chief economist at the Economic Policy Institute. “It’s like the lowest unemployment can go without generating inflation.”

According to the Federal Reserve Bank of San Francisco, the natural rate of unemployment has hovered between 4.5% and 5.5% throughout history. But since 1979, the U.S. has spent far more time with actual unemployment well above that estimated natural rate.

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

“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,’” said Bivens. “And that’s just not a credible threat when unemployment is high.”