How Bad Is the Wage Squeeze? Basic Needs and the American Paycheck

A defining feature of the American economy has been surging pay inequality, but far worse for many working families has been declining pay quality : the material living standard made possible by a full-time job. Well-established basic-needs budget calculators by family type offer highly credible estimates of the full-time wage necessary for sustaining a minimally decent living standard—the living wage—which can serve as the anchor for other thresholds that together define tiers of the wage distribution. Pay quality is then measured by the incidence of employment in each of these tiers. This approach is illustrated with dual (low-pay and decent-pay) and tripartite (poverty-pay, middle-pay, good-pay) job structures, echoing earlier labor market segmentation perspectives. We document large and persistent declines in paycheck-based living standards for most age-education-gender-race groups between 1979 and 2019, most dramatically for young less-educated men. JEL Classifications: J31, D63, E24, I31.