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Feb. 25, 2018, 10:14 a.m. EST

The depressing reason most Americans are making more money

As they go without wage increases, this is what Americans are doing to earn more money

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By Jacob Passy

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Americans with the lowest salaries have had to resort to working more hours in order to increase their income.

Many Americans have gone a long time without getting a raise — even as their cost of living has gone up.

That’s left most with only one option to keep their heads above water: Work more.

Average annual earnings for people in their prime working years (ages 25 to 54) increased 30.2% after inflation between 1979 and 2016, based on an analysis of data from the Bureau of Labor Statistics by the Economic Policy Institute, a nonprofit think tank that advocates for low-to-moderate income Americans. For the most part, however, that growth isn’t a reflection of higher hourly wages — instead it’s an indication that people are working more hours, researchers found.

For the bottom fifth of earners, an increase in wages only accounted for 25% of annual earnings growth, compared with 88% of earnings growth for the top fifth, or richest, earners.

Altogether, prime-age adults worked 7.8% more hours per year in 2016 than they did in 1979. But workers in the bottom fifth in terms of annual earnings upped their hours by 24.3% over that time span, compared with just a 3.6% uptick among top earners. People in the middle-class in terms of wages increased their hours by 9.4%.

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“With wages practically stagnant, almost all of the growth in annual earnings that we’ve seen since 1979 has been because people are working longer hours,” Valerie Wilson, one of the report’s authors and the director for the EPI’s Program on Race, Ethnicity and the Economy, said. “Unfortunately, with a fixed number of hours in a day — and with workers given little control over their schedules — there are limits to how far people can boost their annual pay by working longer hours.”

Another concern, according to researchers, is that more Americans in the prime working years are “disconnected from work,” meaning they are unemployed and not looking for work. Here’s how that divide shakes down across the country:

  • Between 1979 and 2016, the share of prime-age men who aren’t working rose from 6.3% to 11.9% — at the same time, the share of prime-age women not working dropped from 29.8% to 24.1%.

  • Black men are twice more likely than white or Hispanic men to not be working. And those who do work are working fewer hours than people of other racial ethnic backgrounds and less overall.

  • The situation was worse for black men without a college degree. More than 25% of black men with a high school diploma and roughly 50% of those who had not graduated high school or earned a GED weren’t working.

The EPI’s findings match other recent research pointing to a significant wealth gap in America. A Pew Research Center report found that the average wealth of white families was $121,000 above that of families of color overall.

And lower earnings can put these households at a financial disadvantage in other ways. African-American and Latino households were more likely to be underwater. Other research suggests that children growing up in poorer households are less likely to achieve educational milestones including graduating high school and college — making it more difficult for them to increase their wages in adulthood.

Jacob Passy is a personal-finance reporter for MarketWatch and is based in New York.

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