Middle-class wages have remained stagnant for decades despite economic growth and rising productivity. While corporate profits soar and the stock market reaches new heights, working families struggle to maintain their standard of living. This wage stagnation results from a complex web of economic, technological, and structural changes that fundamentally alter how wages are set in the modern economy.
Here are the ten things keeping middle-class salaries low in 2025:
1. The Collapse of Union Power and Collective Bargaining
Union membership has fallen dramatically since the 1950s, when approximately one-third of American workers belonged to unions. Today, private sector union membership has dropped to single digits, fundamentally altering the balance of power between workers and employers.
This decline affects wages beyond just union members. Historically, unions created wage standards that lifted compensation across industries through “spillover effects.” Without organized representation, employers face less pressure to translate increased productivity into higher wages, instead capturing more gains as profits.
2. Globalization Has Shipped Jobs Overseas
Manufacturing jobs, which once provided stable middle-class incomes, have migrated to countries with lower labor costs, eliminating millions of well-paying positions. The impact extends beyond relocated jobs through “threat effects,” where domestic workers accept lower wages to prevent their jobs from moving abroad.
This global labor arbitrage creates a race to the bottom for many middle-skill occupations, forcing workers in developed countries to compete locally and with workers worldwide who can perform similar tasks at a fraction of the cost.
3. AI and Automation Are Replacing Middle-Skill Workers
Unlike previous automation waves that affected manual labor, artificial intelligence now targets cognitive work, forming the backbone of middle-class employment. Customer service representatives face replacement by chatbots, financial analysts see algorithms performing market analysis, and paralegals watch software review legal documents.
This “skill-biased technological change” complements high-skill workers while replacing middle-skill workers, creating wage polarization with high rewards for specialized technical skills and limited opportunities for workers with moderate skill levels.
4. Corporate Concentration Creates Employer Wage Power
Many industries have become increasingly concentrated, with fewer large companies dominating markets. This concentration gives employers “monopsony power” in labor markets, meaning workers have fewer alternative employers and less bargaining leverage.
When workers have limited options for selling their labor, employers can suppress wages below competitive market levels. This dynamic is particularly pronounced in smaller cities where one or two major employers dominate the local job market.
5. The Skills Gap: Too Qualified or Not Qualified Enough
The modern economy has experienced a “hollowing out” of middle-skill jobs, creating a barbell-shaped labor market with high-paying technical positions on one end and low-wage service jobs on the other. Many traditional middle-class occupations have disappeared or been downgraded.
This polarization leaves workers overqualified for available service positions but lacking specialized technical skills for high-paying jobs. The career ladder that once allowed advancement from entry-level to middle-class positions has lost many rungs.
6. Housing and Healthcare Costs Eat Up Any Wage Gains
Even when middle-class wages increase, gains get absorbed by rapidly rising housing and healthcare costs. These essential expenses have grown faster than wages, meaning workers need more raises to maintain their living standards.
Housing costs have been particularly problematic in metropolitan areas where jobs are concentrated, but housing supply hasn’t kept pace with demand. Healthcare costs present similar challenges, with premiums, deductibles, and out-of-pocket expenses consuming larger portions of family budgets. The cost of living has been rising faster than annual cost of living raises, making paychecks lose buying power and fill smaller over the past five years.
7. Shareholder Capitalism Prioritizes Profits Over Paychecks
The shift toward maximizing shareholder value has changed how companies allocate resources. Rather than sharing productivity gains with workers through higher wages, companies increasingly distribute profits to shareholders through dividends and stock buybacks.
This focus on quarterly earnings incentivizes managers to control labor costs rather than invest in worker compensation. Companies view workers more as variable costs to minimize rather than assets worthy of long-term investment, restraining wage growth even during profitable periods.
8. The Gig Economy Strips Away Benefits and Job Security
The rise of independent contracting allows companies to classify workers as contractors rather than employees, avoiding costs for health insurance, retirement contributions, unemployment insurance, and workers’ compensation.
This reclassification saves employers significant money per worker while shifting costs and risks to workers and reducing their bargaining power. Gig workers typically lack job security and benefit packages that traditional employees enjoy, effectively reducing total compensation even if hourly rates appear competitive.
9. College Degree Inflation Makes Workers Pay More to Earn Less
Many positions now require college degrees that historically were filled by high school graduates, forcing workers to invest more time and money in education without necessarily improving pay, job performance, or productivity.
Workers enter the job market later, often with substantial student debt, while competing for positions that may not require their education level. This oversupply of credentialed workers allows employers to be more selective and potentially pay less for the same work.
10. Technology Advances Faster Than Worker Retraining Programs
The rapid pace of technological change creates persistent challenges for worker adaptation. By the time training programs are developed and implemented, the technology landscape has often shifted again, leaving workers constantly behind the curve.
This technological churn creates wage volatility and uncertainty. Skills that commanded premium wages can quickly become obsolete, while new technologies create demand for capabilities that take time to develop. Traditional employer-sponsored training programs have declined as companies focus on hiring workers with existing skills rather than developing internal talent.
Conclusion
Middle-class wage stagnation results from multiple interconnected forces that have reshaped the modern economy. From declining unions and global competition to technological disruption and changing corporate priorities, these factors have systematically reduced workers’ bargaining power while increasing employers’ ability to suppress wages.
Addressing this challenge requires understanding that no single factor causes wage stagnation but rather the interaction of structural economic changes, technological advancement, and shifting power dynamics. The solution will likely need to be equally multifaceted, simultaneously addressing several underlying causes rather than focusing on one area alone.