Raising Middle-Class Pay and Working Conditions through Sectoral Standards

The Problem

Most American workers do not have a say in the governance of their workplaces, and too often are paid wages that have not tracked economy-wide productivity. We need institutions that give workers a collective voice in setting pay, restoring wages in the broad middle. Unions once played that role, but private-sector union density is now only around 6 percent, and inaccessible to the vast majority of U.S. workers.

Past Failure to Solve the Problem

For decades, efforts to strengthen worker bargaining or extend wage standards have stalled. Republican administrations froze or weakened labor protections; Democrats once proposed reforms such as the Employee Free Choice Act and the PRO Act, but these have all died in Congress. Even with a pro-worker NLRB under President Biden, enterprise-level organizing at Starbucks, Amazon, and Trader Joe’s produced hundreds of union elections but almost no contracts. The Trump administration is now rolling back those modest NLRB gains.

The Game Changer: Sectoral Standard Boards

While we work toward stronger organizing and labor-law reform, we can build on the Fight for Fifteen’s success through further experimentation at the state level. Sectoral standard boards offer a different and practical way forward: these public, representative bodies would set binding pay floors, regulate key workplace amenities, and oversee technology use across occupations within a sector.

In America, pay and working conditions are set firm by firm, with the low end left to the vagaries of the market. By contrast, a sectoral approach sets standards across an entire industry—say, hospital nursing assistants, childcare workers, or K–12 paraprofessionals—so that the going rate reflects a social standard rather than the least generous employer’s offer. Such sectoral standards, set either through collective bargaining or by statute, are common in most of our high-income peer countries.

As a demonstration, we simulate a sectoral standard that sets the floor at two-thirds of the median wage within each of roughly 3,000 job groups defined by state, industry, and occupation. Because the floor varies by job group, the gains reach well beyond the bottom of the pay scale. We show that such a standard would raise wages by around 13 percent at the bottom and 8 percent at the middle (Figure 1).

In the twenty states that lack a binding state minimum wage today, sectoral standards would deliver large gains at the bottom (effectively standing in for a missing wage floor) along with sizable gains for the middle. In the thirty states with higher state minimums, the pattern is different: there the bottom has already been partially lifted, so sectoral boards deliver their largest gains around the middle. Sectoral standards thus complement existing minimum wages—filling in the bottom where floors are low, and rebuilding middle-class wage norms where they are higher.

Health and education are especially promising areas for pilots. They employ large numbers of middle-wage workers whose pay has lagged social value, and they are locally rooted. You can’t offshore a nursing home or a kindergarten classroom. They also have an important public funding component, so that wage increases can be at least partially funded out of revenue raised using progressive taxation. We find that for workers above the bottom fifth, about half of the total wage gains from sectoral standards come from these two sectors alone (Figure 2). Recent sectoral standards in healthcare in California and Minnesota, and in childcare in Washington, are consistent with our observation.

Figure 1. Effects of a sectoral wage standard on the wage distribution: by presence of state minimum wages

Figure 2. Effects of a sectoral wage standard on the overall wage distribution: by sector

Taking advantage of a growing body of data, sectoral boards can also set standards for staffing ratios, scheduling predictability, and the adoption of new technologies like AI, bringing more of the work experience under democratic governance.

Economic Rationale and Feasibility

A moderately calibrated set of sectoral floors can meaningfully reduce pay gaps. Our proposal could erase roughly half of the increase in overall wage inequality that has occurred since 1980. The gap between the top and the middle would narrow as well, underscoring that sectoral standards are unusually powerful at lifting pay in middle-wage jobs, not just the lowest paid ones.

Sectoral boards would include worker, employer, and public representatives. Where union coverage in a sector exceeds a threshold, unions can designate worker seats; where it is low, workers could be randomly selected to serve using a “juror model.” Participation by workers in board activities could also increase public engagement and create working- and middle-class leaders, serving a broader democratic goal. Floors would be periodically reviewed in light of productivity, public funding, and labor-market conditions, as independent commissions do in the UK and Australia.

Boards would also commission impact analyses on employment, prices, and service quality. Many of our proposed design elements—such as phase-ins, regular reviews, and clear benchmarks—would allow recalibration if necessary. And because the economy tends to change faster than administrative categories, sectoral board boundaries can be updated based on observed job-to-job flows, in a manner similar to census redistricting.

Taken together, state-level sectoral boards offer an opportunity to experiment with economic democracy as well as a practical, evidence-informed way to rebuild a middle-class wage standard. Enforced by state regulators rather than moribund federal law, they can become durable institutions that raise wages and give workers voice across key sectors of the economy. Learning from state-level experimentation can also help move toward federal legislation and reform in the future.