Squeezestagnation

Squeezestagnation is a neologism combining the terms "stagnation" and "squeeze" to describe an economic condition characterized by slow or no growth in real income or wages, despite nominal economic expansion. The term gained prominence in discussions about the U.S. economy in the 2010s, reflecting concerns that workers were not benefiting from broader economic gains, such as rising corporate profits or stock market growth.

The concept highlights a disconnect between productivity and wage growth, where businesses and investors thrive, but labor compensation remains stagnant. This phenomenon is often attributed to factors like globalization, automation, and shifts in labor market power, where employers face fewer constraints on wage suppression due to excess labor supply or reduced unionization. Critics argue that policies favoring capital over labor, such as tax cuts for corporations or deregulation, exacerbate the issue by allowing profits to accumulate without translating into higher wages.

Squeezestagnation contrasts with traditional stagflation, which combines stagnant growth with rising inflation, and instead emphasizes the squeeze on household budgets caused by flat wages amid rising living costs, such as housing or healthcare. Economists debate whether this trend is temporary or structural, with some attributing it to cyclical factors like low interest rates or others viewing it as a long-term shift in economic power dynamics.

The term has been used in academic research and policy discussions to advocate for measures like stronger labor protections, higher minimum wages, or increased social spending to address income inequality. While primarily associated with the U.S., similar dynamics have been observed in other advanced economies, where wage growth has lagged behind productivity gains for decades.