Thursday, May 11, 2017

You're not getting a raise and nobody knows why


The pay that workers take home has risen a little since the depths of the recession, but not much. Once you factor in inflation, wages growth is so low that workers are hardly better off than they were a year ago. Over the past year, average hourly earnings have risen just 2.5 percent, according to Friday's report on April job growth.


As the economy continues to heat up and companies create more job opportunities, employers should eventually have a harder time finding the caliber of workers that they want. To attract good workers, companies in theory have to start offering pay increases.


Since the recession, the unemployment rate has not been a great indicator of how much slack is left in the labor market.

That's because the unemployment rate, which was a low 4.4 percent in April, counts only workers who do not have a job but are still actively looking for one. Economists argue that the harsh conditions of the recession persuaded many Americans to give up looking for work altogether. Young people moved back in with their parents, workers went on disability and older employees opted for early retirement.

Some of those people have gradually started looking for jobs again as the economy has heated up. But sluggish wage growth may imply that a lot of these people are still left on the sidelines of the economy, and that they might be willing to start looking for work again as their prospects improve.


Gould points to the employment-to-population ratio for prime-age workers, which measures the proportion of the population between the prime working ages of 25 and 54 who are employed. That figure stood at 78.6 percent in April, still significantly below where it was in 2007 and for most of 2008.


weak growth in wages may reflect the difficulty workers have asserting their bargaining position in the current environment, Lawson said.

A dramatic decline in unionization in recent decades has left workers less able to bargain with company owners for pay increases. At the same time, globalization has allowed companies to be more mobile than ever before. If labor gets too expensive in one location, companies can just move.


Sinclair said current market signs are signaling the Fed that the economy still might have substantial room to grow.

"It makes me want to encourage the Fed not to rush, because there doesn't seem to be too much pressure on the wage cost side for employers yet," she said. "Waiting a little longer might allow us to see further improvements for people."

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