Wage growth: Still stagnant

June 27, 2014

Reuters has a story out this week delving into Fed chair Janet Yellen’s views about employment. Yellen wants to see more wage growth before she really believes the employment situation is improving, as “research from the Fed’s staff and her own past academic work both suggest there may be more slack in the economy than inflation hawks believe,” according to the Reuters piece.

But wage growth continues to be stagnant:

productivity-growth

Here are more details about her research:

Her research outlined a number of possibilities, including that companies realize upsetting workers may only cost companies more in the long run as some will quit or become less productive, while rehiring in a recovery will prove more costly.

But a flip side is that, as economies recover, firms make up for the lack of wage cuts by keeping worker pay constant for as long as possible.

The San Francisco Fed, where Yellen served as president until 2010, tracks the percentage of workers whose wages did not rise in the prior year. The bank’s “Wage Rigidity Meter” remains near an all-time high – evidence it will take more time before the type of wage-growth Yellen hopes to see.

Comments

The chart is great. It explains the Fed stance, choppy consumer demand, and the economic ground the middle class has lost since 2007

Posted by ParagCMC | Report as abusive
 

But the real question is….

Are the workers earning enough (at these rates) to support themselves by their allotted labor contributions?

Posted by UrDrighten | Report as abusive
 

As our economy recovers…….except this nation remains 7 million jobs shy due to population growth. This will hold wages DOWN unless we’re able to assume NONE of them want jobs. Janet keeps her options open by disclosing only what she chooses to discuss.

Posted by SaveRMiddle | Report as abusive
 

Nothing new here. This is trickle down theory the only wages that will go up are the top officers and wealthiest individuals, the rest of us have been experiencing wage stagnation for 30 years. If you include the lost benefits and the shifting of the cost of benefits unto the employee most positions have experienced a reduction in income over the last 30 years.

Unfortunately the economy is not going to show major improvement as the middle class and working class have had their ability to drive a “consumer” economy decimated by the redistribution of the wealth upwards under trickle down theory.

Posted by paulp25789 | Report as abusive
 

The leading edge of the 77 million baby boom retirees is just starting. The burden they pose will soon be felt. It is not economic growth, but rather their vacancies that account for the decline in the unemployment rate. Washington’s deficits will continue to rise as the wave of the baby boom tsunami approaches. Early 2012 Census stats. show 102 million Americans with full time work and the rest receiving some type of financial support. That situation will worsen. Where are the taxes to come from? As always cheap labour becomes the focus. That’s why Mexican immigration is front burner in Washington.

Posted by whoisit | Report as abusive
 

And why would it have gone up? There are no incentives or forces pushing companies to pay higher wages. The recession gave them desperate workers who will accept pay cuts and twice the workload out of fear of losing jobs and benefits.

All of the recovery has gone to corporate and bank coffers; not the workers who made it happen.

Posted by Solkre | Report as abusive
 

because money is so cheap first i will refinance my debt this will increase my profit. then i will borrow some money and buy back some of my stock.this will increase my earnings per share and drive my stock higher.after that i will borrow more of this unbelievably cheap money and increase my dividend and that will drive my stock higher.i have increased my profitability and there for driven my stock higher increasing my bonus and i did not have to hire anyone. by the way since the labor market is so slack i can make my employees do more work and pay them less money.the federal reserve has made it unnecessary for me to hire anyone thanks to their massive stimulas which does nothing to increase demand which has been the problem all along thanks bernanke

Posted by dennyboy1 | Report as abusive
 

Fed president, Janet Yellen, hopes for wages to match productivity is unlikely to materialise while the west’s “unfair to workers trade policies” continue. While workers in the developed world have to compete on “level playing fields” with workers in Asia, wages in the developed world will continue to be depressed. Is it surprising that the cap between rich and poor is continuing to grow? This is because these “unfair to workers” trade policies disproportionately benefit the wealthy, and not the workers.

Ricardian comparative advantage assumes that nations will give up their diversified economies and instead concentrate on those things in which they have a natural advantage. Unfortunately, developed countries don’t have a natural advantage in wage-based activities. QED: wage-based activities fall off. Why can’t anyone see this?

Indeed, crushing diversification doesn’t build strong economies, so this approach is not even helpful to poor countries, who are pushed into “banana-republic” style developments. QED: everyone loses, except the top 1%ers.

Posted by GrahamLovell | Report as abusive
 

Maybe its because of the abundance of unskilled labor crossing the border. Or NAFTA. Or the continued offshoring of every job possible. Or…

The American dream is a joke. I hold no allegiance to a country that continually undermines the livelihood of its hardworking and honest citizens for the benefit of a few (who evade taxes at every turn).

Posted by AnnonReuters | Report as abusive
 

Unemployment in the U.S. is just north of 6%. Unemployment amongst recent college grads is over 8% and UNDEREMPLOYMENT is over 16%. 16% of recent college grads are hungry enough for work that they’ll take anything and there’s a huge slug of new grads coming right behind them. There may be a shortage of workers with some particular skills set but I can’t see wages in general rising when there are so many kids with reasonable credentials sitting on their hands.

Posted by WCTopp | Report as abusive
 

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