By most reports, the U.S. Economy is in better shape than it’s been in a long while. Although employers only added 126,000 jobs in March (far below the 295,000 added in February), we’ve seen an average of 269,000 jobs per month over the past year, according to the Bureau of Labor Statistics (BLS).
Responses from PayScale’s 2015 Compensation Best Practices Report (CBPR) are in line with BLS reports. When asked, “What is the expectation for your company’s financial performance in 2015?” 73 percent of respondents said they expected financial performance would improve, and only 5 percent expected it would weaken. In addition, 55 percent of employers said their companies had grown since January 2014.
And yet, many workers are still waiting for employers to “show them the money!” Last month, the BLS reported that real average hourly earnings for all employees decreased 0.1 percent from January to February. And according to The PayScale Real Wage Index, U.S. wages are down 6.5 percent since 2006. (The PayScale Real Wage Index tracks the buying power of wages for full-time private industry workers in the U.S.)
Still more workers than jobs…
Perhaps part of the reason for the slow increase in wages can be explained by the simple law of supply and demand.
At the end of February, there were 5.1 million job openings in the U.S., and 8.7 million unemployed people. In other words, for every job opening, there were generally 1.7 job seekers. That said, according to the experts, this ratio more or less mirrors the pre-recession ratio. So, what might be some other explanations?
Other possible reasons for persistent stagnant wages
Possible reasons for stagnant wages include:
- Employers are still feeling antsy. It could be that many employers simply aren’t feeling enough confidence in the economy to open their coffers.
- Employers don’t believe their labor demands warrant higher wages. Even as employers bemoan the skills gap and its impact on their ability to find good workers, perhaps they aren’t fully convinced higher wages will solve the problem?
- Something fundamentally wrong in the U.S. economic structure is preventing the growth of wages for low- and middle-income Americans. In “2015 Will Be the True Test of the Economic Recovery,” author Ben Casselman says there’s cause for optimism about the economy but also cause for concern. He writes, “Not since the late 1990s has the U.S. economy managed to generate strong income gains for the American middle class, let alone those at the bottom of the earnings totem pole.”
Meanwhile, the national “quit rate” (i.e., percent of voluntary separations) has jumped 17 percent in the past 12 months, indicating that more and more Americans aren’t content to continue waiting for their current employers to pony up the cash.
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