With the nationwide unemployment rate at 4.1 percent, the lowest since 2000, economists have been surprised by the slow growth in workers’ paychecks. Historically, when that few people are unemployed, companies have had to pay more to attract workers — simple supply and demand.
But maybe competition for workers isn’t quite as intense as the unemployment rate suggests. The government’s official definition of unemployment is pretty narrow: it excludes anyone who isn’t actively looking for work. Adam Ozimek, an economist at Moody’s Analytics, has found that under a broader definition of unemployment — anyone in the prime working years who isn’t employed, for whatever reason — recent wage growth is in line with historical norms.
If Mr. Ozimek’s analysis is right, it suggests there is a sizable pool of people who aren’t officially counted as unemployed but who might be willing and able to work under the right circumstances. Some may be struggling with addiction or other illnesses, or may have been out of work so long that they’ve given up looking. Others may just not be willing to work for the wages offered.
As the economy improves, more may come off the sidelines. But as economists at the Federal Reserve Bank of San Francisco recently argued, that could make overall wage growth look worse, because people entering the labor force usually earn relatively low salaries. The country’s aging population could also be a factor, because retiring baby boomers (who, on average, earn relatively high wages) are gradually being replaced by millennials (who generally earn less).
Chosen excerpts by Job Market Monitor. Read the whole story at 6 Reasons That Pay Has Lagged Behind U.S. Job Growth – The New York Times