Over the past 12 months, average hourly wages rose 3.2 percent, according to the latest jobs report from the Bureau of Labor Statistics. But the longer-term story is contested. Many analysts and commentators lament the situation of stagnating wages, while others celebrate wage growth. To take just two of hundreds of examples, our colleagues in the Hamilton Project here at Brookings report “long-run wage stagnation for lower-wage workers”, while Michael Strain over at AEI writes that “the wages of a typical worker have increased by 32% over the past three decades. That’s a significant increase in purchasing power”. Though we would be remiss if we did not point out that this corresponds to less than a one percent increase per year.
The honest but boring answer to the question of what is happening to wages is: It depends. Specifically, it depends on how you measure it. As so often, methodology really, really, really matters. In the case of wage growth, four analytical decisions bear heavily on the results: which time period, which deflator, which workers (by gender), and which workers (in terms of position). We discuss each of these four below and show how they influence the wage story.
Wages – Decline in organized labor has reduced the bargaining power of labor across the developed world Bridgewater says
The biggest force behind the global profit margin expansion has been the decline in the labor share of output. A key factor that has contributed to this reduction in labor’s bargaining power versus capital is the decline of organized labor and unions. This phenomenon has occurred over decades for an array of reasons that are … Continue reading
Several OECD countries have been grappling not only with slow productivity growth but have also experienced a slowdown in real average wage growth relative to productivity growth, which has been reflected in a falling share of wages in GDP. At the same time, growth in low and median wages has been lagging behind average wage … Continue reading
Every month for the last year, the Bureau of Labor Statistics’ wage data releases have continued to demonstrate that workers simply aren’t getting ahead. Despite some nominal growth, real wage growth has been consistently hovering around zero (rising at just a 0.2 percent annual rate from 2016-2017). At the same time, this year’s annual data release from the Census Bureau showed us that the median household income has risen to $61,370 in 2017, a 1.8 percent increase even after … Continue reading
Despite the strong labor market, wage growth has lagged economists’ expectations. In fact, despite some ups and downs over the past several decades, today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. And what wage gains there have been have mostly … Continue reading
Wages in UK – The typical pay rise for someone switching jobs is, on average, around 2.5 times higher than for someone remaining in the same job
Analysing pay growth for those in continuous employment. Figure 5 does this by showing the median pay rise for those remaining in the same job from year-to-year and those remaining in employment but switching jobs. Typical pay change for people remaining in work over a year Source: RF analysis of ONS, ASHE (post April 2017 … Continue reading
The Future of Work in US – How to fix the broken historical link between labor productivity and wages
In Don’t Fear the Robots: Why Automation Doesn’t Mean the End of Work, Roosevelt Fellow Mark Paul challenges the narrative that large-scale automation will imminently lead to mass unemployment and economic insecurity. He debunks the idea that we are on the cusp of a major technological change that will drastically alter the nature of work, … Continue reading
For large shares of the population in the advanced economies, there has really been no positive movement or no sense of progress in terms of where their incomes have gone over the last one to two decades. When we looked at the data across the US as well as a set of European economies, we … Continue reading
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 … Continue reading