walkitout (walkitout) wrote,
walkitout
walkitout

So Why Is Wage Growth Negative?

Coverage of the most recent employment report has been ... mixed, to say the least. Obvs, when you get unemployment down to 5.6% and underemployment dropping as well, it's hard to present it as bad news. On the other hand, BI can find the negative anywhere:

http://www.businessinsider.com/this-was-a-terrible-jobs-report-2015-1

True, wages actually dropped. Here is what McBride has to say about the report:

http://www.calculatedriskblog.com/2015/01/employment-report-comments-first-come.html

"Looking forward, hopefully 2015 will be about "wages". My thinking is first come the jobs, then comes the real wage growth."

"Unfortunately there was disappointing news on wage growth, from the BLS: "In December, average hourly earnings for all employees on private nonfarm payrolls decreased by 5 cents to $24.57, following an increase of 6 cents in November. Over the year, average hourly earnings have risen by 1.7 percent." But wages will hopefully be a 2015 story."

Here is something that I would hope would be obvious to everyone, but apparently is not.

The last people to get hired do not tend to be hired at the top end of the wage curve. In fact, I would argue, the opposite is probably true. And wage pressure historically has not really manifested until unemployment overall was under 5% anyway.

Seeing negative wage growth now is sort of like watching median house sales price _rise_ as the bust developed. Luxury real estate lags, so when fewer houses were sold, a higher proportion of them was higher in price. Similarly, as we slowly came _out_ of the bust, median sales price _dropped_, which was expected and fine, because it meant that starter family and condo sales were finally happening as mortgages became available again.

I assume that people have trouble with this because they have conflated stages in economy improvement/deterioration. (The alternative explanation is that people basically have no fucking clue about how prices are set, which honestly, is probably a better explanation, but I find it profoundly depressing because, you know, we kind of live in a capitalist society and prices are sort of a central part of capitalism and if we don't get that then Sad.) It can be hard to keep the details straight, if you don't sit down and think it through in terms of what actual people are doing around you. It's also confusing if everyone you know is Just Like You -- you do need to have contact with a range of socioeconomic status and background to really get a sense of how this develops over time.
Tags: our future economy today
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