Monday, June 13, 2016

Job Creation and Slow Wage Growth

Click on Image to Enlarge
According to the Bureau of Labor Statistics, nearly 60% of all workers in this country are paid hourly.  But, when I look at the graph above, showing extremely low wage growth for hourly workers since 2009, it tells me that it is nearly half of what it should be.  It also tells me that the economy is suffering from an employment condition known as a "slack workforce".  In other words, there are too many workers chasing too few jobs.  As a result, employers aren't competing with each other to fill jobs and retain personnel through higher wages.

Essentially, organic wage growth all comes down to vigorous job creation which appears to be seriously missing.  There can be several reasons for this.  The lack of funding to create startup businesses and entrepreneurship.  Government over-regulation such as ObamaCare which forces businesses to convert workers to part time employment or to use contract labor.   Or, low wages themselves which results in slow business activity and less job growth.

What I am trying to stress is that, since Obama has been in office, wage growth has been well below normal from about 3.5% to 4.5% annually.  Now, while there has been an up trend that started last year, I believe that it had more to do with the fact that 29 States and the District of Columbia imposed minimum wages higher than the Federal minimum of $7.25. If so, this is not indicative of normal or sustainable growth. Only time will tell if true wage growth is restored to normal levels.


Chart Source: St. Louis Federal Reserve:

What Is an Appropriate Annual Salary Increase?:

Characteristics of Minimum Wage Workers, 2014:

American Entrepreneurship: Dead or Alive?:

No comments: