January 14, 2015
Neil Irwin has an Upshot piece making the case for why we should expect to see wages rising soon. He noted a survey of employers showing more are planning to raise wages than in prior years. He also noted the promise by Aetna to place a floor of $16 an hour on its workers’ pay.
However the main piece of evidence is a rise in the number of job opening to a high for the recovery. While this is indeed encouraging, there are three important qualifications that deserve mention.
First, the biggest rise in openings compared with pre-recession levels are in low-paying sectors like retail and restaurant employment. This may mean some shift from these low-paying sectors to higher paying sectors, but the high-paying sectors do not appear to be having trouble getting workers. One exception is the government sector, which has also returned to pre-recession levels of openings. This could reflect the deterioration in the pay and work conditions of government employees.
A second fact worth noting is that real wages were rising very modestly even before the recession. The last time we saw strong real wage growth was at the very beginning of the decade. This series began in December of 2000, just before the 2001 recession kicked in. But the job opening rate was higher in the three months preceeding the recession than the number released by the Labor Department this week, 3.6 percent in 2001 compared to 3.4 percent in November.
Finally, the quit rate at 1.9 percent is below the 2.1-2.2 percent pre-recession level and well below the 2.5 percent rate of 2000-2001. This means that workers still do not feel comfortable leaving their jobs.
Clearly the labor market is improving, but we likely still have a long way to go before most workers see real wage gains. The one wild card is that the Affordable Care Act, by allowing workers to get insurance outside of employment, may make workers more comfortable leaving jobs they don’t like. This could lead the labor market to tighten up more quickly than otherwise would have been the case.
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