While I agree that turning a problem around and looking at it from the opposite perspective, as Neil Irwin does in this New York Times op-ed on wages:
One of the economy’s biggest mysteries is this: The labor market is the strongest it has been in a decade, yet wages are rising barely faster than inflation.
For some reason, the booming job market and ultralow unemployment rate, which fell to 4.4 percent in April, haven’t led employers to raise pay in a meaningful way. That flies in the face of a basic assumption of how the economy works: A tight labor market is expected to lead to pay increases that in turn fuel broader inflation.
But the mystery of the missing pay raises may have a surprisingly simple solution, and one that sheds light on the larger economic challenges of our age.
can provide insight, I think he’s overplaying his conclusion. Yes, if inflation is low and productivity stagnant, you shouldn’t expect rapid wage growth. However, I think he’s reaching when he tries to explain a very recent turnaround with localized increases in the minimum wage:
Why? Minimum wage increases in several states probably contributed.
What percent of workers were affected by that change? I just don’t think it’s a credible explanation. There’s another one available. Consider this graph, graciously provided by Heritage.org:
Let me summarize that for you. For the last couple of decades Americans have been taking their pay increasingly in the form of health care insurance and the cost of that insurance has been rising rapidly.
If, as has been claimed for the last several years, health care expenses were not rising as fast as they had been, it means that employers might be able to offer more compensation in the form of wages.
Why, as the graph also illustrates, total compensation has lagged productivity so greatly for so long, remains an open question but it’s one that will need to wait for a later post.
Globalization destroyed the capacity of workers to negotiate wage increases. That was the entire point of “free” trade agreements.
Well, one thing we do know, is will have to more with less, or do without altogether, as we are no longer needed at all, except perhaps by the others who have no ability to pay either.
Well… SOME workers got health insurance and yes it was part of their compensation, even if they mostly didn’t see it as such. So their take=home wage increases appeared to lag behind inflation.
And then there are a whole lot more workers who don’t get health insurance, but who assess their status on the basis of comparative take-home wages.
Other words, While inflation was hitting 5%, engineers were taking home pay checks which increased at 3% per annum (and f\grumbling about it) but ignored the 9% increases in health insurance costs their employers were paying for them. And people working at Macdonalds, receiving no health insurance, generally felt relief at not falling behind if their take home pay went up 3% per year.
The net result is that the sum of wages for engineers and employees of Macdonalds (i.e., the sum of all wages paid to skilled and unskilled employees) rises at a slower rate than than one would expect when considering inflation and productivity.