Here’s an article from a few weeks ago at Bloomberg by Matthew Boesler (hat tip: Daniel Gross) that makes a case that’s counter-intuitive to me—wages are growing faster in the lower quintiles now than they did in the last business cycle and growing faster than in the upper quintiles:
Comparing wage growth in 2017 to 10 years ago, when pay was rising at the fastest rate of the previous expansion, shows a tale of two labor markets — or maybe five.
The bottom 20 percent of workers by average industry pay are seeing significantly faster wage growth now than they were then. Yet the shortfall in the upper 80 percent has been large enough to keep overall pay growth almost a full percentage point lower.
A closer look at the lowest-paid cohort, along with the four that make up the top 80 percent, provides some insight into the puzzle of why pay gains remain sluggish even with the unemployment rate at a 16-year low of 4.1 percent. For the calculations, Bloomberg ranked 303 distinct Labor Department industry categories by hourly pay and then produced five quintiles of average wages based on the industries’ share of total employment.
He doesn’t furnish an explanation for why this is occurring. Does it have something to do with the lower labor force participation rate? I could see how that could increase wages for the remaining workers. Which workers actually left the labor force?
The decreased rate of immigration from Mexico? I could see how fewer low skilled and semi-skilled workers could increase the wages of the workers with whom they compete.
I don’t think that the explanation raised by some, that the very high wages of the extremely skilled (or credentialed) depend on support from workers with lower skills, is explanatory. That was as true a decade ago as it is now.
Higher minimum wages?
I’m open to explanations. Right now it’s a mystery to me.
We can only speculate. But you beat me to it. I would suggest lower immigration rates and labor force participation.
More interesting to me – I know its unpopular, but the fact is that US citizens just won’t take the jobs on offer in ag , much retail and low level services. Down here in FL you have to be comatose not to see it. The counter is always to raise wages. Perhaps we have an experiment in progress.