GUEST EDITORIAL: Why aren’t wages rising more quickly?

Staff Writer
Walton Sun
Walton Sun

In 2019, Americans found that snaring a paycheck was easier than growing one.

Even as corporate America continues to hire, wages rose slowly in a tight labor market. In December, we learned last week, average hourly earnings eked out a meager 0.1% gain over November.

It’s a somber counterpart to word that the U.S. jobless rate held at 3.5% — a 50-year low — last month. Nonfarm employment rose by 145,000, falling short of expectations. Employment growth in 2019 has slowed from the pace of 2018. From that perspective, as one prominent economist put it, “the job market is losing its shine.”

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And, for many, raises continue to disappoint.

After encouraging, albeit small, gains in pay last year, the uptick has dissipated in 2019. Wages in December were 2.9% higher than the same month a year earlier, but most of that was eaten up by consumer prices rising by more than 2%. By the same year-over-year yardstick, wage gains peaked at 3.4% last February.

If you’re among the millions seeing little or no gain in pay, what’s been called the hottest labor market in two generations should be disillusioning. If you’re one of those in the lowest-paying jobs, meager pay gains are even more worrying. A 1.1% raise — from $11 an hour to $11.12 — won’t change life for the better.

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Some major cities phasing in a $15-an-hour minimum wage are championing efforts to pick up the pace of pay gains — but at the risk of curbing job growth for low-skilled workers.

The paradox of slower wage growth at a time of continued labor demand can be tied to many factors: slower economic expansion, uncertainty posed by the Trump tariff war, foreign labor competition and the certainty that 11 years of increased prosperity inevitably will end in recession one day.

Add to those factors the choice by many U.S. firms to use the corporate tax breaks of 2017 to increase dividends and lift share prices by buying back stock rather than building factories and adding equipment — precursors of hiring. And a manufacturing slump aims directly at traditionally high-paying jobs.

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In that environment, bidding up wages for workers may seem unsustainable to cautious employers.

A closer look at labor market numbers also reveal another unhappy truth, one that won’t be lost on workers who once made $30 an hour having to settle for new jobs that pay $10 or $15 an hour. “Low-quality” jobs, with low wages and uncertain hours, today outnumber positions with better pay and steady, 40-hour weeks, according to researchers at Cornell University.

A reading of 100 on the newly created U.S. Private Sector Job Quality Index marks an equal balance between “low quality” and “high quality” jobs.

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Until that trend is reversed — through better job training, increased private investment and more equitable economic policies — U.S. jobs reports won’t merit unbridled reveling.

This guest editorial was originally published in the Star Tribune (Minneapolis).