Wages at the Mid and Lower Levels Making Slight Gains–Part 2

The chart with which we precede this article by Jim Puzzanghera lifted from The Los Angeles Times of September 5 shows clearly how far wages would have to rise in order to properly reward workers at the lowest and middle pay levels for the “prosperity” to which they contributed but have not shared in.

This is the second part of a three-part blog.

With annual inflation running below 1%, the accelerating wage growth is boosting workers’ purchasing power.

“We have turned the corner, and today the wage gains that are happening are far in excess of inflation,” said Andrew Chamberlain, chief economist at recruiting website Glassdoor.

“As long as we keep seeing steady job gains in the monthly jobs report and near-record job openings, it’s inevitable we’re going to see wage growth pick up,” he said.

Chamberlain said Glassdoor data show that competition for workers has pushed wage growth up sharply for some skilled professions. Pay for business system analysts is up about 10% compared with a year ago, while sales consultants saw a 7% gain and pharmacy technicians 6%.

Many of those sales consultants are in the technology industry, which saw average wages rise 3.6% last year in the 10 top markets, including Silicon Valley, Seattle, New York City and Los Angeles, according to a report from financial and professional services firm JLL.

The burgeoning Los Angeles tech industry showed the biggest increase in average annual pay — 13.2%, to $114,540, which includes benefits and stock options. 

In addition, more middle-income jobs are being created than was the case earlier in the economic recovery, indicating that the wage gains are being spread more evenly among the workforce.

From 2010-13, new jobs that paid between about $30,000 and $50,000 annually lagged well behind high- and low-wage positions, according to research released recently by the Federal Reserve Bank of New York.

But from 2013-15, the U.S. added about 2.3 million middle-income jobs in fields such as construction, education, and transportation. During the same period, the economy created about 1.5 million high-paying jobs and about 1.6 million low-paying jobs.

“The tide has begun to turn,” William Dudley, president of the New York Fed, said in unveiling the study. “For the first time in quite a while, gains in middle-wage jobs actually outnumber gains in higher- and lower-wage jobs nationwide.”

But economists said there’s still a long way to go to get wages growing at a level to reverse the damage to household incomes from the recession.

“Wage growth is picking up, but it’s still below what you’d expect in a well-functioning economy,” said Mark Zandi, chief economist at Moody’s Analytics.

That level is about 3.5% a year. If the labor market continues to improve, the economy should start producing those types of wage gains in 2017, he said.

“That’s been the missing ingredient, the last step in the jobs recovery,” Zandi said.

Some states and localities have tried to accelerate that wage recovery for low-income workers by raising minimum wages. There now are 29 states, plus the District of Columbia, that have minimum wages higher than the federal level of $7.25 an hour, which hasn’t budged since 2009. 

Part 3 will conclude this article on wage levels subsequently

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