Dive Brief:
- Despite the fact that U.S. employers steadily added jobs over the course of 2015 and into 2016, it appears that the data on earnings is not keeping pace, according to an article at Deseret News.
- The News reports that average hourly wages for those on private company payrolls in March of 2016 climbed just 0.3% from the previous month and a modest 2.3% from a year earlier, to $25.43, according to the U.S. Department of Labor's latest employment situation report. According to the News, if you go beneath the data, generational workplace changes may be what is affecting the apparent earnings lag.
- It's possible the job market is actually generating earnings growth, but federal policymakers are focusing on the wrong data, ignoring key changes in a workforce buffered by the aftershocks of the 2007-08 recession and the massive baby boomer generation's retirement trends.
Dive Insight
Combined, the article reports, those factors may make "average" a poor barometer of the true health of the overall workforce. Some economists and analysts agree.
For example, researchers at the Federal Reserve Bank of San Francisco contended in a March report that "while higher-wage baby boomers have been retiring, lower-wage workers sidelined during the recession have been taking new full-time jobs. Together these two changes have held down measures of wage growth."
During the downturn, the report explained, a higher number of lower-wage workers were laid off, while higher-paid, more skilled and often older staffers kept their jobs, which boosted aggregate wage measures at the time. As lower wage workers now rejoin the labor force (outnumbering higher earners) — and as baby boomers at the peak of their earning power move into retirement en masse — the result is the "average" goes down and wage growth appears poor, according to the News.
The San Francisco Fed analysts conclude that "sluggish wage growth may be a poor indicator of labor market slack." In fact, they write, "correcting for worker composition changes, wages are consistent with a strong labor market that is drawing low-wage workers into full-time employment."