Wages show signs of an up­turn

Job open­ings force em­ploy­ers to raise pay, at­tract work­ers

Baltimore Sun - - FROM PAGE ONE - By Jim Puz­zanghera

WASH­ING­TON — For mil­lions of Amer­i­cans, a re­minder of the eco­nomic dam­age of the 2007-’09 re­ces­sion has ar­rived ev­ery week or two for years — in their pay­checks.

Painfully slow wage growth has lim­ited eco­nomic re­cov­ery, with many work­ers get­ting few if any raises. But there are signs that has started to change.

The fall­ing un­em­ploy­ment rate has led to more com­pe­ti­tion for work­ers, spurring solid gains in av­er­age hourly earn­ings in re­cent months.

Those pres­sures, am­pli­fied by laws pro­vid­ing min­i­mum wage in­creases in Cal­i­for­nia, New York and else­where, also are trig­ger­ing changes for the work­ers who need raises the most. Be­gin­ning last year, large firms such as Wal-Mart, Star­bucks, McDon­ald’s and JPMor­gan Chase in­creased what they pay their low­est­level em­ploy­ees.

“A pay in­crease is the right thing to do,” JPMor­gan Chase CEO Jamie Di­mon said re­cently in an­nounc­ing raises that would bring the hourly pay of bank tell­ers, cus­tomer ser­vice rep­re­sen­ta­tives and other em­ploy­ees to at least $12 an hour in three years, from the cur­rent $10.15.

“Wages for many Amer­i­cans have gone nowhere for too long,” he wrote in a New York Times opin­ion ar­ti­cle.

The same mes­sage has em­anated from the pres­i­den­tial cam­paigns.

When ad­justed for in­fla­tion, me­dian an­nual house­hold in­comes de­clined to $53,657 in 2014, the most re­cent year for In­creased com­pe­ti­tion among busi­nesses for work­ers is trig­ger­ing changes for em­ploy­ees who need raises the most. which gov­ern­ment data are avail­able, from $57,724 in 2000.

“House­hold in­comes are more than $4,000 lower than their lev­els in the year 2000,” GOP nom­i­nee Don­ald Trump said re­cently. “Think of it: You’re mak­ing $4,000 less now than you did 16, 17 years ago.”

Wage growth al­ready was tak­ing a hit this cen­tury for sev­eral rea­sons. One fac­tor is the loss of bar­gain­ing power caused by a drop in the share of pri­vate-sec­tor union­ized work­ers; an­other is the de­cline in high­er­pay­ing man­u­fac­tur­ing jobs as com­pa­nies moved more fac­to­ries abroad.

As a re­sult, the share of money flow­ing into house­holds from wages be­gan fall­ing sharply com­pared with cap­i­tal in­come from in­ter­est and div­i­dends, ac- cord­ing to a study last year by the Fed­eral Re­serve Bank of Philadel­phia.

The 2008 fi­nan­cial cri­sis and the worst eco­nomic down­turn since the Great De­pres­sion am­pli­fied those changes, fur­ther sti­fling over­all wage growth.

But af­ter two years of strong job growth, job open­ings are near record lev­els. That’s forced em­ploy­ers to raise pay to at­tract new work­ers and re­tain ex­ist­ing ones, econ­o­mists said. Av­er­age hourly earn­ings in­creased 2.4 per­cent for the 12 months ended Aug. 31.

An­nual wage gains have been con­sis­tently in that range since last fall — they reached a seven-year high of 2.7 per­cent year-over-year in July — an im­prove­ment from the tepid 2 per­cent dur­ing much of the first six years of the re­cov­ery.

With an­nual in­fla­tion run­ning be­low 1 per­cent, 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.”

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 per­cent com­pared with a year ago, while sales con­sul­tants saw a 7 per­cent gain and phar­macy tech­ni­cians 6 per­cent.

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

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

From 2010 to 2013, 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.

Some states and lo­cal­i­ties have tried to ac­cel­er­ate wage re­cov­ery for low-in­come work­ers by rais­ing min­i­mum wages. There are now 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.

In April, Cal­i­for­nia Gov. Jerry Brown signed leg­is­la­tion that will raise the min­i­mum wage in Cal­i­for­nia to $15 an hour by 2022. Also in April, New York en­acted leg­is­la­tion that will raise the min­i­mum wage there to $15. The in­creases vary by re­gion — faster for New York City, slower for more ru­ral ar­eas — and it is un­clear when the en­tire state will hit that level.

As those pop­u­lous states moved to in­crease their min­i­mum wages, large com­pa­nies re­al­ized that they’d soon have to raise the pay of many of their work­ers. That was one fac­tor behind the na­tion­wide pay raises that sev­eral be­gan an­nounc­ing last year.

“We cer­tainly are mind­ful of wage in­creases in var­i­ous states through­out the coun­try,” McDon­ald’s Chief Fi­nan­cial Of­fi­cer Kevin Ozan said dur­ing an earn­ings call in July.

“It has, from a purely busi­ness stand­point, cre­ated an in­cen­tive to lift the wages at the bot­tom across their work­forces,” said Chris­tine Owens, ex­ec­u­tive di­rec­tor of the Na­tional Em­ploy­ment Law Project.

JOE RAEDLE/GETTY 2015

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