Why aren’t wages rising faster even with low unemployment?
Trade war, weaker economy are among reasons
Source: USA Today
By all rights, U.S. wage growth should be kicking into a higher gear amid falling unemployment and intensifying worker shortages…“Wage growth has hit a wall,” Joseph Song, senior economist at Bank of America Merrill Lynch, wrote in a report. Economists blame myriad factors, including President Donald Trump’s trade war with China and a slowing U.S. economy, weak productivity growth and meager inflation.
I love this topic. Washington crows about low unemployment, but nobody in government seems to worry that your wage growth sucks. “Explanations” get tossed around like dry leaves whipped up by a forest fire: It’s the trade war, productivity, low inflation. I’ve got a simpler answer: Successful companies don’t share the wealth with their employees because it just feels better to keep the money. Job candidates need to push back harder. Can’t negotiate a higher salary? Ask for more money.
What do you say?
- Why are wages not going up meaningfully?
- How can you get more money for your work?
Notice how some companies loudly proclaimed all the bonuses they gave people back when the tax cut went into effect a couple years ago? Said cut is permanent for businesses…..but you don’t hear much about those bonuses for people now.
But they continue to implement stock buybacks.
I’m kinda glad I work for an ESOP company. At least the profits eventually make their way back to us.
@Chris: Yah, didja notice? A few pundits pointed this out at the time. It would make for a good couple of interview questions from the candidate.
So, didja pass some of the tax cut on to your employees? [Of course we did!]
Is it a permanent pay increase? [Uhhhh….]
IMO, it boils down to supply and demand. Groups like the American Welding Society says the median age for skilled welders is now 55. Groups like the National Tooling & Machining Association says the median age for skilled journeymen machinists is now 58. The rub is employers complain they don’t have workers with these in demand skills to take the helm when these older workers hang it up. Whether it’s been wages, being short sighted, not supporting vocational programs in the community colleges, the elimination of apprenticeship programs, and no school to work transition programs in the high schools in lieu of pushing the four year college track on everyone is a question I ask. Then there’s HS counselors and parents dissuading young people from pursuing welding or machinist trades. I frequently deal with industrial accounts that are crying for such skilled workers in my region. Some offer subpar wages and benefits, but most offer competitive wages and benefits. Certain less glamorous occupations can sometimes offer better wages. Skills sell, not pieces of paper in nebulous degrees from a university. Ask the bartender, server, or call center worker about this.
This is IBM PR, but at least they can show they’re doing something:
Antonio you nailed it. I am now retired and was active in private business(corporate & self employed) most of my life until the last years before retirement. The then mayor of my city received a Federal grant for what is now called Workforce Development and desired a business person (specifically not a bureaucrat or educator) to develop and implement a school to work apprenticeship style of program in a “challenging” part of town from scratch. Sounded easy and I was looking for something different to do so I said give me a phone and air conditioning and I can make anything happen. It turned out to be more exciting,fun and toughest thing I had ever done. I saw first hand exactly what you say happening in the high schools,community colleges, unions, government levels etc. We were successful primarily because of the industry I was associated with and its very active support. Where I live every trade seams to have a “cultural” aspect to it and they all appear to be doing okay.
@Larry: I love it! What a great gig!
I think a big part of it is that “wage increases” are getting soaked up by increased employer health care contributions and not making their way into the pockets of the workers.
Corporations often operate on razor thin margins – they can do a certain task if they can hire someone below a certain rate. If they can’t find anyone to take that rate they hire no one.
Today, I went to buy some windshield wipers. I could have spent $30 or $50 – I chose $30.
If you can get the right employee for $80000 per year, why pay $120000?
I just turned down an interview today as I would need much more money than the market rate in the city for which they were recruiting. This is what I told the recruiter. She said my news was “very unfortunate” since the hiring manager was really looking forward to interviewing me. I knew where this was going. I had to name my price first. Without naming a price, I checked salaries in that city. I would have needed more.
Bet a CEO isn’t operating on a “razor thin margin” when it comes to his household budget – but you can guarantee his employees almost certainly are.
My experience is that HR blocks applicants at the starting gate, even when they approach the company through an internal contact.
If during a telephone interview with HR the applicant will not agree to an artificially low compensation number, they are told their application will not be advanced to the hiring manager for consideration for interviews. The hiring manager does not learn about the applicant. It’s crazy to expect someone to agree to compensation before they know what the job is though I get that HR wants to remove any leverage an applicant may have.
I am an experienced corporate governance manager in NYC and have encountered this God awful approach multiple times in my recent search. I also have a background in sales and can tell you that companies will stretch to hire a person they want provided they get to meet them. HR’s approach makes that meeting impossible. So everyone loses.
Only desperate or unqualified applicants get considered. Way to go, HR!
@Kat, Your point is very valid. HR blocks good candidates, and I’ve experienced this firsthand many times.
I’ve been conducting a clandestine job search for awhile now. After 7 years, my current small mom & pop employer appears to be tanking. A friend of mine hand delivered my resume to the Sales Manager for a position at his employer. The Sales Manager was impressed with my qualifications, and sent it to the HR Manager to contact me to set up a face-face interview. The HR Manager called me, and the first thing she said was “how much compensation are you looking for”? I gave her a competitive and researched figure of close to where I’m at currently (underpaid for my skills and experience, but not looking for unrealistic wages, just need out of my current sinking ship). She immediately replied that my desired wages were too high, disqualified me, and hung up abruptly. I ran this by my friend, who was perturbed by the HR Manager’s behavior. When I told him what my compensation requirements were, he told me I was on the “low” end for their industry.
@Kat and Antonio: When I hear stories like this, I want to scream, and I wonder why hiring managers aren’t screaming. It’s hard to believe hiring managers don’t know that HR is cutting off the pipeline of good candidates without giving the managers a chance to decide for themselves whether to consider a higher salary. Yet I’m sure HR is doing this — I’ve seen it. We can blame HR (and I do), but managers need to wise up and take personal responsibility for their recruiting.
A full, well articulated, and sound argument is made by David Weil in his work The Fissured Workplace:
By shedding direct employment, lead business enterprises select from among multiple providers of those activities and services formerly done inside the organization, thereby substantially reducing costs and dispatching the many responsibilities connected to being the employer of record. Information and communication technologies have enabled this hidden transformation of work, since they allow lead companies to promulgate and enforce product and quality standards key to their business strategies, thereby maintaining the carefully created reputation of their goods and services and reaping price premiums from their loyal customer base.
The new organization of the workplace also undermines the mechanisms that once led to the workforce sharing part of the value created by their large corporate employers. By shedding employment to other parties, lead companies change a wage-setting problem into a contracting decision. The result is stagnation of real wages for many of the jobs formerly done inside.
Laws originally intended to ensure basic labor standards and to protect workers from health and safety risks now enable these changes by focusing regulatory attention on the wrong parties. Core federal and state laws that regulate employment, often dating back to the first half of the twentieth century, often assume simple and direct employee/employer relationships. They make presumptions about responsibility and liability similar to those we make as customers, presumptions that ignore the transformation that has occurred under the hood of many business enterprises. Traditional approaches to enforcing those laws similarly ignore the myriad new relationships that lie below the surface of the workplace. As a result, the laws crafted to safeguard basic standards, to reduce health and safety risks, and to cushion displacement from injury or economic downturn often fail to do so.
In essence, private strategies and public policies allow major companies to simultaneously profit from the core activities that create value in the eyes of customers and the capital markets and shed the actual production of goods and services. In so doing, they have their cake and eat it too. How did the workplace fissure? What are the wider impacts? Is continued shedding of employment the inevitable outcome of a modern, flexible economy? Are there ways to assure that workers are treated fairly and responsibly given the continued pressure to fissure employment? These are the central questions explored in this book. (Weil, David. The Fissured Workplace (pp. 4-6). Harvard University Press. Kindle Edition.)
And even if you remain a full-timer you are competing with a huge talent pool that has been turned into precarious workers who are always ready to step into your role (albeit as a “contingent” worker working for a body-shop) at half the salary (actually hourly wage).
I know this true because I first disarticulate the global supply chain using digital forensics to peak behind the technological smoke screen that hides the real ugly side of the job boards and recruitment industry and only later turned to economics to provide the jargon and conceptual framework to make a sound economic argument why this is destructive to the family wage earner.
You can listen to a small sample (there are over 1000 digital forensic evidence recordings) of how Employer Delegated Deception (EDD) works, and keep in mind if you lied in job interview the so-called HR industry literature makes a big fucking deal of it but is absolutely silent on EDD:
Here I expose the data my Cloud based Resume Vault captures (i.e., their butt-in-seat-ip):
@Rob: Weil captures the problem succinctly and compellingly. Why do Congress and federal agencies apparently not know what is going on? Dumb question, eh? I’ll rephrase it: Where do campaign contributions come from?
Thanks for posting!
Money will kill American democracy if it is allowed to dominate whom we choose for our leaders …