Written by: Jared T.
As recently as 2012, just 7 years ago, wages were growing like they should, at a touch under 4% per year. The rapid dive meant that by June 2014, 2 years later, they were growing at 3%, the lowest rate since the last recession. Then in 2017 they were growing at just under 2.7%; The lowest since the Great Depression in the 1930s.
Yet we aren’t in a depression, or even in recession. People keep buying houses and other things as if wage growth will recover. It needs to recover to make those house payments and car payments manageable.
Another factor to consider is Inflation. In the past 10 years, inflation on average has always been increasing year to year. In 2012 the average inflation rate was at 2.1%. Then in 2014 the average was at 1.6%. And in 2018 it was increasing at 2.4%.To determine your actual wage increase you subtract average inflation from your wage increase. So in 2016, wage increase and inflation combined, the actual wage increase was only 0.3%. Which is very low considering that it was at 1.4% back in 2012. This sudden change in wage increase didn’t affect the unemployment rate, because many companies were still hiring and weren’t laying off.
Certain careers or jobs however still see more pay increase than others. Most of the time it depends on the industry or the company that you work for. Many of the trades, like electrical, plumbing, and carpentry are seeing a lot more than average pay increase. This is because there is a higher demand for them with new houses and companies being built. Wage increase also depends on where you live, people in california may see a higher wage increase due to the cost of living there.
As of May 2019 the wage increase rose to 3.2% from last year. With the average Inflation being 1.7%, that means the real wage increase is 1.5%. The average wage increase is slow rising back up which helps many families that have a lower income. With the recent wage increase, it is mostly benefits the lower income salaries. This is because of many states or cities are increasing the minimum wage. In the past, the wage increase was more for the middle class to compete with their competitors wages, now that they have evened out, the middle class is now seeing mostly the average pay increase. With that being said if the wage increase continues to rise, once you enter the workforce, you will see a good wage increase.
Works Cited
“Bureau of Labor Statistics Data.” U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics, data.bls.gov/timeseries/CUUR0000SA0L1E?output_view=pct_12mths.DeSilver, Drew. “For Most Americans, Real Wages Have Barely Budged for Decades.” Pew Research Center, Pew Research Center, 7 Aug. 2018, www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/.
“Real Average Hourly Earnings Increased 1.3 Percent over the 12 Months Ending March 2019.” U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics, 16 Apr. 2019, www.bls.gov/opub/ted/2019/real-average-hourly-earnings-increased-1-point-3-percent-over-the-12-months-ending-march-2019.htm?view_full.
I'm curious to see where these wage trends are going to end up. Obviously there is a slow trend upwards, but as the presidential election is coming up and other people take the reigns, that trend can be completely thrown off. Throw in a little bit of worldwide tension, and things could go off. This seems like something completely unpredictable, but if it's increasing a little bit, I'd expect it start to level with inflation. Some of these wage increases are due to minimum wage increases, which could easily make more inflation occur. Do we think this'll eventually have repercussions?
ReplyDeleteThis is a sad reality that may not get solved until we hit something like a recession where it becomes clear to lawmakers and businesses that wage increases are necessary. This is a similar problem to that of paying for college. The price of college keeps rising while the scholarships are not just like people keep spending more while the wages are not going up.
ReplyDeleteI'm still confused a little bit as won't the inflation rate eventually catch up with the wage increase. Kind of like long run equilibrium in our market structures. We can't just let wages grow and grow for lower income jobs without inflation catching up, otherwise there is little incentive to pursue such scholarly jobs. In the future, if all income jobs experience pay raises, won't that just make the US dollar worth less and less until its equivalent to a Vietnamese Dong?
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This was an interesting topic, and one that needs to be addressed. If inflation keeps rising at the rate that it is going right now, and our wages stay the same, eventually, we might start losing money. This isn't good, when you get a raise at your job, it should be an actual raise and not just a readjustment for inflation. This makes me think back to some other posts that I read about the wage difference between genders, and another about minimum wage. In the post about the wage gap, I learned that there not only is there a big difference when first paid, but the difference grows once invested. I wonder how the inflation vs. wage growth compares between men and women. The post about minimum wage is also applicable to this post. I believe that the author of the post said that due to inflation, minimum wage is a lot lower now than it used to be, just like this post hints at. Hopefully, companies will start to realize the pay difference over time, and start giving their employees a true raise.
ReplyDeleteIf inflation continues to rise at the rate that it is right now, with wages not increasing or decreasing, we start losing more money. This is a very interesting topic as it hits on the subject of losing money as well, and how hard it could be due to inflation.
ReplyDelete