You're Not Getting A Raise!
September 29, 2015 typesofaid.com Staff
Wage Increases Stagnant for Most Workers
Even though some sources report that the nation's unemployment rate is nearing normal and companies in the United States are hiring across a broad range of fields, there is a piece of the puzzle still missing: despite improvements in the labor market, paychecks are still not growing.
This leads many people to wonder what exactly is keeping the lid on the growth of wages. As one would suspect, there is a vast array of theories, many of which are debatable. However, the following are four real possibilities:
After a fragile gain in the 1st quarter of 2015, the United States economy grew at a seasonally adjusted yearly rate of 2.3 percent in the 2nd quarter–the approximate rate at which it has grown since 2009. However, the growth rate before the recession averaged approximately 3.5 percent.
Senior vice president at Reis and chief economist, Victor Calanog, states that the reason is because it is currently an employer's market. He said that the demand for services and goods remains fragile, and this affects the willingness of companies to hire workers and invest in the future.
Slack in the Labor Market
The unemployment rate–which officially reached 10 percent in 2009– is now hovering around 5.3 percent. Even though this appears to be good news at first, it is not a true indicator of the strength of the employment market, as it does not reflect the slack that still lingers in today's economy, according to Irene Tung, who is the National Employment Law Project's senior policy researcher. This slack, the latter of which essentially means more workers than available jobs, is excessive. This is evidenced by high numbers of underemployed or unemployed individuals and a 62.6 percent labor participation rate, which is a record low in this country. Chief economist of Moody’s Analytics, Mark Zandi, has stated that this labor participation percentage is far above what is normal for a tight, well functioning labor market.
Globalization and technological advances have led to fewer middle-wage positions in the United States. Some workers are reinventing themselves, learning new skills or retiring early. However, there are many other individuals who once had essentially well-paying jobs in fields that are now languishing, such as manufacturing. These individuals often settle for lower paying positions in the service or hospitality industries, such as leisure, retail or travel, says Digital MIT's Erik Brynjolfsson, who is director of Initiative at the firm. Brynjolfsson, went on to state that the lack of compensation for workers has caused a shift in the kind of employment being created and sought, but unfortunately the end result is smaller paychecks.
IHS Global Insight's Ozlem Yaylaci has stated that many corporations are just plain stingy. He believes that because there is no pressure to increase wages companies see no need to pay workers anything substantial. According to Mary Ludgin, global investment research director at HCM, companies are offering many other things in lieu of financial compensation, from free meals to flexible working hours. In other words, businesses are giving employees inconsequential things that they may desire on a daily basis, but in terms of cash, they are offering very poor compensation. Zandi believes this pattern is especially prominent in the financial and technology sectors.
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