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The Wage Implosion

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June 3, 2009

The Wage Implosion

by Lawrence Mishel and Heidi Shierholz

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Average hourly wages of production workers
Wage growth has been the last labor market indicator to deteriorate in this downturn but it has done so in dramatic fashion in 2009. For the entire first year of the recession, wage growth had been holding up; from December 2007 to December 2008, nominal hourly wages of production workers (82% of all payroll employees) grew 3.9%. From December 2008 to April 2009, however, nominal hourly wage growth has collapsed, growing at an annualized rate of 1.8% over this period. The figure below shows hourly wage growth since January 2007. The recent collapse of wage growth not only means the recession is greatly affecting those who keep their jobs, it also puts downward pressure on consumption growth which will further delay economic recovery.

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