Despite a historically low unemployment rate, inflation-adjusted average hourly wages did not grow at all between June 2017 and June 2018, according to the Current Employment Statistics survey. While this stagnation was driven in part by an uptick in energy prices, it is also a sign that nominal wage growth—the best historic barometer for measuring short-run changes in workers’ leverage in the labor market—remains extraordinarily weak for an economy with low unemployment. Last week, EPI posted a series of blog posts analyzing these recent, troubling trends in wages.
Senior Economist Elise Gould and Policy Director Heidi Shierholz looked at overall trends. They found that weakness in wages was broad based and not confined to small corners of the labor market. They argue that this is a sign that continued labor market slack is a prime culprit and that a long period with a tight labor market will boost wages.
Gould and Shierholz also argue that anemic wage growth is not due to workers lacking the skills employers are looking for, nor is it due to low-wage jobs being added disproportionately. On the first point, they note that workers with less educational attainment have seen stronger wage gains recently, undercutting stories of skills or credential shortages.
EPI Research Director Josh Bivens then argued that neither the decades-long assault of workers’ leverage (sometimes referred to as rising monopsony power of employers) nor rising monopolization mean that workers’ wages cannot grow even if the economy hits full employment. Instead, he argues that the definition of full employment is wage growth fast enough to support the Fed’s price inflation target—and nothing about rising employer power or monopoly changes this calculus. He notes that these influences largely mean that policymakers just have to work harder to ensure labor markets are tight to spur decent wage growth.
EPI experts are available for interviews on wages and other topics.
- Average wage growth continues to flatline in 2018, while low-wage workers and those with relatively lower levels of educational attainment see stronger gains
- Why is real wage growth anemic? It’s not because of a skills shortage
- Why is wage growth so slow? It’s not because low-wage jobs are being added disproportionately
- A long spell of very low unemployment would raise wages—even in the face of employers’ monopsony power
- Does America’s monopoly problem mean that high-pressure labor markets can’t boost wages?