For years, economists have been predicting fatter paychecks for U.S. workers. It hasn’t happened. Over the last year, Americans have seen their hourly pay rise only 2.5 percent, with wages idling for the last four months.
The failure of wages to gain liftoff, even with unemployment falling to its lowest level since 2001 and the economy adding 1.2 million jobs since January, has had experts scratching their heads. “The real world has been confounding the set model,” said Rick Steve, chief economist at CUNA Mutual Group.
Averages, however, hide a lot of variability. And one area where wages have started to nose up is among workers whose jobs pay minimum wage or just above.
“If you look at the rate [of wage growth], the bottom quartile is growing a lot faster than this average. That’s really good news,” said Cathy Barrera, chief economic adviser at ZipRecruiter.
Thanks largely to laws that raised the minimum wages in a number of states at the start of this year, the lowest-paid 10 percent of workers saw the fastest pay raise of any workers in the first half of this year. That group saw pay jump 5 percent between the first half of 2016 and the first half of this year, according to an analysis of Labor Department data by the Economic Policy Institute. Over the previous decade, their wages barely budged, while higher-paid workers saw gains.
Data from Glassdoor further back up that trend. In a report the salary research company released this week, the fastest-growing pay is in jobs that pay little to begin with. Aside from raises for recruiters a product of many employers’ difficulty filling jobs the biggest pay bumps were for baristas, restaurant cooks and bank tellers, all of whom earn less than $30,000 a year.
Baristas’ pay went up by 6.4 percent from the year before; cooks and tellers saw growth above 5 percent.
For most of the U.S. economic recovery, wage gains have largely gone to the highest-paid workers. The resulting inequality has been a public policy issue in a number of cities and states that have raised the wage floor. The fact that employers are still adding robust numbers of jobs six months later suggests that those hikes haven’t had the job-killing effects some in the business world had feared. But it also illustrates just how large a gap remains between the lowest- and highest-paid workers.
As EPI Senior Economist Elise Gould recently wrote, “Most workers are just beginning to make up for lost ground rather than getting ahead.”
But with wage growth topping 5 percent in some occupations, why is the average number so stubbornly low?
It turns out the increases at the bottom of the income distribution are matched by stagnation in the middle, as white-collar occupations are increasingly replaced. Office managers, financial advisers and retail buyers are seeing their pay stagnate or fall. Operations analysts, the group with the biggest income drop, earned 3 percent less this year than last.
“Retail buyers and office managers they’re competing with automation today,” said Andrew Chamberlain, Glassdoor’s chief economist. “Today, there are lots of offices who go without an office manager: They order supplies on Amazon Prime and have a front-desk check-in with an iPad. Loan officers face the same pressure. It’s possible today to request a credit limit increase totally online, without ever dealing with a person.”