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Pressure on wages is not there and raises are thin

Feb. 8, 2014 at 10:01 AM   |   Comments

WASHINGTON, Feb. 8 (UPI) -- When job gains are slow, raises for U.S. workers are sluggish, the Labor Department's January Employment Situation report indicated.

The New York Times reported Saturday that wages were up 1.9 percent in 2013, well below the 2008 rate of 3.5 percent.

It is also far short of the 3.8 percent average from the two decades that preceded the 2007-2009 recession, the Times said.

Figuring in inflation gives the 1.9 percent gain a sobering reality check. With inflation figured in, wages in 2013 rose 0.4 percent, the Times said.

On a macroeconomic scale, wages do not go up by accident. They rise when there are not enough available people to fill jobs.

It follows that slow job growth with 10 million people out of work equates to very weak pressure on employers to hand out raises, economists say.

"We won't see stronger wage growth until unemployment gets below 6 percent and we begin adding 200,000 jobs a month," Ethan Harris, co-head of global economics at Bank of America Merrill Lynch told the Times.

The unemployment rate dropped from 6.7 percent to 6.6 percent in January on the addition of 113,000 jobs. But most of the gain was provided by workers so long unemployed that they are statistically not counted as looking for work anymore.

Economist had expected 180,000 new jobs in January. In the previous month, data was similar with 75,000 jobs added to the economy, far fewer than expected.

That translates to little pressure on employers to raise wages.

"People are running in place in terms of their living standards. There's almost no growth in spending power," Harris said.

There appears to be an obvious discrepancy among workers who are well educated and those who are not. The unemployment rate for college graduates, those with high school diplomas and those without high school diplomas is 3 percent, 6.5 percent and 9.6 percent, respectively.

At a glance, that would imply that college graduates have more negotiating power, when it comes to raises, but that has not been the case, as hourly workers did slightly better than salaried workers when it came to raises in 2013, the Times said.

"It's just an extremely competitive environment for workers, where people have little negotiating power," Harris said.

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