Wages show signs of improvement

By Jim Puzzanghera

Los Angeles Times (TNS)

WASHINGTON

For millions of Americans, a reminder of the economic damage of the 2007-09 recession has arrived every week or two for years – in their paychecks.

Painfully slow wage growth has limited economic recovery, with many workers getting few if any raises. But there are signs that has started to change.

The falling unemployment rate has led to more competition for workers, spurring solid gains in average hourly earnings in recent months.

Those pressures, amplified by laws providing minimum-wage increases in California, New York and elsewhere, also are triggering changes for the workers who need raises the most. Beginning last year, large companies such as Wal-Mart, Starbucks, McDonald’s and JPMorgan Chase increased what they pay their lowest-level employees.

When adjusted for inflation, median annual household incomes declined to $53,657 in 2014, the most recent year for which government data are available, from $57,724 in 2000.

“Household incomes are more than $4,000 lower than their levels in the year 2000,” Republican nominee Donald Trump said at a rally in Virginia last month. “Think of it – you’re making $4,000 less now than you did 16, 17 years ago.”

Wage growth already was taking a hit this century for several reasons. One factor is the loss of bargaining power caused by a drop in the share of private-sector unionized workers; another is the decline in higher-paying manufacturing jobs as companies moved more factories abroad.

As a result, the share of money flowing into households from wages began falling sharply compared with capital income from interest and dividends, according to a study last year by the Federal Reserve Bank of Philadelphia.

The 2008 financial crisis and the worst economic downturn since the Great Depression amplified those changes, further stifling overall wage growth.

But after two years of strong job growth, job openings are near record levels. That’s forced employers to raise pay to attract new workers and retain existing ones, economists said.

Average hourly earnings increased 2.4 percent for the 12 months ended Aug. 31.

Annual wage gains have been consistently in that range since last fall – they reached a seven-year high of 2.7 percent year-over-year in July – an improvement from the tepid 2 percent during much the first six years of the recovery.

With annual inflation running below 1 percent, the accelerating wage growth is boosting workers’ purchasing power.

In addition, more middle-income jobs are being created than was the case earlier in the economic recovery, indicating that wage gains are being spread more evenly among the workforce.

From 2010 to 2013, new jobs that paid between about $30,000 and $50,000 annually lagged well behind high- and low-wage positions, according to research released recently by the Federal Reserve Bank of New York.

But from 2013-15, the U.S. added about 2.3 million middle-income jobs in fields such as construction, education and transportation. During the same period, the economy created about 1.5 million high-paying jobs and about 1.6 million low-paying jobs.

Some states and localities have tried to accelerate wage recovery for low-income workers by raising minimum wages. There now are 29 states, plus the District of Columbia, that have minimum wages higher than the federal level of $7.25 an hour, which hasn’t budged since 2009.

In April, California Gov. Jerry Brown signed legislation that will raise the minimum wage in California to $15 an hour by 2022. Also in April, New York enacted legislation that will raise the minimum wage there to $15. The increases vary by region – faster for New York City, slower for more rural areas – and it is unclear when the entire state will hit that level.

As the states with the nation’s largest and third-largest populations moved to increase their minimum wages, large companies realized that they’d soon have to raise the pay of many of their workers. That was one factor behind the nationwide pay raises that several began announcing last year.

“We certainly are mindful of wage increases in various states throughout the country,” McDonald’s chief financial officer Kevin M. Ozan said during an earnings call in July.

“It has, from a purely business standpoint, created an incentive to lift the wages at the bottom across their workforces,” said Christine Owens, executive director of the National Employment Law Project, which has been pushing for a $15-an-hour minimum wage.

“A lot of companies ... were getting a lot of bad press about how they treated their employees, and raising wages was an obvious way to respond to that,” she said.