For the majority of employees, the upset from the Great Recession has faded. Nevertheless, paychecks are still increasing slowly in advanced countries. Statistics reveal that it was weighed down by decreasing unionization, globalization, low inflation expectations and weak labor productivity. Besides, younger, lower-paid employees are replacing retiring workers and extreme retail rivalries are restraining prices and the capacity of businesses to increase pay.
In the U.S., the costs of labor are still the same even if there is a short supply of capable employees. It’s highly improbable that the Great Recession is still the reason, especially because of high amounts of customer confidence. Although, automation might have a more enduring impact on employee’s wages and anxieties. If this is why, wages will continue to be low for some time, holding back interest rates and inflation.
From all reports available, the labor market of the U.S. is close to full employment. Numerous measures of unemployment are at all-time lows and short-term joblessness is the lowest in 50 years. Over half of the 16 signals in the amount of labor market slack are tighter than usual. As reported in the Beige Book by Fed, the slow pace in hiring indicate that businesses are having a hard time finding low-skilled employees to occupy a record amount of openings.
In spite of the shortages, employees don’t get paid more than before. After it increased briskly in 2015, the compensation per hour has hardly kept up with inflation. If labor shortage was forcing wages, there should be bigger surges in states that have low unemployment rate. However, this isn’t the case.
In fact, North Dakota and Colorado have some of the lowest employment rates and slowest salary increases in America. Samples scopes on an industry expose that there is no link between job openings or jobless rates and the growth of earnings.
Undeniably, the salaries could still takeoff. The unemployment rate nationwide was around 4.3 percent or less on a couple of former instances in the past 50 years from 1965 to 1970, as well as, from 1999 to 2001. In both circumstances, the unit labor costs increased by almost six ppts in the 1960s and two ppts in the tech boom. Meanwhile, the core inflation heightened. The difference this time around is that new automation is still progressing up and down the chain of skills, which threatens a broader variety of jobs compared to the past, such as numerous non-routine positions.