Why are wages not doing better?

What’s going on with falling (!) wages? “From May 2017 to May 2018, real average hourly earnings *decreased* 0.1%” for production and nonsupervisory employees

That is from Erik.

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This could be good news if you believe in sticky wages. Paging Scott Sumner.

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Would we see this with individual level data and individual level fixed effects? It seems it could be driven by a change in composition of workers as more are entering the labor force.

What John said, with details added by me:

The real question is "real purchasing power including distributions both to and from, adjusted for life stage".
So are wages *down* for people with 10 years steady employment in a given job role?
So, do today's 40 year olds make less than their parents did at 40, including healtcare from employers, extras taxes they pay, etc. etc., and adjusted for real purchasing effect?

(I don't know, and "they make less, really" could be the answer - but an economy wide average tells us nothing.)

Tells us “nothing”?

Also, economists tend to be pretty smart about cohort effects and the like. You think Tyler doesn’t know about them?

I feel like attempts to explain this away by assuming statistical quirks may be related to some motivated reasoning here.

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Indeed -- aren't we bringing in the marginal workers who were considered unemployable before? In which case this is due to moving more workers from making $0 to making a lower than average wage -- which is all that's required.

Unless wages are not used to pay for consumption, it's the marginal consumers coming into the market and they need less money to return to consuming.

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Supply outstripping demand at more or less constant productivity would be my guess. Also, the one significant tailwind of Spring 2018 (Dollar down 10% YoY compared to the Euro) weakened lately.

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More and more jobs are now Baumol jobs, so labor productivity is slowing. Humans can only do certain tasks at human speed, and those tasks become more common over time as the ones that can be sped up employ fewer people.

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1) If job growth involves low wage jobs, while no ones wage has actually declined, average real wages decline. I think this captures the case of the UK, if not the US, where employment growth has risen and most of that is likely to be low skilled folk (as the skilled/high wage already work).

2) Increasing relative importance of measurement error as the trend growth rate has fallen (as productivity growth has fallen).

3) Summation of small random factors?

Your first suggestion seems like such an obvious cause that, until that is accounted for, I don't think it's worth hunting further for a reason

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It's people previously out of the work force entering. Until that slack is absorbed the policy of reducing legal immigration (as well as illegal) is the correct one. Let's alos take the money we waste on military abroad and put it into worker training.

Yep.

A better question is "Why couldn't an economist figure this out?"

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Yeah. Most economists, including Tyler, underestimated how many of the 10 million people who lost their jobs during 2008-09 would come back.

I have heard from a friend in manufacturing that the tight labor market is really starting to bite; reduced immigration is doing its part too. Wage increases are coming. Erik's analysis captured a "blip" of temporarily above-trend inflation in the past year.

"Most economists, including Tyler, underestimated how many of the 10 million people who lost their jobs during 2008-09 would come back."

+1, I never understood the mindset that declared the post 2008 Labor Force participation numbers to be permanent.

My understanding was that so many boomers were getting older and close to retirement, and therefor would have a hard time finding a lateral job to the one they had before the recession. Could it be that the 55-65 demo is finally coming back to the workforce? Are they taking low paying jobs out of boredom?

It's almost certainly a marginal effect. With some workers working longer hours, some people that were previously working part time getting full time jobs and others that were working very little getting pulled into regular part time work.

And indeed, that's what the actual data from the source indicates:

" combined with a 0.6-percent increase in the average workweek"

The work week has increased over the past year.

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Let's alos take the money we waste on military abroad and put it into worker training.

How about the businesses that employ the workers train them as well? Is the general population supposed to supply them with buildings, equipment and raw materials for free? No, but that same general population believes that prospective employees are expected to be a very nearly finished product for profitable use by the business machine. A very myopic view.

Above trend inflation? A minor-league increase in wages has zilcho to do with inflation, as Milton Friedman explained over and over again. If an increase in wages is inflationary, why wouldn't an increase in stock prices also be inflationary? It's basically the same thing.

I believe I understand and concur with Mr. Friedman's notions of inflation. We have had a blip of above-trend inflation over the past year. This has nothing directly to do with wages, but it does undercut the nominal wage increases of the past year.

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Massive increase in labor supply. This doesn't always lower wages, but there's evidence that it is suppressing wages. When a bakery in Chicago was raided by ICE and several hundred illegal aliens detained, wages rose from $10 to $14, almost hitting the "fight for $15" living wage slogan. Anecdotal, but also brutal. Read the stories about farmers complaining about losing foreign workers, they are complaining about having to pay workers more.

Depression. Even after 10 years of recovery, current credit growth (TCMDO at FRED) is consistent with recession in in the 50+ years before 2008.

Globalization, reserve currency status and regulations. The U.S. economy is structured to benefit consumers over producers, and for keeping this system alive with additional debt, but the slowdown in credit growth, political backlash, stagnant wage growth all point to a system hitting its limit.

I do not hang my hat on one year of data, but a dip in wages is consistent with an incoming recession/slowdown. China's stimulus efforts (Fed QE is involved as well) have a maximum effect of about 2 years (2008-2010, 2011-2013, 2015-2017) . Financial markets slid in 2011, 2015/16 and now starting again in 2018/19. I'm taking the under on inflation expectations.

I am a farmer and I employ a lot of legal immigrant labor to harvest fruits and vegetables. I’d like to clear up a couple misconceptions. 1. Regular citizens won’t do the work. It’s not just that they would do it if the wages were higher. Orchard workers on piece rate basis make $25-30 per hour and hourly workers (the older and less motivated) make at least $15. If you can’t find the people on your own you have to use a labor contractor which will add 33% to your labor costs. US citizens don’t even apply for these jobs. I’ve seen a few come and try it over the years and I don’t remember any coming back for a 2nd day. There is an ample supply of US citizens in my area and the low skilled will take the $12/hr McDonalds job instead of the higher paying field work job. Food processing jobs in our area are unionized and pay well they are still only taken by immigrant labor.
2. These kinds of jobs should be mechanized. That would be great if it could be done. Untold millions have been spent trying to accomplish this without success. The best they have been able to do is provide some harvest aids to make human labor more efficient.
A streamlined guest worker program is sorely needed if we are to continue producing these items in the US. Perhaps in urban areas immigrants are displacing American workers, I don’t know, but in the production of fruits and vegetables we are highly dependent on immigrant labor.

Get off your entitled ass and pick the fruit yourself.

Good point. I picked my share of fruit as a youngster and eventually went on to better paying work and creating jobs for others. One of the problems is that child labor laws (at least in the people’s republic of Washington) are so ridiculous that a large pool of potential American labor, high school students, are very difficult to employ legally. The ones I’ve talked to are eager to work but most of us don’t want the regulatory burden of hiring them.

That's not limited just to Washington, it's everywhere: there are a lot of young males ages 15-17 who would be excited to work manual labor jobs, which usually pay more than the summer job in retail or fast food, but a number of child labor laws make it so that a majority of the core tasks are off-limits to those under 18. Some of these are legitimate, like repairing sharp industrial equipment, but others are almost incomprehensible: one of my high school retail jobs at Lowe's prohibited those under 18 from operating the paint mixing machine according to state labor law.

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You simply need to have a bigger family. Work rules don't apply to your kids or grandkids.

Seven kids with seven kids will give you almost 50 child workers, plus a crew of adult workers.

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Why do the farms have to be so large? There is an abundance of young American males wanting to be the farmer, but land being zero sum & lack of access to capital, don't allow them to.

I think farm consolidation occurs for many of the same reasons as in other industries. Additionally, farmers generally don’t have any pricing power in the market and must accept commodity prices. A rational reaction to this is to try and gain economies of size to lower breakeven costs.

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Eric, you basically think that you're paying more, and people aren't coming.

What if you paid $45/hour? Would people come? If you really can't get people to come at any price, then it's time to automate.

The thing is, you don't have a right to employees any more than employees have a right to any particular wage.

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The answer is in your very post:

"(the older and less motivated) make at least $15. ... the low skilled will take the $12/hr McDonalds job instead of the higher paying field work job. "

$12/hr at McDonalds is much easier work than $15/hr in the field. Odds are the immigrants would take the McDonalds work too if other factors weren't holding them back (language, legality, etc).

I believe that’s right. Most of the folks doing field work have some obstacle such as language keeping them out of other types of jobs. How do you see field work getting done if not by immigrant labor? One option would be to source our fruits and vegetables from other countries such as Mexico but domestic farmers have much more stringent environmental and food safety standards. It’s likely that some of the same laborers would be used but at much lower pay. I hear that the going rate in Mexico is $15/day

Raise the wages. The average wages for that kind of labor remain low.

"We found that crop workers make about $9.18 an hour. Vegetable and melon workers were near $7.78. Blueberry workers made about $6.70 an hour."

" Information from state and federal agencies, the director of a farmworker aid group, and AJC reporters shows wages are closer to $10 an hour or less."

http://www.politifact.com/georgia/statements/2011/jun/14/gary-black/some-farm-workers-do-earn-high-wages-not-all-do/

How many pickers in your area make $40K per year? Probably very few. And it's grueling, hard work.

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Eric, in Australia agricultural workers are simply paid more than in the US. This means we pay more for labour intensive foods and so the equilbrium is we eat less berries and things like that. We're also probably going to lead the world on agricultural automation as economies of scale probably give us an edge over smaller farms in Europe, Japan, and China. (China's average agricultural worker age is high.)

Agricultural work here is often done by new immigrants, those young and fit enough to make decent money from it, those who have difficulty obtaining work elsewhere but are still willing to work, overseas tourists, and of course, future rock stars:

https://www.youtube.com/watch?v=GNda5N5-3ds

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A $12/hr job that you can work 52 weeks a year results in a much higher income than a $15/hr job that you work for a few weeks at harvest time. To make it work you have to move around to work different crops and if the non-immigrant worker was willing to move around to find good work, they wouldn't be in a rural area with a crappy economy in the first place.

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That immigrant labor comes with too many external costs. Grow crops amenable to automation and we'll import the fruit from sh*thole countries.

Enough already.

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I appreciate your perspective, but here's the thing...

I'm a well-paid computer engineer. But if you were to offer me $100 per apple that I pick, I'd pick that damn apple. I'd pick a hundred apples, a thousand even.

OK so we have found a point at which a US citizen with other (very good) career options would definitely forego a mid 6-figure salary to pick fruit in an orchard. In fact I'd wager 99% of US citizens would pick apples for that amount of money. Now cut that in half, and you've lost some of your workforce. Halve it again, and more drop out. /But some will still work in your orchard/. Keep halving, until you get the right number of workers.

Yes, you might have to pay more than you're comfortable paying. Welcome to the labor MARKET. Workers decisions are based on more than just $/hr. McDonalds offers an air conditioned working environment, a 401k, educational opportunities, etc... Do you offer those? No? Well, then, you're probably going to have to pay more. I live in an agricultural area and from what I can see the benefits top out at a lemonade stand near the porta-potties.

And if all that results in apples costing more at the grocery store? Great. Substitutes that cost less to produce will be found, and the incentive to mechanize will lead to innovations there.

"..and the incentive to mechanize will lead to innovations there."

I suspect that, as soon as, picker wages raise above the low $10 per hour average, we'll see a rapid increase in the percent of automation.

Actually, in our area they earn more than twice that based on piece work. The problem is they will have 5 kids, 2 will graduate high school, one will join a gang and eventually be incarcerated, but only after doing considerable damage in the community. Of the two that actually graduated from high school, one will bump an Asian out of Harvard because they earned a "B" in math.

No wonder a state like CA, once paved with gold, is now a sh*thole state.

The great irony, some of the finest loams in the US are now covered with multiple family dwellings to house the progeny of the illegal alien farmworkers imported to pick strawberries growing in that loam 40 years ago.

I would like to get that loam back, but it ain't gonna happen.

"Actually, in our area they earn more than twice that based on piece work. "

Sure, plenty of pickers do get paid $15-$20 hour for small amounts of work. But it's intermittent and the yearly averages are still around $20K per year. Which is low pay when you consider the difficulty of the work.

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Fruit picking robots are already here:

https://www.pbs.org/newshour/science/apple-picking-robot-means-future-farm-workers

There are all kinds of automation that is here. Just not economical with labor at $15-25K per year. As the wages go up and the cost of automation drops, more of the jobs will be automated.

Cotton combers became uneconomical 200+ years ago. It's doubtful if will have any long term human field labor in another 100 years. I suspect a drastic drop in the next 25 years for that matter.

+1. Think more like 10-15 years though. One aspect is not just wages, it's that with the falling Mexican birthrate and the sharp drop in immigration from Mexico, there aren't even enough pickers to go around. I mean, obviously you could entice more of them to come in or even natives to do it for $100/hour but the robots are far more economical at those levels.

Fascinating story at the link.

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+1 Brilliant! Finally a STEMster steps in and parts the clouds - further proof of the nonsense and obfuscation running wild amongst economists.

How do economists measure their effectiveness?

Software engineers have their effectiveness tested by quality assurance engineers eager to prove their effectiveness by finding bugs and performance deficits. The market then tests both of them.

Economists?

Of course, the overlords can get around market forces by importing millions of poor, uneducated, and fecund people who unable to assimilate while passing on the costs to someone else. In the same manner, the tech barons would like to flood the market with tech professionals from China and India. However, the barons are constrained by the number of H1Bs and English fluency.

It's good to be the King, but not everyone can be the King.

>> " How do you see field work getting done if not by immigrant labor? "

I appreciate Eric's candour and acumen as a businessman, but his post above really does read like "I need an un-integrated helot immigrant labour caste willing to work for low wages". It's interesting that he can't even imagine that there is a wage point at which locals like Fred Lee will start doing the job, even though there is.

I take it as further evidence that the unholy alliance between large / labour-hungry business, the rent-seeking left, and immigrants is a Real Thing. I take it as evidence that the Trump / alt-right Weltenschuang is onto something.

He can't just pay what he thinks the workers deserve and still sell any applies. Nobody will eat a $100 apple. I though you were economists. The price of a good is set by the interaction of supply and demand and all we're talking about is supply.

Frankly, Americans, other than college educated professionals and some skilled tradesmen, can't do much other than work in a big box store and say, "If you don't see it, we don't have it." It takes time to change a culture and an educational system, and we're barely even trying. Meanwhile, fruit is rotting in the fields and people want to eat. Let the immigrants come.

Sorry, apples, not applies.

If so, then perhaps his business is simply unviable?

As it stands, this is private profit and social costs. Eric enjoys the cheap labour and profits, but native workers have their wages depressed, the general taxpayer gets to pay more public assistance, and everyone suffers from the immigrant crime, housing, and culture externalities whilst the rule of law and value of citizenship is traduced.

Republicans and libertarians need to stop privatising profit and socialising costs like this. It's the worst kind of crony capitalist corporatist apologetics.

Let the apples be imported instead from countries with workers that will do it.

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"""
Massive increase in labor supply.
"""

This is my intuition as well. Unemployment rate is a silly metric since it doesn't actually measure, you know, the UNEMPLOYMENT RATE. I'm loathe to agree with Trump, but he's right in pointing out that the /actual/ unemployment rate is far higher than reported. And as those workers re-enter the workforce, it's natural that wages will lag. Of course his idiotic tariffs aren't going to help anything.

I really wish that some of the ECONOMISTS who continue to report on the mystery of wage non-growth would put down their blogging pencils and their podcasting microphones long enough to actually do some economics, and study the impact of workers re-entering the workforce on wages.

"...and study the impact of workers re-entering the workforce on wages."

And the effects on the solvency of SS and Medicare, welfare costs, government spending on healthcare, bankruptcy rates, taxes collected etc.

I suspect that a higher Labor Force participation number will be a pretty large positive for the countries economic health.

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Unless you're willing to stick a tinfoil hat on and claim the numbers of all bogus, no, the unemployment rate is not massively understated. And the labor force participation rate is very near its historical average so, no, we do not have an unusual number of people out of the work-force.
My take on this is that employers just aren't willing to raise wages-- they will let a job sit unfilled and accept lower output and greater stress on the existing workforce rather than pay higher wages or hire someone who does not meet a large laundry list of requirements.

I think the question is what is different this time around?

Employers generally would rather not give raises. Always. I think this is basically axiomatic.

My point is that I don’t think it can be brushed aside as easily as “employers don’t want to give raises.” They never do.

Either the labor market has more slack or your point about preferring lower output is correct. If they prefer lower output then we need to ask why.

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" And the labor force participation rate is very near its historical average ..."
No that's not correct.

https://www.statista.com/statistics/191734/us-civilian-labor-force-participation-rate-since-1990/

You're cherry picking your stats to start with the employment boom of the 90s. The historical average darting back to 1950 (the first year we have data on) is 62.99%.
(https://tradingeconomics.com/united-states/labor-force-participation-rate) That is very close to the current stat of 62.9%.

Seriously, you are calling a chart going back 30 years cherry picking?

Sure if you look at the time period before the modern Women's liberation movement the numbers are lower. But that's primarily because women were largely excluded from the professional workforce until the late 1970's. Times have changed. Women make up a huge part of the work force and most of them don't sit home as house wives.

Yes, I am calling it cherry-picking! Or if you prefer a politer way of putting it, you are selecting an arbitrary data set that conduces to your conclusions. The only way to do this sort of thing with intellectual honesty is to use the entire dataset, unless there's an argument that some portion of it is not reliable enough to trust.
Time may change, but math is still math and works the same way it did in 1950. And all that matters here (for your actual point) is the math. Nothing else. So I reiterate: the historical average for workforce participation by non-elderly adults is 62.99%. which is very, very close to today's number.

By the way, it's not the case that women were excluded from the workforce (though they were paid less). My own mother spent much of her 20s working a clerical job at the Toledo Edison in the 50s-- and with lots of other women too. (Some of her female coworkers show up in old pictures as guests at my parents' wedding) There were far fewer women in commanding high income roles, that much is true, but that's not the same as saying women were excluded from the workforce.

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Corporates have collectively learned that raising wages is the death of corporate profits and are resisting fiercely.

Wages are one expense that corporations can have a handle on. The cost of raw materials, IT, travel, construction, real estate, etc. are really out of their control. Despite the fact that management and major shareholders (eventually the same thing) have the ability to loot the company for millions, increased wages for the janitors that push brooms and wash windows after the white collar bureaucrats have left for the country club will be the death sentence for the company.

Ouch!

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For those who don't know: there are a number of companies that constantly survey the wages organizations pay in a region and provide access to that data to everyone's HR organizations. Anytime we hire, we check the minimum of the range for a skill and advertise at that minimum. Everyone does. It is a very quiet mechanism for unstated agreement on managing wage claims. And it is very effective. Wages generally cannot increase in any real sense.

"Wages generally cannot increase in any real sense."

What kind of an idiot do you have to be to write a sentence like that? What happens when no one responds to your ad? Explain why random blue collar jobs pay six figures- is it because those workers are super geniuses and break through conspiracies?

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Guy Berger responded to the tweet with a plausible explanation.

In 18 months, President Trump has the economy comparatively "running like a top." However, he may need much of his additional six-and-a-half years to resolve the massive messes left by Clinton, two Bushes and Obama.

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Many excellent comments above.

Also, Tyler Cowan has blogged that median wages for men are lower now than in the late 1960s.

So is this a surprise?

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Wages went up 2.7% year over year, but consumer prices went up a shade more.

That does look disappointingly steady-state.

Given the number of people who exited the workforce what is being reported as full employment is not even close.

Claims like that seem pretty arbitrary. We have all combinations of extended education, early retirement, disability and seniors reentering the workforce.

How many people should be happily not working? How many should be unhappily working?

Zeroing in on the 25-54 subset (less prone to extended schooling and early retirement), we see that the employment to population ratio has climbed back to 79.3 in June 2018. In January 2008, at the previous employment peak, the ratio was 80.0. Almost all the way back.

Cite: https://fred.stlouisfed.org/series/LNS12300060

Thanks. I guess something around 80% is reasonable, though possibly more women would like to be full-time moms, if they could.

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I see 82 in 2000 or so. But yes the slack is being taken out. Not there yet.

Why do you want women to send their children to daycare and then go to work?

Or for that matter what's wrong with just going the gym and then the juice bar with your friends?

What we have to distinguish here is how people might enjoy a wealthy society or slave away in the same.

I think the question is insoluble, and that any labor participation may actually be "best."

You probably want to approach it completely differently and Survey people on "Financial Security."

Some people go to the gym while others clean it. Some go to the juice bar, while others make the juice and clean up the mess.

The workers then spend most of their money renting expensive housing from the customers of the gyms, juice bars, and BMW dealerships.

It isn't working.

This will have unintended consequences.

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My bottom line would be that if we are not seeing higher wages, when we are not seeing people "bought out of" other Pursuits.

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Perhaps one thing that would be clear would be that higher wages imply more people happily working.

Actually, the people taking all those low wage jobs aren't necessarily happy working, they are happy they don't have to sleep under the bridge and poop in gas station bathrooms.

Actually that's the vibe I'm on. Flat wages and expanding employment may be good, but you can't really reason backwards.

I mean it's a very "economist thing" try to reason backwards from labor participation to happiness, but it doesn't really work.

Do the census, the polls, and find out directly.

There have been tons of research indicating that employed people are happier than unemployed people.

"One of the most robust findings in the economics of happiness is that unemployment is destructive to people’s wellbeing. We find this is true around the world. The employed evaluate the quality of their lives much more highly on average as compared to the unemployed. "

https://hbr.org/2017/03/does-work-make-you-happy-evidence-from-the-world-happiness-report

"...employed people happier..."

Well duh! Did we have to raid the public treasury to finance that conclusion?

People with a roof over their heads are happier than people trying to sleep in a rain soaked sleeping bag.

Jaysuz!

"Well duh! Did we have to raid the public treasury to finance that conclusion?"

Talk to the Polar Bear, he's the one who seems confused.

You didn't answer me though. I am happily retired without a job and with a roof over my head. Does your poll a I should not be happy?

Basically your misapplying data sets or assuming that set A corresponds to set B.

I have hiked 60 miles so far in July. I think that's better than working.

Again you seem confused. You are applying situational anecdotal data in an attempt to refute broad based study data.

That being said, certainly retirees with high earnings and good health will probably have high happiness. But I bet you wouldn't be nearly as happy without all those legions of workers providing you goods and services. And statistically speaking, those legions of workers are happy to take your money in exchange.

I try to be patient with you, but man. Of course it's an anecdote and of course I didn't claim data. I asked a question for which you do not have an answer!

For what it's worth I hiked with three ladies last Friday. One was a Pilates instructor, one was a personal trainer, and one was a triathlete. None of them work enough hours to be considered full-time employed by participation statistics.

Great when confronted with actual data, you respond with more anecdotal evidence.

Your hiking group is not representative of a world of 7 billion people.

Sigh. You have not presented data on what fraction of those not working are happy not working.

Given that 80% of a certain age group do work says that most want to work, sure. But it doesn't actually tell you about the composition of the other 20%.

You cannot work backwards from labor participation to happiness. This is a very basic thing.

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+1

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Labor force participation is very near its historical average-- there are not an unusually large number of people out of the work force. Moreover people not in the workforce should not have any effect on wages-- they're not part of the labor supply factor in supply-demand equations.

They’re part of the labor supply.

Given average reservation wage X for Y million workers, we know that if the wage rises to X the supply will increase by Y.

What am I missing?

You're not, and Jonfraz is somewhat wrong. Those people represent a potential labor supply and essentially make wages somewhat inelastic. As wages go up, then some marginal amount of people will re-enter the work force. Thus wages will have a downward pressure in periods of low Labor Force Participation.

And currently we are still substantially below the numbers that the US had between 1988 and 2008. Furthermore, we are below the 70 year average. We are quite a bit below numbers if you look specifically at males.

https://tradingeconomics.com/united-states/labor-force-participation-rate

Why don't we see the same effect in other eras when similar numbers of non-elderly adults were not in the work force?

Women were largely excluded from the professional workforce in earlier eras.

I responded to this above. women were not excluded from the workforce, only from some high income and command roles. But those are always somewhat rarified. Most people are not and never will be in those jobs. And the stats capture wages across the whole economy, not just the elite.

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From FRED himself. Maybe you want to read it:

https://fredblog.stlouisfed.org/2014/05/labor-market-conditions-good-or-not-so-good/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog

Then look at the updated EP - still way below peak. Some demographics, but not all due to that.

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Wages are growing in real terms.

Of the 2.7% inflation, about 1/2% is from food and energy, which is noisy. About 1% is from shelter inflation, which isn't really a monetary phenomenon. It's a transfer to owners of a restricted asset because of an endemic housing shortage, and most of it is imputed to homeowners, so it has little effect on discretionary cash income. That leaves about 1.2% actual, persistent, monetary inflation.

Real wages are rising by a bit more than 1% annually, and we have instituted a sort of real-estate medallion system where you have to pay the medallion owners rent or buy a medallion (in this case, called a "deed") in order to live in certain restricted cities.

So you're saying there is no need for concern because real wages are rising (modestly) for those wealthy enough to already own real estate in restricted cities? Pretty sure that attitude is what gets the revolution started.

I'm saying there is nothing unusual about wage growth. Its doing fine. Buy we should be concerned about the housing shortage.

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Why is the data limited to production and non-supervisory employees? Production employees are only a small fraction of the overall workforce, and many or even most office workers could count as “supervisory” depending on how you define it.

The stagnation in wages is best explained by low productivity growth though. The other typical explanations don’t hold water when you look at other countries. Labor market slack doesn’t explain it because Japan has the tightest labor market in the world and much worse wage growth than the US. And weak unions or labor regulations don’t explain it because Western European countries have the strongest unions and labor regulations in the world and worse wage growth than the US. The only countries that are experiencing better wage growth than the US are developing countries, which also have high productivity growth as they catch up to the economic frontier.

Indeed it's not likely only one thing.

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Larry Summers credits economists (including Summers) for overcoming the Philips Curve dilemma (i.e., lower unemployment correlates with higher inflation). It's quite a trick to have rising asset prices (owners of assets appreciate it) and flat wages (employers appreciate it); employees, not so much. But it comes with a cost: lower economic growth. Trump promised that his tax cut would produce higher wages. Not. So GDP is up but wages are flat, does that mean the labor share is falling while the capital share is rising? That's what Noah Smith has concluded. But contrarians have sliced the pie into more pieces than just labor and capital and concluded that it's all too complex to make generalizations like the labor share is falling and the capital share is rising. The most creative contrarians claim it's the taxes share that's rising, but that's hard to square with trillion dollar tax cuts, or that it's the self-employment share that is rising (the gig economy, etc.), but that's hard to square with rising inequality. It's hidden in there some where, and economists will eventually see it. Of course, economists being human, and given the human capacity for confirmation bias, I suspect they will see what they are looking for.

There's actually a good point buried in this post.

"Trump promised that his tax cut would produce higher wages. Not."

It ignores the fact that this was only one subgroup of wages. However, most potential Trump voters do expect to see economic gains. So, if wages remain stagnant, it will undermine some of the bump Trump would get from an otherwise good economy.

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Another point, re entrants to labor market likely to come in on low end, depressing average calculations possibly even if existing participants rising slightly.

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After looking into the press release, I'm not sure this isn't cherry picking to some degree. Here's the full paragraph the sentence was extracted from:

"From May 2017 to May 2018, real average hourly earnings decreased 0.1 percent, seasonally adjusted.
The decrease in real average hourly earnings combined with a 0.6-percent increase in the average workweek resulted in a 0.5-percent increase in real average weekly earnings over this period. "

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Employment cost index continues to rise https://www.bls.gov/news.release/eci.t01.htm

So: employers are paying more (as we would expect with rising marginal productivity of labor) but workers are receiving less of that in the form of wages. This is not my area of expertise, and I would be happy to hear corrections or more nuanced explanations.

howard, I'm glad you brought this point up. I typically watch and observe the comments on this website, but felt compelled to offer my experience in an effort to bolster your point. Our small business does an excellent job controlling wage growth by targeting 1-2% wage raises, per annum. No more, no less. However, we have very ability to control other employment related costs such as healthcare insurance and general liability/worker's compensation insurance. These are the employment costs that are getting out of hand -- we saw healthcare insurance increase by almost 10% last year, and that was after we left our previous provider that was insisting on a 20% increase. So on the whole, our employment costs have increased dramatically in the last 5 years, though wages themselves are only a small contributor to that.

People aren't talking about it enough, but insurance is becoming a huge drag on small- and medium-sized businesses' viability in this country. Hell, when it takes Amazon, JPMorgan, and Berkshire joining forces to be able to get a fair deal for their employees' healthcare, how do you think the rest of us smaller guys feel? We have to eat whatever increase we get every single year.

This is what single-payer insurance is supposed to fix. Even Obamacare was trying.

Oh, yes, I completely agree on single-payer insurance being the solution. Unfortunately, Obamacare was not enough and did nothing for our business in mitigating spiraling healthcare insurance. Not saying the intent wasn't there with Obamacare, like you said it tried, but in actuality we never saw the results promised -- it only continued to get worse. At this point, I believe it needs to be all or nothing when it comes to single-payer healthcare on a federal level, or else small and medium businesses within low margin industries are going to become insolvent soon given these worsening insurance headwinds.

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Theory: as more less productive people leave unemployment or enter the workforce to get new jobs, it brings down the average productivity. Also new hires are likely to be less productive than old hires, especially if their skills have eroded from long-term unemployment.

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