I suppose that if you look at the shortest possible time frame, you can make a respectable case that wages in America are finally showing or soon will show long-awaited signs of life – as so many analysts keep contending. Trouble is, that’s the only way that the case for wage pickup can be made – and even those short-run data are problematic.
As always, the monthly jobs report released by the Labor Department last Friday also provided the latest wage (December) figures for the American workforce before adjusting for inflation. (The inflation-adjusted data is scheduled to come out on the 20th.) Although the figure will be revised, Labor reported that current dollar wages for the entire private sector rose 2.52 percent year-on-year. As the graph below shows, that was indeed the best such improvement since these data began to be tracked (which is only since 2009).
Yet as several observers have pointed out, this December-to-December comparison looks to be unsustainably juiced by a terrible wage performance in December, 2014 – which made the December, 2015 rise look that much bigger. For what it’s worth, few expect these easy comparisons to continue.
It’s also important to remember that sizable minimum wage increases kicked in last year in 23 states and the District of Columbia. So a fair portion of the wage advance had nothing to do with the natural strength of U.S. labor markets, and everything to with politicians’ decisions.
Longer-term data is available for workers whose jobs are described as “non-supervisory” and “production.” Think of this as the blue-collar workforce – i.e., those workers who depend on wages rather than salaries, bonuses, and other forms of non-benefits pay. (Often their benefits aren’t so great, either, but that’s another story.) And here’s where the wage recovery story breaks down.
Here’s how blue-collar wages have changed year-on-year before inflation since 2009-10 – the maximum time-frame available for the entire private sector.
Obviously, these workers have enjoyed much less progress than their white-collar counterparts, even though their 2.41 percent 2014-15 increase was also their best since 2009-10.
Go back further, though, with blue-collar wages, and you see how feebly these non-supervisory wages have been growing for literally decades. The graph below shows the annual percentage increases since 1980. And yes, you’re permitted to react with a “Yuck”!
In other words, there’s been no acceleration of wage inflation since the late-1980s.
At the same time, as I’ve written repeatedly, the most valid way to judge economic trends over time is not according to completely arbitrary, economically meaningless units like calendar years, but according to periods of economic expansion and contraction. So do those numbers provide any support for the wage inflation thesis? Anything but. Here’s how they look for non-supervisory workers for all the economic recoveries since Ronald Reagan became president.
“Reagan recovery,” Dec. 1982-June 1990 (c. 7.5 years) +27.18%
“Clinton recovery,” Apr. 1991-Feb. 2001 (c. 10 years) +37.38%
“George W. Bush recovery,” Dec. 2001 to Nov. 2007 (c. 6 years) +19.59%
“Obama recovery,” June 2009-present (6.5 yeaes) +14.27%
They demonstrate that although the current expansion isn’t yet especially long by recent standards, its blue-collar wage increases have been by far the weakest. In other words, if there’s anything that’s increasingly inflating about the American wage scene, it’s claims or accelerating wage inflation.