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Wages Increase – Finally

July 07, 2019

After the Great Recession, economist kept asking why aren’t the wages increasing as the economy expanded. No one really has an answer. Unemployment was low yet wages stayed constant. Perhaps employers reached a point where they couldn’t get more productivity any more from existing worker. The jury is still out on the why now phenomenon.

However, wages increased 3% over last year. Part of the explanation may be the rise in minimum wage. The Economic Policy Institute notes that in states where the minimum wage increased, low-wage workers pay checks rose 13% compared to states without a minimum wage increase. Low-wage growth in these states was only 8.4%.

According to Ernie Tredeschi, an economist at Evercore ISI, about one-quarter to one-third of the wage increase is due to increases in the minimum wage. The remainder is attributable to the tight labor market.

Many employers are having to raise wages to keep the workers they already employ from leaving for higher paying jobs.

Will this trend continue? No one really knows. According to Julia Pollak, an economist for ZipRecruiter (a job site), “You need two things. A labor market tightness and employer optimism about demand.”


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