6 Reasons That Pay Has Lagged Behind U.S. Job Growth

Average hourly earnings were 2.9 percent higher in January than a year earlier, a hopeful sign that wages might be gaining traction in a tight labor market. Their stubborn failure to do so is one of the mysteries of a recovery now in its ninth year. These are factors that may be playing a part.

article jobmarket

FEB. 1, 2018 - A collapse in the rate of union membership for private-sector employees — to 6.5 percent last year from the upper teens in the early 1980s — appears to have played a key role in holding down wages. This is partly because unions benefit workers directly: Average pay for workers represented by unions tends to be higher than for those who aren’t, even after controlling for education and other characteristics. But unions also benefit workers indirectly. In industries and regions where unions have a larger presence, pay tends to be higher for all low- and medium-wage workers, not just those represented by unions.

“If you work for a nonunion firm and your employer is worried about the possibility of a unionization drive, one way to dampen down that possibility is to pay workers at the union rate,” said Jake Rosenfeld, a sociologist at Washington University in St. Louis.

The effects are especially pronounced for men. A recent study by Mr. Rosenfeld and two colleagues estimated that wages for men employed in the private sector who are not union members would have been 5 percent higher on average — about $2,700 per year — by 2013 if unions had the same reach as in the late 1970s. (The figure excludes senior managers.) For men with only a high school diploma or less, that figure rose to nearly $3,200. NOAM SCHEIBER

Restraints on Competition

Contract restrictions, such as noncompete clauses and no-poaching agreements, that prevent workers from quitting their jobs for better ones have grown across the work force. Once reserved for highly paid, highly skilled employees like doctors and engineers, these contracts have filtered down the ladder to nurses, laborers and even retail clerks.

Virtually every study on the subject shows that these agreements reduce wages in an area, since many people get their largest raises when they leave their company or threaten to. Noncompete clauses also tend to prevent growing businesses from hiring as fast as they would like, and that can harm the overall economy by keeping talented employees from joining the higher-productivity companies that move business forward.

In many fields, a similar effect has been produced simply by the consolidation of local businesses, particularly outside major cities — areas where President Trump’s campaign tapped into economic frustrations. A recent study found that wages fell when fewer employers in a geographic area listed most of the open jobs in an occupation. CONOR DOUGHERTY

article jobmarket02


Read more: www.nytimes.com

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