October was a great month for the unemployment rate. According to government data, 214,000 jobs were added last month and unemployment moved down to 5.8%. This is great news for those who are actively seeking employment and are counted in the rankings. Those in the lowest wage rungs haven’t seen much improvement in wages.
As unemployment numbers decline it naturally soaks up the slack in the labor market. Higher skilled workers usually get the cream puff jobs while lower skilled workers will still be picking up crumbs. Typically higher skilled workers find employment faster because they are needed in penetrating growth sectors of society that rely heavily on education and specialized skills.
Lower wage service jobs and part-timers will be stuck in lower wages until slack in the market is tighten to create demand-not so easy in a global world. Some lower wage workers may find new training opportunities that help them move into higher paying employment but others may simply stay in lower wage positions unless they actively seek to improve their own skills.
Eventually wages will rise on all levels of society but inflation may eat up a higher percentage of its purchasing power. For example, people are paid more today than they were 30 years ago but their individual purchasing power has declined. It simply takes more money to live a middle class lifestyle in American today than it did in the past.
What mitigates this relationship is the cost of doing business and the productivity of the American worker. When infrastructure is strong, positive growth policies are enacted, cost of information transference is low, productivity rises, education is reasonably priced then the overall costs of business will be lower. Improving on productivity and lowering the systematic costs in society helps create new employment opportunities.