Friday, February 6, 2015

2015 Picks Up Employment Steam- Will You Will Be Getting a Raise?

The American economy is picking up steam and zooming forward. According to the Bureau of Labor Statistics the economy added 257,000 non-farm payroll positions in January (1). U.S. Labor Secretary Thomas E. Perez characterizes this employment increase as, "2015 is picking up right where 2014 left off – with strong, steady, sustained job growth that is leading a dynamic recovery" (2).  Great news that could have an impact on future wages but who will be getting a raise depends on market position.

Even though the unemployment creaked up from 5.6 to 5.7% much of this has been attributed to people jumping back into the job market. When people are not searching for work their numbers are not counted. However, as they engage back in their searches and applying the numbers become more accurate as previously unaccounted for people rejoin the statistical measurement. The value of labor is determined in part by the availability of labor; lower unemployment numbers are good.

The jobless rate is different based upon the demographics of the person. Jobless rates for adult men (5.3 percent), teenagers (18.8 percent) adult women (5.1 percent), whites (4.9 percent), blacks (10.3 percent), Asians (4.0 percent), and Hispanics (6.7 percent). Relatively low numbers could mean slack is being soaked up by the market but it will not influence all Americans fairly until labor demand rises more.

Wages and labor supply are integrally tied together and have a long history in historical analysis. For example, a paper out of the Federal Reserve Bank of Atlanta found that wages in high-skill occupations rose dramatically while middle and lower skilled occupations stagnated (Mandelman & Zlate, 2014). Those with higher skill demands in growing industries found themselves obtaining wages raises before others.

If we break labor supply into general and specific we will find where the highest increases of wages are likely to occur.  Those who have obtained specific higher levels of skills/education in advanced industry export oriented companies will see their wages rise substantially as their market supply dwindles. Those in the middle level skill/education will see modest increase while those in low skill/education markets will be the slowest to respond. 

Wage increased are based on economic activity and meeting the needs of the labor market with employable skills. Those who have access to educational opportunities, whether they be skilled labor or degrees, will see higher wages while those who have not obtained new skills will find their wages stagnated. Before low and middle income earners see their wages increase, significant slack will need to be soaked up through increased market demand. Raising earning potential requires a level of investment in the acquisition of new skills through training, skilled trades, experience, and college education.

Mandelman, F. & Zlate, A. (2014). Offshoring, low-skilled immigration, and market polarization. Working paper series (Federal Reserve Bank of Atlanta), 28.

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