What is Behind Wage Stagnation?

Last time, we wrote about the positive impact on wages created by unions, even for non-union workers. This time, we will look at a less positive trend involving earnings.

We will start with some good news. In Ohio, as in many areas, we have reached a point where the number of available jobs exceeds the number of job seekers. This is obviously good news for job seekers and is typically bad news for employers.

Traditionally, when employers have difficulty finding new employees, wages tend to increase. It is a basic example of supply and demand. Unfortunately, this is where the bad news for workers comes in.

According to the Paychex/IHS Market Small Business Employment Watch, hourly earnings growth in June fell to a gain of 2.47%, the first time it has been below 2.5% since early 2016. Both values are below the 3% economic growth goal of the administration.

Why are workers lagging behind economic growth? Studies point to a reduced interest on the part of workers to move to a different area where jobs are more plentiful, declines in productivity in some jobs, and the people no longer looking for work. The biggest single factor they list is the decline in unionization of the workforce which limits the power to bargain for higher earnings.

One thing that is clear is employers cannot blame weak profits for stagnant wages. A study by Yardeni Research reveals operating and reported margins have doubled since 1994, at least for the S&P 500 companies. A report from Harvard Business Review states total wages account for 57% of total revenue today compared to 65% in 1975. While the US economy has expanded over the past decades, the portion earmarked for workers has declined.

It appears often the reason for wage stagnation is the refusal of some employers to pay more. Without a driving force for higher wages such as a bargaining unit, this trend is likely to continue or even worsen. Keep this in mind when considering the impact of the recent Supreme Court decision on union dues which certainly has the potential to damage unions and workers.

There is one group appears to be winning: CEO’s. CNBC reports the compensation for top executives at the 350 largest US corporations has skyrocketed, with the average CEO in 1978 earning 30 times the salary of a typical worker versus a hair-raising 271 times today.

The stagnation of wages has many impacts on the workforce, including difficulty in meeting basic needs. The National Low Income Housing Coalition and the Coalition on Homelessness and Housing in Ohio reports only 2 of the 10 most common jobs in Ohio pay enough for a worker to afford a modest two-bedroom apartment.

They reported the hourly wage a renter needs to earn to pay for a basic, two-bedroom unit is currently $15.25. The coalitions said the average Ohio renter earns $13.32 an hour, nearly $2 less than needed. Only registered nurses ($30.59) and customer-service representatives ($15.34) had median hourly wages that topped the amount needed for housing.

We wish the news was better for workers this week. We hope the need to work together cooperatively to address issues, including wages and productivity will continue to be recognized.

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About CALMC Blog

Columbus Area Labor-Management Committee is a not-for-profit organization dedicated to involving employers and employees to preserve jobs, resolve workplace issues, and promote labor-management cooperation. Visit our website at http://calmc.org
This entry was posted in CALMC, Columbus Area Labor-Management Committee, Right to Organize, Trends in Labor-Management Relations and tagged , , , , , , . Bookmark the permalink.

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