Wages are Going up for the Bottom 25%
With unemployment falling to half-century lows, gains for rank-and-file workers have accelerated. A smaller supply of workers means increased poaching and minimum-wage increases have helped those nearer to the bottom of the pay scale.
Pay for the bottom 25% of wage earners rose 4.5% in November from a year earlier, according to the Federal Reserve Bank of Atlanta. Wages for the top 25% of earners rose 2.9%. Similarly, the Atlanta Fed found wages for low-skilled workers have accelerated since early 2018.
“A strong labor market makes the bargaining power of lower-paid workers more like the labor market higher-wage workers experience during good times and bad,” Nick Bunker, economist with job search site Indeed.com, said.
Labor Department data show average hourly earnings for production and nonsupervisory workers in the private sector were up 3.7% in November from a year earlier (compared to the 3.1% advance for all employees) This would imply managers and other nonproduction workers saw a 1.6% wage increase in the past year.
Nonsupervisory workers earned an average of $23.83 an hour in November according to the Labor Department; managers earned about twice that rate.
“There’s been more job hopping and firms are having a hard time finding employees,” said Michael Horrigan, president of the W.E. Upjohn Institute for Employment Research. He was previously associate commissioner with the Bureau of Labor Statistics.
The unemployment rate for high school dropouts fell to 5.3% last month from 7.8% three years earlier. The rate for college grads is down to 2% from 2.4% in November 2016.
Another factor supporting the lowest-paid workers is a wave of minimum-wage increases. Twenty-nine states have increased minimum wages above the federal level, and 21 of those will lift the level again in 2020. For example, the minimum wage will increase 12.5% in Washington state, to $13.50 an hour. However, pay is also increasing for low-skilled work in states such as Georgia, where the minimum wage remains at the federal level of $7.25 an hour.
“They realize they’re losing their talent to their neighbors,” Mr. Watson said. “Another company will call and offer the worker 50 cents more an hour—and they’ll leave immediately.”