The Reasons Why Wage Growth Seems So Slow

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As of writing the American economy is currently booming. All across the world, the economic trends are positive overall. Companies are taking home massive amounts of money and CEOs are being awarded giant bonuses, so why does it seem like these riches aren’t making it to the common person?

Wage growth has been stagnant for quite some time. While the American workforce has helped to create remarkable growth for American companies they’ve been rewarded with wages that grow at just over the rate of inflation. Add in the rising costs of many goods and services and many people feel like they’re falling behind. So what’s going on?

To begin with, it’s important to note that things aren’t bad for everyone. Wage growth isn’t bad in sectors where workers can be picky. Any industry that requires skilled workers that are hard to find is forced to pay better than average wages. Still, median wage growth is low because many workers are in fields where the labor supply outstrips the demand.

To help dig in deeper to the situation an economist with the International Monetary Fund named Yasser Abdih released a statement in conjunction with a chart showing the latest wage figures. Abdih’s statement laid out two reasons for the unimpressive rate of wage growth, slow productivity growth and the declining slice of the pie that workers take home in income.

Employers will often point to the slow growth of productivity as the reason for the slow growth of wages. The implication is that workers aren’t doing their part to earn greater wages, so why should they be paid more? But this is a highly controversial take on the situation. Productivity isn’t just about working harder, it’s about finding ways to get the most out of your assets.

The biggest leaps in productivity don’t have to do with employees working harder, they’re driven by new technology that allows workers to do more without working harder. A look at the numbers reveals that companies aren’t investing back into their companies the way they might and this is stifling productivity and

Other economists point to the simple fact that employers don’t usually want to pay any more than they have to. Companies will almost always try to maximize profits by minimizing expenses, and wages are a major expense. If an employer can avoid a pay raise, they usually will, and in recent decades workers haven’t been able to force employers to make significant pay increases.

Traditionally unions have allowed workers to band together to demand more from employers without appealing to the government. But a shift away from unions has occurred politically and culturally. While there are definitely pros and cons to unions, it’s hard to argue that the disappearance of unions has helped strengthen the position of workers.

Individual workers aren’t in a position to make demands in most fields, and most companies aren’t going to increase wages more than they have to. These two simple facts have a lot of American workers in a bind that doesn’t seem like it will loosen up any time soon.

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