No. 2. Productivity gains: This is a long-standing conundrum that won’t be settled here, but rising productivity hasn't benefited workers very much. Despite producing more goods and services, labor's share of the total pie -- which has been falling for at least two decades -- hasn't gotten back to where it was before the financial crisis.
No. 3. Profits: Goldman Sachs has described rising labor costs as a risk “to some U.S. companies already facing trade-related tensions, limited pricing power.” That might explain why companies have been so wary of granting raises that can be almost impossible to reverse if the economy slows. Los Angeles Times writer Michael Hiltzik is even more specific: He blames management short-termism and an excessive focus on profits and share prices.
No. 4. Demographics: As my Bloomberg Opinion colleague Michael Strain has noted, “the composition of the work force is changing in ways that affect pay.” Older, better-paid workers are retiring, and more, young workers are accepting lower-wage jobs in services industries, such as restaurants and bars as the chart below shows. This skews the average wage gain.
No. 5. Real Wages: As the chart below shows, even when wages finally do tick up, they tend to not keep up with inflation. This means that workers are merely treading water despite rising wages. If you thought stagnant wages created populist discontent before, wait until people figure out that their raises do nothing to raise living standards.
Here's how I see things when all these factor are taken into account. The negatives are mostly older, longer-term trends, while the positives are all fairly recent developments that will get stronger as the economy chugs ahead. Based on that, my expectation is that positive wage pressures should become more evident during the next several quarters as employers have no choice but to pay more to attract and keep workers.
This column was provided by Bloomberg News.