So why aren’t wages responding to the tightening job market?

January 12th, 2015 at 8:32 am

Because it’s not as tight as that 5.6% unemployment rate would lead you to believe. Over at PostEverything. I think figure 2 of the piece, below, tells an important part of the story, but you be the judge.

Light posting this week and not because I’m off to Cuba to walk the beaches before they become resorts. I’m trying to make some serious headway on my book “The Reconnection Agenda: Reuniting Growth and Broadly Shared Prosperity.”


Source: see data note in WaPo piece.

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4 comments in reply to "So why aren’t wages responding to the tightening job market?"

  1. Smith says:

    Since the implication of a slack job market is that the government should assist, let me state the obvious. The way for the government to create more jobs is for the government to create more jobs. It is not for the government to subsidize wages and therefore reward companies paying substandard wages, enrich the 1% with increased corporate profits, and punish companies paying fair wages by putting them at a competitive disadvantage, while at the same time also freezing everyone’s current wage and lowering entry level starting salaries. A truly lose lose situation for the middle class and the working class heroes. If the administration doesn’t want to or can’t help states rehire teachers, or fund needed infrastructure projects, expand education, and restore cuts to government research, and regulatory work that protects the environment, and our food supply, then first do no harm. Don’t bribe corporations to do what they’d do anyway, hire more workers if they are needed. The corporations are already sitting on record amounts of cash. They borrow to fund stock buy backs, while profits sit overseas to avoid taxation. If congress won’t restore cuts, don’t give in to their blackmail. Instead, make the case for changing the makeup of congress. There is no need for appeasement. Gridlock yes, appeasement no.

  2. Randall Conadt says:

    Someone, somewhere, sometime, and somehow, needs to address the myth about not taxing the “job creators”. The myth implies that, at the end of the year, a profitable company takes its profits and (if the tax burden isn’t to high) decides to hire some folks because, you know, they have this extra money just sitting there. This is simply not reality. If a company needs or wants to hire people, then they do so during the year in hopes that the new hire will contribute to the company and to its success. As an owner/employer you then pay that person a salary, and benefits, and you might supply them with a desk, or a computer, or whatever they need to perform in their new job. It is by paying those newly incurred expenses that one reduces one’s taxable income, since these are all business expenses and fully deductible at year end. If the person or persons hired are amazingly successful, they may increase your profits and taxes by more than was spent in the hiring process. OH MY GOD!?! Is it so horrible to think that a company may have hired people and, together, they were so successful that now the profits have grown so much that the taxes due actually rise?

    I don’t understand how it became un-American to pay the taxes that keep America running. I don’t understand why being hugely successful to a degree where one must pay more in taxes is a bad thing. Frankly, it’s a problem most of us wish we had.

    • Vitya says:

      I think it’s because “tax cuts let investors create job” flatters the right people. If you’re a media big shot, you’re pulling in good money and investing a good part of it. The tax cuts let you invest more, and that must create jobs, right? Why go to the trouble of investigating the issue when your peer group already agrees with you?

  3. Larry Signor says:

    The most obvious answer is the unemployment rate is not the unemployment rate. We have an inherent data measurement error which misleads the analytics.