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US Job Growth Rebounds But Wages Disappoint

In June, over 220,000 jobs were added by employers to the job market. This is great news for those looking for jobs, not great for those currently employed. Wages have increased at a slower rate than predicted by Federal analysis because companies are in a hiring kick rather than reinvesting in their current employees.

Economists are hoping as the job market tightens, wages will begin to increase. But employers are not ready to take this step just yet. There are many reasons as to why employers are investing in new labor rather than increasing wages, but two are most prominent in today’s economy.

“Why don’t wages increase?”

One of the reasons why wages continue to stagnate is because workers are pushing for full-time rather than higher pay. Many employees cite “economic reasons” for keeping part-time work, not the desire to work part-time. Most workers would prefer to be promoted to full-time, rather than demand for higher wages in their current position.

The second determining factor is known as the ‘sticky wage theory”. During a recession, many companies cut costs by firing and cutting bonuses rather than lowering wages. Wages are considered “sticky” because they easily rise as the economy rises, but rarely fall if business is poor. When unemployment is high they don’t have to keep their people around; but, they also can’t afford to lose their best employees.

During the 2008 recession many people were being paid more than their employers could afford. But, these employers knew cutting wages would kill morale. They kept pay stagnant and instead fired as many employees as they could. Now that the economy has recovered, employees are back to having wages equivalent to what the company can easily afford, while maintaining a healthy level of employees. It will take time for businesses to cap out on the employees they need to hire and also afford to give their employees raises and bonuses.

This issue should resolve itself in time when the economy hits a point of stability. Until then, employees should be aware of the stagnating wages and be patient (or ask for a raise!). Unemployed people or part-time workers should take advantage of the recent job growth, however, and find the best opportunity they can to advance their careers.

To find job opportunities in your area, contact Perseverance.

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