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Does ageing explain America’s disappointing wage growth?

Lafayette

Lafayette

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From the Economist (Aug. 2017): Does ageing explain America’s disappointing wage growth?



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WHEN America’s unemployment was last as low as it has been recently, in early 2007, wages were growing by about 3.5% a year. Today wage growth seems stuck at about 2.5%. This puzzles economists. Some say the labour market is less healthy than the jobless rate suggests; others point to weak productivity growth or low inflation expectations. The latest idea is to blame retiring baby-boomers.

The thinking goes as follows. The average worker gains skills and seniority, and hence higher pay, over time. When he retires, his high-paying job will vanish unless a similarly-seasoned worker is waiting in the wings. A flurry of retirements could therefore put downward pressure on average wages, however well the economy does. The first baby-boomers began to hit retirement age around 2007, just as the financial crisis started. And since 2010, the first full year of the recovery, the number of middle-aged workers has shrunk considerably. They have been replaced partly by lower-earning youngsters (see chart above).

Researchers at the Federal Reserve Bank of San Francisco think this could explain disappointing wage growth over that period. They split earnings growth into the portion caused by pay rises, and the portion caused by people joining or leaving the workforce. From mid-2012 until recently, changes to labour-force composition have reduced income growth by about two percentage points. By comparison, in early 2007 the drag was less than one percentage point. For those in work continuously, pay is rising just as fast as it was then.
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Whether we humans are being replaced by advanced robotic machines depends upon the nature of our work. As I never cease to underline, the Bureau of Labor Statistics reports that total manufacturing employment at "Goods-producing, excluding agriculture" remains at only 12% of the total. (See here.)

So the phenomenon is restricted to only that sector of employment. Elsewhere, however, we should be looking at what the Internet is doing to on-the-floor employment in commerce. Shopping malls are reported to be giving way to Internet-commerce.

But does that mean that jobs are being lost if they are recuperated at Internet-commerce companies? Methinks not. The Employment-to-population Ratio is increasing though it has a way to go to get back to pre-2008 levels (see here) ...
 
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Lafayette said:
From the Economist (Aug. 2017): Does ageing explain America’s disappointing wage growth?



- excerpt:
20170826_FNC515.png




Whether we humans are being replaced by advanced robotic machines depends upon the nature of our work. As I never cease to underline, the Bureau of Labor Statistics reports that total manufacturing employment at "Goods-producing, excluding agriculture" remains at only 12% of the total. (See here.)

So the phenomenon is restricted to only that sector of employment. Elsewhere, however, we should be looking at what the Internet is doing to on-the-floor employment in commerce. Shopping malls are reported to be giving way to Internet-commerce.

But does that mean that jobs are being lost if they are recuperated at Internet-commerce companies? Methinks not. The Employment-to-population Ratio is increasing though it has a way to go to get back to pre-2008 levels (see here) ...
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Even discussing the employment-to-population ratio numbers just as a level of ignorance that's incredible
 
katzgar said:
Even discussing the employment-to-population ratio numbers just as a level of ignorance that's incredible
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Consider me ignorant and tell me why.
 
katzgar said:
the drop in the ratio is largely due to factors like people going back to school and boomers retiring nothing more
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I agree about boomers ageing out of the work force but most of the people going back to school should be under 25 and not part of the sample. I would think that boomers leaving the job market would benefit those remaining since demand for labor should increase.
 
bearpoker said:
The question is: with labor in high demand, why aren't wages rising faster?
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My guess? A combination of globalism and falling union membership.
 
katzgar said:
Even discussing the employment-to-population ratio numbers just as a level of ignorance that's incredible
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If so, the ignorance is yours.

This IS, after all, an Economics Forum. The subject I posted is taken from the Economist.

Just where do you think you are ... ?
 
bearpoker said:
The question is: with labor in high demand, why aren't wages rising faster?
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Because the supply of laborers is ample.

It's the Employment-to-population Ratio that shows how many were once not looking for a job are now in fact finding one. See here:
latest_numbers_LNS12300000_2007_2017_all_period_M07_data.gif


That graphic means that more and more of total Employment is being attracted into the workforce at existing levels of remuneration. Once that curve gets back up to 63% of total employment, only then will we say wages rise significantly. (But don't count on it any time soon. It'll take another five years.)

By then, of course, it will start to trigger inflation as employment hits its upper limit.

Which is the other edge of a double-sided sword that is any market-economy ...

PS: All this could have been avoided in 2010 when the Replicants took back the HofR but refused Obama any Stimulus Spending. So, that E-to-p Ratio remained constant. With high unemployment and people churning their thumbs wondering where all the jobs went. (Those un- and semi-skilled jobs went offshore, and they aint comin' back.)

What will come back are more higher-skilled jobs that require advanced Tertiary-level Degrees ...
 
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bearpoker said:
The question is: with labor in high demand, why aren't wages rising faster?
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A mismatch in job seeker job skills vs the jobs requirements.

Second a lot of jobs have in the US have to be compared with the cost of that job being done elsewhere, either in other parts of the US or other parts of the world. This was seen in auto factories being created in the US south east from the 80's until around 2010. The pay for auto factory jobs in the South East were and are lower than the same job in the Midwest like Mich. But they are higher than the wages in Mexico. Mexico over the last 8 years or so has seen a significant boost in the factories being built
 
I always wonder how much rising health insurance premiums eat into wages. Could explain why wage growth has slowed so much.
 
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