Americans are getting their best pay raise in years as Obama leaves office
It keeps happening. After, a long period of stagnant wages, U.S. paychecks are looking peppier.
Wages for all employees rose 2.9 percent in 2016, according to the December jobs report released today by the U.S. Bureau of Labor Statistics, as the economy produced 156,000 new jobs in the month. That’s the 75th straight month of positive job growth, the longest such stretch on record.
While the wage gain wasn’t massive. (It was probably less than 1 percent if you factor in inflation, which nobody, except economists, does.) Still, the non-inflation adjusted 2.9 percent increase in wages in December is the biggest jump in more than seven years. Yay.
If you think of the economy in terms of the sterile interplay of supply and demand, the rise in wages is a logical outgrowth of the improvement in the U.S. job market in recent years.
Since the unemployment rate peaked at 10 percent in October 2009, unemployment has clawed slowly lower. It was 4.7 percent in December.
As unemployment declines, it effectively shrinks the supply of labor. Which, all else equal, raises the price of labor. The price of labor is what we call “wages.”
But if there’s one good thing about the election of Donald Trump as the next president of the United States, it’s that it has put an end to the notion that economics is a sterile interplay of supply and demand. As Trump shows with every micromanaging tweet castigating some company for a capital expenditure decision, economics is always intertwined with politics.
And when it comes to wage economics. Politics matters, a lot. In fact, there’s been a broad-based, bipartisan political push in over the last year to raise wages. In 2016, minimum wages increased for 16 states. On Election Day, four states—including hard-right states like Arizona—voted to boost the minimum wage. And this year, some 19 states boosted minimum wages as of Jan. 1, raising the paycheck of millions of workers.
The federal minimum wage hasn’t risen since 2009. But under Obama, the federal government can pull a lot of other levers to help nudge pay upwards. For instance in 2014, the Obama administration raised the minimum wage for federal government contractors to $10.10. Such government pay increases can be important in setting baseline pay elsewhere. A federal judge recently blocked a separate Obama administration effort to boost overtime pay.
It’s impossible to say how much political nudging and economic improvement is responsible for raising wages. The important thing is that it’s happening. For instance Wal-mart boosted pay for over a 1 million of its workers in 2016. Target also boosted its pay levels. As did JPMorgan Chase.
Nobody really knows what Trump’s position on *the minimum wage* is. His statements on the topic have been the usual, mind-fogging mix of vagueness and inconsistency.
But it’s fair to say that the incoming Trump administration—chock-a-block with billionaires—will have a fairly different view toward wage growth than the Obama administration.