Why Wages Aren’t Rising as the Economy Recovers

It’s been repeated time and time again regarding the slow but steady recovery the job market has been experiencing. It seems like each piece of great news had been watered down and tampered with a note of caution citing that although the economy has been moving the right direction, it’s moving frustratingly slow. The bottom line is that unemployment is still higher than it should be even though employers are creating jobs in some sectors. And wages aren’t rising as fast as they should because of the slow recovery. Employers have had to keep wages stagnate in case another economic downturn occurred. If they raise wages too soon they may have to lay people off which is terrible for morale. Besides just waiting for employers to dish out raises, some are simply asking for them according to some surveys. As a whole, however, wages aren’t rising as they should and here a few possible reasons why.

Already at the Top

There is a high percentage of people who are staying employed for longer periods because they’re either saving money for retirement or they have debt that needs to be taken care of before throwing in the towel. So it’s likely these individuals have arrived at the top tier of how much their profession pays.

Don’t Over Do it

There’s a high percentage of employees who get a pay raise at least once a year. However, with a slow economy, consumer spending is down which means productivity has had to decrease to avoid a surplus in supply. This can limit the amount of profitability a company receives which, in turn, limits their capability to increase pay.

No Where Else to Go

Of course, with jobs scarce, it’s not that likely employees are going to be able to find work elsewhere with better pay. In a good economy where jobs are plentiful, if someone isn’t happy with the pay they are receiving from an employer, they can simply search for a new job with better pay and benefits. That is not the case in an economy that’s slowly recovering like this one.

The Type of Jobs Being Created

According to a New York Times article, the jobs that are being created are low-paying jobs. That sort of knocks the excitement of a lowering unemployment rate in addition to those simply dropping out of the labor market altogether so that they can’t be counted for the statistic. Fast food restaurants and strip malls that are keeping the unemployment rate low aren’t going to do much to increase the overall pay Americans are getting.