Unemployment in the U.S. Is Falling, So Why Isn’t Pay Rising?
Well, if Labor is a function of supply and demand, then it tells us that supply of willing labor is happy to work <i>at all</i>, even if wages aren&#x27;t rising. Turned around, in a market where people are desperate for work, corporations have no incentive to raise wages.<p>Still, this is overly simplistic. The problem in my mind is that unemployment rate is reflective only of those looking for work, and labor force participation rate is low. <a href="https:&#x2F;&#x2F;data.bls.gov&#x2F;timeseries&#x2F;LNS11300000" rel="nofollow">https:&#x2F;&#x2F;data.bls.gov&#x2F;timeseries&#x2F;LNS11300000</a><p>The result is that as employers&#x27; needs for people rise, they can siphon off those looking for work at current market rates, and then, (maybe), people from the non-participating group can gradually replenish the unemployed pool.<p><i></i>*<p>My own experience tells me that there is limited wage stagnation in modern high-skill jobs and that there is low unemployment there as well. In that market, wages seem to be rising, and talent seems to be scarce. (Read some recent earnings transcripts from companies like CDI that do staffing in these industries.)<p>On the lower or outdated skill market, though, companies have more people to choose from, likely lower transaction costs (non-benefits&#x2F;salary jobs enable more employee turnover), and also slimmer margins. Why pay any more than they absolutely have to?<p>Where this becomes a real problem, though is that low-skill jobs are not even keeping place with inflation. As a result, real earning potential in many of these jobs is through the floor.<p>Personally, I look to the huge run in returns on capital in the equities market over the last few years as the primary cause. In many cases, historically low interest rates and fast growing equities prices have diverted efforts from business growth and innovations in the &quot;core&quot; to financial growth and innovations for the balance sheet. This <i>will</i> revert, at some point. But, as we have seen elsewhere in HN over the last few days, there is a large entrenched &quot;Business Class&quot; that knows far more about financial optimization and asset allocation than they do about the businesses that they actually run.