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Tuesday, February 6, 2018

Links, High vs. Low Wages

Links, High vs. Low Wages // Jared Bernstein | On the Economy

The stock market opened way down, continuing last Friday's selloff, though it has climbed back since the open–implying the return of volatility–as skittish investors continue to fear the sequence I describe in this AM's WaPo: tight labor market, wage pressures, higher interest rates, inflation, lower profit margins. Underneath these swings is an unsustainable, inequitable economic model with serious political implications.

BTW, in discussing last Friday's 2.9% wage pop–which I tried to put in perspective here (Don't Fear Wage Growth! Embrace It!)–many of us noted that the wage gains of the 80% of the workforce that's blue-collar production workers or non-mangers in service jobs went up only 2.4% (call this the PNS wage, for production, non-supervisory). Well, given that we know the average private sector wage, the PNS wage, as well as PNS employment, we can back out the white-collar (WC) wage. (Caveat: I once asked BLS is they viewed this as kosher and they didn't say 'yes.' Nor did they say 'no' or explain why not. At any rate, it's gotta be ballpark, I think.)

Over the past year, here are the three rates of nominal wage growth:

All: 2.9%
PNS: 2.4%
WC: 3.9%

It's a noisy series and I'd want to see other evidence before concluding there's much here, but the figure below shows the ratio of the backed-out WC wage to the PNS wage. It's been growing lately and spiked last month, implying rising wage inequality.

Source: BLS, my calculations.

Wage inequality was already on my watch list, of course, but this is worth keeping on eye on. See this WSJ piece for more sectoral detail.


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