Over the last couple of years as the economy has recovered and unemployment rates steadily dropped, workers have been asking “where’s my raise.” According to conventional notions of supply and demand, as unemployment rates fall, wages go up as companies bid for increasingly scarce workers. However, a recent Wall Street Journal analysis of data from the Labor Department showed that there are constraints on worker pay, including companies tapping pools of workers who do not appear on U.S. unemployment tallies, the scale of overseas competition that makes companies reluctant to raise pay, slow growth in productivity, and lingering concerns from the recession.
However, wages are starting to move. The latest figures from the United States Bureau of Labor Statistics (BLS) show that wages are starting to trend upward. In May 2015, average hourly earnings grew by 8 cents, which is more than the 3-cent growth in April 2015. Over the past 12 months, real average hourly earnings have increased 2.3 percent. According to Michael Strain, the deputy director of economic policy studies at the American Enterprise Institute, as the unemployment rate declines, the labor market will tighten and businesses will have to raise wages.
Another possible reason for the economy finally seeing wage growth is the bump in minimum wage. Major companies such as Walmart and McDonald’s have committed to raising their minimum wages this year, while cities have announced plans or approved minimum wage hikes as well.
As the job market starts to normalize, PayScale, a compensation research firm, identified industries where workers have the best and worst likelihood of getting a raise in 2015. Among the best industries for a raise are professional, scientific, and technical services, retail trade, and finance and insurance. Among the worst industries for a raise are health care, real estate, and utilities. PayScale notes that these numbers are averages and do not apply to everybody in a given field. Workers with the skills most in demand generally earn the biggest raises and highest pay in any field, while low-skill workers are likely to remain at a wage plateau even if the industry is growing.