November 18, 2019
The Wall Street Journal had a piece last week that purported to explain why wage growth remains weak. The explanation is that people are more reluctant to switch jobs than they had been in the past.
While this is a concern (I have often noted the surprisingly low quit rate, given an unemployment rate of less than 4.0 percent), real wage growth is roughly where we might expect given the extraordinarily low productivity growth of recent years. The real average hourly wage has risen a bit more than 1.1 percent annually over the last five years. This is a period in which economy-wide productivity growth has been around 0.7 percent annually. (Economy-wide productivity is an unpublished series that the Bureau of Labor Statistics produces annually. It is the appropriate basis for comparison with economy-wide wage growth.)
It would be good to see a somewhat larger gap between wage growth and productivity, given how much ground workers lost in the Great Recession, but this pace of real wage seems pretty reasonable give the slow rate of productivity growth. The extraordinarily weak productivity growth of recent years is striking, but that is another story. It also is completely opposite the concern raised by Andrew Yang, of mass job displacement due to extraordinarily rapid productivity growth.
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