During the last election, politicians and pundits made a lot of hay trying to argue that the labor market was somehow broken and not functioning like it always has. First, the argument was that we were having a "jobless recovery." Then, when employment took off, the argument was that wages were somehow broken and trailing productivity. Whether this was a secret plot by GWB or by Wal-Mart was never quite made clear.
Well, it turns out that the job market works like it always has. In a cyclical economic recovery, employment and productivity gains always precede wage gains. Wages tend to go up late in the cycle, after excess available labor is soaked up:
After four years in which pay failed to keep pace with price
increases, wages for most American workers have begun rising
significantly faster than inflation.
With energy prices
now sharply lower than a few months ago and the improving job market
forcing employers to offer higher raises, the buying power of American
workers is now rising at the fastest rate since the economic boom of
the late 1990s.
The average hourly wage for workers below
management level "” everyone from school bus drivers to stockbrokers "”
rose 2.8 percent from October 2005 to October of this year, after being
adjusted for inflation, according to the Bureau of Labor Statistics. Only a year ago, it was falling by 1.5 percent.
I am not one to really accept the "active bias in media" argument (I believe in a more passive bias based on reporters failing to apply skepticism to stories that fit their view of the world). However, the bias crowd predicted that reported economic news would suddenly improve after the election and that certainly seems to be the case.
One final note - be careful of folks who are claiming that wages have not kept up with inflation for years. Make sure they are using "total compensation, including benefits" and not just "wages." The former number has consistently outpaced inflation. These numbers diverge because the portion of compensation paid out in non-cash benefits has been growing as a percent of total compensation.