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Four Reasons Wage Growth Is Lagging Behind The Jobs Recovery

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While jobless rates have dropped, wage growth has been comparatively weak, creating a seeming paradox.

Wage Increase, More Money

Last month, the U.S. added 156,000 jobs, not a big surprise seeing as the labor market continues to tighten and unemployment dropped to lows not seen in a decade.

What was surprising was the boost in wages, the best gain since 2009. While the economy has steadily grown over the years, Americans have seen very little adjustments to their pay.

Experts provided four explanations for the disparity, according to the Wall Street Journal.

1. Different Jobs

The types of jobs being created post-crisis are different than those lost during the Great Recession. Most jobs lost were in the construction and manufacturing sectors, according to the Organization for Economic Cooperation and Development, but they’ve largely been replaced by lower-paid service jobs.

2. Weak Bargaining Power

General economic uncertainty has helped undermine labor market reforms, making it harder for workers to form unions and demand higher wages. Experts also say global competition from China has forced companies to keep wages low.

3. Lagging Pay

Economists say many firms were not able to lower wages as much as they wanted after the crisis, so instead those firms have slowed the pace of wage increases over time to make up the cost. Public sector pay is also largely contracting as governments work to balance budgets.

4. Changing Labor Force

Researchers from the Federal Reserve Bank of San Francisco said low-wage workers were disproportionately fired during the crisis, and now that they’re being hired back, their wages are pushing down the average. Adding to the imbalance, highly paid Baby Boomers are starting to retire.