Sunday , February 25 2018
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Links, High vs. Low Wages

Summary:
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

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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.

Links, High vs. Low Wages

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.

Jared Bernstein
Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, Executive Director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute, and between 1995 and 1996, he held the post of Deputy Chief Economist at the U.S. Department of Labor.

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