For the first time in years Americans in the lowest-paid paid group of earners are seeing their incomes rise faster than other groups. Cashiers and people in the service sector are at long last beginning to do better. The Wall Street Journal reports:
The shift for low-income workers—including restaurant workers and retail cashiers—who make about $10.75 an hour, is a sign that a tightening labor market is delivering better pay to workers who largely haven’t shared in gains since the recession ended eight years ago, according to economists and government data. Last quarter marked the first time since late 2010 that this earning group’s gains outpaced all others.
Usual weekly earnings for workers ages 25 and older at the bottom of the pay scale rose 3.4% from a year earlier in the second quarter, according to analysis of newly released Labor Department data. That was stronger than median gain of 3.2% and the 3.1% improvement for workers at the 90th percentile, who earn more than nine in 10 other Americans. The percentage increases are based on a four-quarter average of earnings, to smooth out volatility in the data.
Throughout much of the economic expansion that began in mid-2009, wage gains for the lowest-earning Americans trailed behind median wage gains and those of the highest earners. During 2015, top wage earners received about a 4% annual increase, while the annual raise for those in the bottom 10th percentile was near 1%.
What 's behind this shift? In a nutshell: a lower unemployment rate. The Journal explains:
The recent improvement for low earners coincides with a downward trend in the unemployment rate, which stood at 4.4% last month, versus 4.9% a year earlier. The unemployment rate for those with less than a high-school education—who make up much of the low-wage workforce—fell even more sharply, to 6.4% last month from 7.5% a year earlier. Tighter labor supply in theory should push up wages.
The hikes in minimum wages for several states may be a factor, but raising the minimum wage to unrealistic levels leads to layoffs and the inability to hire entry level workers. The shift may also reflect that some middle-income workers are faring less well because of mechanization.
Still, it is worth noting that, after eight years of lip service to improving the lot less well off Americans in the previous administration, they are finally faring a bit better in a tightening labor market.