Thread by @eliselgould

Jobs Day Tomorrow! In this preview post for jobs day, I review some reasons that do NOT explain slower wage growth, then discuss some far more compelling explanations. 1/n
epi.org/blog/what-to-w… @EconomicPolicy

Dispelling a couple myths:
1. It is NOT because log wage jobs are being added at a disproportionate rate. 2/n
epi.org/blog/why-is-wa… @EconomicPolicy

Dispelling more myths as to why wage growth is slower than expected:
2. It is NOT because workers do not having the skills employers need. In fact, that argument has the logic backwards. They should raise wages in order to attract qualified workers. 3/n
epi.org/blog/why-is-re…

Myths on slow wage growth:
3. If there was a credential shortage, we’d expect faster wage growth among those with more credentials, which has also not been happening in the past couple of years. 4/n
epi.org/blog/average-w… @EconomicPolicy

Why is wage growth slower than expected? One reason why employers may not feel compelled as of yet to raise wages is that the unemployment rate is overstating the strength of the labor market. 5/n
epi.org/blog/what-to-w… @EconomicPolicy

Leverage is the key factor here. In a recent address, Alan Krueger summarized some of the ways workers leverage vis-a-vis their employers to negotiate for better wages has been reduced. It’s short and well worth a full read. 6/n
kansascityfed.org/~/media/files/… (pdf)

In his concise and incisive address, @Alan_Krueger discusses several ways in which employers’ disproportionate power to set wages have historically been counterbalanced by forces that boosted workers’ leverage. 7/n
kansascityfed.org/~/media/files/…

Some examples are the erosion of labor standards, the decline of collective bargaining, and an explosion of practices that augment employer’s power at the expense of worker’s bargaining power (e.g. non-competes, non-poaching agreements). 8/n
@Alan_Krueger

So, where does that take us? It’s going to take an even tighter labor market to turn out the gains in wages for most workers. But, it’s well worth the patience in terms of the boost to low- and moderate-wage workers + the narrowing of employment gaps. 9/n
epi.org/publication/th…

While I'm on the topic of wage growth, I've got a few words about the latest #CEA report on wage measurement. For one, I think it’s really important to note that the benchmark for strong wage growth has never been zero.
10/n

Two, changing the metric for one month without taking a historical look with that same metric is sort of like moving the chains and the goal posts in the same direction at the same time. It doesn’t tell us how healthy the economy is, or the affect of Trump-era policies.
11/n

Applying the same adjustments the CEA makes for the past year’s wage growth back in time would likely make the past year’s growth look even weaker than previous periods (e.g. non-wage compensation moved considerably faster than wages in prior years).
12/n

Also important to remember that whether or not the tax cuts boost average after-tax wages for typical workers, the tax cut can only provide a one-time shift in wages, not a change in the trajectory of wage growth.
13/n

In sum, wage growth isn’t strong enough to be reflective of a tight labor market. If the economy keeps moving as it has, stronger wage growth could well be on the horizon, but it hasn’t happened yet and how it’s measured doesn’t change that.
14/14
@EconomicPolicy