{ "title": "No Victory Lap Yet: U.S. Wage Growth Elusive", "publication": "IMF Blog, September 20, 2016", "sourceUrl": "https://www.imf.org/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive", "canonical": "https://www.imf.org/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive", "overlayPath": "/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive/index.md", "summary": "Unemployment rate has been below 5 percent for some time.", "sections": [ { "heading": "Labor market overview and puzzle", "content": "- Unemployment rate has been below 5 percent for some time.\n- Job growth is steady.\n- Labor participation is increasing (more Americans returning to the labor market).\n- Despite a bump-up in 2015, wage growth so far this year—compared to the 2000s—is still disappointingly low.\n- Concern: consumer spending, which makes up the majority of U.S. economic output, cannot continue at the current pace unless wages grow." }, { "heading": "Legacy of the Great Recession: decomposition and re-entry effects", "content": "- Low wages are described as a vestige of the crisis; almost eight years after the height of the crisis, laid-off workers continue to re-enter the labor force.\n- Decomposition effect: new employees are often hired for less than the average wage rate and, when re-entering after long unemployment spells, tend to accept wages well below peers who remained employed—pulling down the average hourly wage across all workers.\n- The re-entry effect is substantially larger in the post-Great Recession period than before, with returnees to the labor market having to accept large wage cuts." }, { "heading": "Wage growth among continuously employed workers and productivity", "content": "- Wage growth for a broad segment of steadily employed workers is lower than a decade ago.\n- Specific findings:\n - Wages of job stayers have risen 3.5 percent this year, a full percentage point lower than before the Great Recession.\n - Earnings at the 50th percentile have risen by 3.2 this year compared to 4.1 percent during 2000–07.\n- The slowdown is observed across services and other sectors.\n- Contrary to a common explanation, the rise in low-paying jobs has not grown nearly fast enough to make a substantial dent in average wage growth.\n- Likely important factor: declining productivity of workers — \"The more productive workers are, the more they earn.\"" }, { "heading": "Decline in labor mobility and implications for productivity and wages", "content": "- Labor mobility has slowed over more than two decades; workers transition less frequently between firms or across sectors.\n- Measured change in job changing:\n - Declined from 20 percent of job changes per year on average in the early 2000s to 12 percent in the last few years.\n- The decline in job move rates was widespread: young and older workers, skilled and low-skilled, women and men.\n- Results persist after accounting for lower job security post-2008 and changes in age and skill composition of the U.S. labor market.\n- Slower reallocation: reallocation rates of workers to more productive firms appear to have slowed.\n- Possible causes offered:\n - A rise in regulations that have raised the cost of job changing and hiring.\n - Technological change that makes skills less transferable.\n - A rise in social distrust.\n- Little evidence that job searching has become easier and job matching better; reduced mobility likely weakens a traditional source of wage growth (climbing the wage ladder by changing jobs)." }, { "heading": "Policy implications and recommendations", "content": "- A resounding wage recovery is not strongly supported by the evidence; policies to raise wages by increasing productivity are paramount.\n- Policy recommendations for the United States:\n - Increase infrastructure investment to help businesses become more productive.\n - Expand partnerships between industry and higher education institutions.\n - Expand vocational training.\n - Expand apprenticeship programs.\n\nStephan Danninger — September 20, 2016\n\n---\n\n Content in this bundle\n\n- wp16122\n - wp16122 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - wp16122 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive/index.md)", "[Structured JSON version](/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive/index.json)", "[Bundle manifest](/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive/bundle-manifest.json)", "Authors: Stephan Danninger", "Published: September 20, 2016", "Unemployment rate has been below 5 percent for some time.", "Job growth is steady.", "Labor participation is increasing (more Americans returning to the labor market).", "Despite a bump-up in 2015, wage growth so far this year—compared to the 2000s—is still disappointingly low.", "Concern: consumer spending, which makes up the majority of U.S. economic output, cannot continue at the current pace unless wages grow.", "Low wages are described as a vestige of the crisis; almost eight years after the height of the crisis, laid-off workers continue to re-enter the labor force.", "Decomposition effect: new employees are often hired for less than the average wage rate and, when re-entering after long unemployment spells, tend to accept wages well below peers who remained employed—pulling down the average hourly wage across all workers.", "The re-entry effect is substantially larger in the post-Great Recession period than before, with returnees to the labor market having to accept large wage cuts.", "Wage growth for a broad segment of steadily employed workers is lower than a decade ago.", "Specific findings:", "The slowdown is observed across services and other sectors.", "Contrary to a common explanation, the rise in low-paying jobs has not grown nearly fast enough to make a substantial dent in average wage growth.", "Likely important factor: declining productivity of workers — \"The more productive workers are, the more they earn.\"", "Labor mobility has slowed over more than two decades; workers transition less frequently between firms or across sectors.", "Measured change in job changing:", "The decline in job move rates was widespread: young and older workers, skilled and low-skilled, women and men.", "Results persist after accounting for lower job security post-2008 and changes in age and skill composition of the U.S. labor market.", "Slower reallocation: reallocation rates of workers to more productive firms appear to have slowed.", "Possible causes offered:", "Little evidence that job searching has become easier and job matching better; reduced mobility likely weakens a traditional source of wage growth (climbing the wage ladder by changing jobs).", "A resounding wage recovery is not strongly supported by the evidence; policies to raise wages by increasing productivity are paramount.", "Policy recommendations for the United States:", "**wp16122**" ], "related": [ { "title": "wp16122", "role": "document", "sourceUrl": "http://www.imf.org/external/pubs/ft/wp/2016/wp16122.pdf", "summary": { "path": "/external/pubs/ft/wp/2016/wp16122.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/external/pubs/ft/wp/2016/wp16122.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive/index.md", "json": "/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive/index.json", "bundleManifest": "/en/blogs/articles/2016/09/20/no-victory-lap-yet-u-s-wage-growth-elusive/bundle-manifest.json" }, "generatedAtUtc": "2026-08-27T22:35:13.042Z" }