Since the official end of the Great Recession in 2009, the economy has added millions of private-sector jobs, expanding for a record 80 straight months. However, one measure of prosperity has eluded the American worker: substantial wage growth.
The PayScale Index, which measures the change in pay for U.S. workers, forecasts a 3.2 percent year-over-year increase in pay for the first quarter of 2017. That would represent the largest per-quarter increase in worker pay in more than 10 years. Is sustained wage growth finally on its way? A lot may depend on the incoming administration’s policies.
Why Wages Have Stagnated
“Wage growth only recently appears to have picked up in the U.S. Average hourly earnings rose 2.9% in December from a year earlier, greater than the 2% average that prevailed during much of the expansion,” writes Tom Fairless at The Wall Street Journal. “Still, it’s too early to say if that will be sustained and other U.S. wage measures are less robust.”
Fairless lists several potential explanations for wage stagnation, including the types of jobs added (services jobs vs. manufacturing and construction, for example), and weakened bargaining power for workers.
Last year at The Economic Policy Institute, Lawrence Mishel suggests that lack of wage growth is directly due to policy.
This dismal wage growth is the result of intentional policy choices made on behalf of those with the most income, wealth, and political power. …these choices fall into five broad categories: the abandonment of full employment as a main objective of economic policymaking, declining union density, various labor market policies and business practices, policies that have allowed CEOs and finance executives to capture ever larger shares of economic growth, and globalization policies. Collectively, these policy decisions have shifted economic power away from low- and middle-wage workers and toward corporate owners and managers.
Wage Growth Under Trump
If Mishel is right, the Trump administration might curtail wage growth. Although the president-elect has promised to create jobs in the U.S. and keep American companies from moving jobs abroad, he’s been less forthcoming with promises about policies that promote wage growth for workers. (His campaign website, for example, promises to “increase annual wages by more than $30 billion over the next 7 years” — but that appears to be in reference to adding jobs, not boosting pay.)
President-elect Trump claimed victory with a deal to create 5,000 jobs at Sprint in the U.S., although critics point out that the deal appears to pre-date his involvement. Lost in the shuffle: the fact that many of these jobs will be at outside contractors, in customer service roles — and that there were no details about pay or benefits at the time of the announcement.
A more recent deal with Alibaba founder Jack Ma promises to bring a million jobs to the U.S. But as Jennifer Booton points out at MarketWatch, the agreement really consists of Ma increasing his company’s investments in the U.S. with the goal of encouraging American businesses to sell products on his sites. That could well lead to increased hiring, but there’s no guarantee of how many jobs — much less good jobs — will arise from the agreement.
“It’s like saying Amazon.com Inc., Etsy Inc. and eBay Inc. have all created millions, if not billions, of jobs through their respective marketplaces that connect third-party sellers to buyers,” Booton writes. “Sure, they’re all platforms connecting sellers and buyers, which are necessary tools in a modern economy in which even tiny merchants wish to reach potential customers across the globe. But their actual full-time, with-benefits workforces are much tinier.”
We don’t know what the Trump administration’s official policies will be until we see them. But we can take a hint from the PEOTUS’s pick for Secretary of Labor. Andrew Puzder, CEO of the chain that owns Hardee’s and Carl’s Jr., is a critic of minimum wage increases and worker protections.
Where Wages Will Go in 2017
Of course, an incoming president’s policies don’t affect the economy the day he takes the oath (stock market fluctuations notwithstanding). In terms of your bottom line, 2017 is more likely to reflect Obama’s policies than Trump’s.
Then, there’s the fact that presidents might not have that much effect on the economy in the first place.
“…presidents, in general, have far less control over the economy than the public often thinks,” wrote Ben Casselman at FiveThirtyEight in July 2016. “It is impossible to know for sure, but it is likely that the housing boom and bust would have played out much the same way under President Gore as it did under President Bush, and it’s likely that the recovery would have been just as long (and just as disappointing) under President McCain or President Romney as it has been under President Obama.”
It’s important not to underestimate grassroots movements, either. Recent minimum wage hikes in several states resulted from citizen petition, meaning that the people directly asked for and received higher pay.
When it comes to economic policy, it’s not all about the president.
Tell Us What You Think
Do you think wages will grow in the coming years? We want to hear from you. Tell us your thoughts in the comments or join the conversation on Twitter.
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