Prime-age participation
The labor market as a whole might be weaker than the 3.5% unemployment rate implies. While the metric is critical to measuring economic growth, the prime-age labor force participation rate lends a closer look at who is working and how that's changed over time.
The prime-age participation rate tracks those aged 25 to 54 who are employed as a proportion of those in the age range available to work.
The latest BLS report pegged the prime-age participation rate at 82.6% in September, nearly hitting highs not seen since the 2008 financial crisis.
The latest reading signifies more prime-age individuals are entering the work force after post-recession woes pulled the rate as low as 80.6%. As more people apply to enter the workforce, companies can delay wage increases as they no longer need to entice potential employees with raises.
Polarization
America's middle-income jobs — such as those in construction, production, and repair — are disappearing as wage polarization sets in. The New York Federal Reserve detailed the trend in a December 2018 report, showing the state's labor force becoming more saturated in low and high-income roles in the years since the 2008 crisis.
Globalization and automation have wiped out much of America's manufacturing industry, and as it's more difficult to scale the job ladder than descend it, many of the workers have been forced into lower-paying roles. The trend may explain the slowing wage growth seen nationwide.
The security trade-off
Private sector union membership has plummeted from roughly 20% in the early 1980s to 6.4% in 2018. The average pay for workers in unions is typically higher than nonunion workers, making the drop in union membership a fairly direct driver of lower average wage growth.
Unions even benefited those not involved, as industries and areas with large union presences typically pay all workers more compared to those where collective bargaining is scarce. The lack of organization between workers grants companies greater leeway for slowing wage growth.
Inflation vs. legislation
The gap between the minimum wage and the minimum wage adjusted for inflation was widest in the 1970s, and has since gradually closed as minimum wage laws have been driven by state legislatures more than the federal government.
The federal level of $7.25 hasn't changed since 2009, and inflation has nearly caught up with that level over the past decade.
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If workers aren't able to improve their pay through education, collective bargaining, or moving up a corporate ladder, increasing the minimum wage is a safe way to ensure American workers earn a steady living wage.
Though opponents of such legislation argue raising the wage floor would stave off job creation, the latest research from the New York Fed noted the state's gradual wage hikes haven't killed off payrolls.
It's unlikely any single trend noted above is responsible for slowing wage growth across the US. Yet it's worth considering them as parts of a whole as the US job market faces the puzzling phenomenon of high employment and stagnant wage growth.
