By Eric Morath
For the first time in years, pay for lowest-income Americans is
rising faster than for other groups.
Weekly pay for earners at the lowest 10th percentile of the wage
scale rose at a faster rate last quarter, from a year earlier, than
any other group measured by the Labor Department -- including those
at the top of the income scales who earn five times as much.
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%.
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.
Usual weekly earnings is a different wage measure than the more
broadly cited average hourly earnings figure reported in the jobs
report each month. The jobs report showed average hourly earnings
for hospitality workers, the lowest paid of 19 broad sectors
tracked monthly, rose 4% in June from a year earlier, the
second-strongest gain. The quarterly numbers, which tend to be
volatile, are based on a survey of workers and include overtime
pay, commissions and tips that might not be captured in the hourly
figure.
Average hourly earnings, which have been stuck near a 2.5%
annual increase for most of the past year and a half, are based on
a separate survey of private-sector employers.
Wages have been rising swiftly in fields such as restaurants,
amusements and gambling, said Jed Kolko, economist at job-search
site Indeed. That is an indication that employers need to pay more
to attract workers into those fields.
"In a strengthened economy, people spend more on entertainment
and eating out, raising demand for workers in those fields," he
said.
Those wage gains also at least partially reflect rising minimum
wages in many states and cities. At the start of the year, the
minimum wage increased in 19 states, and Maryland and Oregon raised
their pay floors this month.
Still, higher-earning Americans have fared much better during
the expansion. Pay for workers in the 90th percentile has increased
nearly 20% since mid-2009, better than the median gain of 16.3%.
The 10th percentile worker fared worse, with pay improving 12.5%.
That hasn't been enough to offset inflation during the past eight
years.
"We're starting to see wage pressure at the two ends -- the
high-skilled end and the low-skilled end," Philadelphia Federal
Reserve President Patrick Harker said in an interview this month.
"Where the squeeze is still happening is the middle-skill
jobs."
He said that could partially reflect new technologies emerging
to supplant better-paid workers. For example, he said,
sophisticated document-reading software is reducing law firms' need
for armies of young associates to do the task.
Since the recession ended, employment in legal services rose
less than 1%. Employment at restaurants and bars is up 24%.
Last year, the Wireless Zone, a chain of cellphone stores,
raised base pay for workers at its company-owed locations to around
$18 an hour, but cut back the bonus incentives it offered. As a
result, the lowest-paid workers earn more, shrinking the gap
between high and low earners. Average pay is little changed, said
Dave Staszewski, executive vice president of the Rocky Hill,
Conn.-based franchise. He said the change in pay structure was
designed to attract scarce workers.
He said the strategy has been effective in attracting workers as
these job seekers put a bigger emphasis on guaranteed salary rather
than potential bonuses.
However, some low-paid workers say the raises are still too
small to make a difference. LaShawnda Obie, a Wendy's worker from
Detroit, received a 40-cent increase to $8.90 an hour in January,
when Michigan's minimum wage increased. That is a 4.7% raise -- but
she said it isn't enough to support herself and two daughters.
"I still have to sacrifice," the 28-year-old said. "My kids need
underwear and clothes, but I have to push that aside so I can pay
rent."
Write to Eric Morath at eric.morath@wsj.com
(END) Dow Jones Newswires
July 20, 2017 05:44 ET (09:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.