Higher Pay Ahead? Wage Growth Perks Up

Average pay buys less today than in 2006, but “real” wages may finally be recovering

By Stephen Miller, CEBS January 11, 2016

In the fourth quarter of 2015, U.S. wages across all industries showed signs of growth after years of stagnation. Wages rose 1.1 percent in the last quarter, bringing the average 12-month increase to 1.5 percent, according to Seattle-based consultancy PayScale Inc.

But taking inflation into account, average wages for typical workers buy less today than in 2006. That’s because “real” wages (adjusted for inflation) have fallen since the 2009-09 recession. Small wonder that worker dissastisfaction with their compensation has remained high. Last year Mercer found that only 55 percent of surveyed U.S. workers felt they were being paid fairly, down from 57 percent in 2011.

“Our economy has produced a bleak landscape for wages across almost every industry since the recession,” said Katie Bardaro, vice president of data analytics at PayScale. “While wage growth was still tepid in the fourth quarter, it was encouraging to see that U.S. wages exceeded expectations and that real wages showed signs of improvement.”

Among the findings from the consultancy’s Q4 2015 PayScale Index report:

Since the depth of the financial crisis and recession in 2009, real wages have fallen by more than 7 percent, and by more than 8 percent since 2006.

In late 2014 through early 2015, real wages experienced a relatively large increase due to a drop in inflation and slight increase in wages. But during 2015 inflation picked up, causing real wages to again fall.

The fourth quarter of 2015 brought a bright spot as relatively flat inflation and stronger wage growth raised real wages to their highest point since the end of 2012. Analysts will be watching closely to see whether this positive trend continues into 2016.

Regional Variations

U.S. metro areas experiencing the most annual wage growth last year, Payscale found, included:

San Francisco (up 2.5 percent).

Chicago (up 1.9 percent).

Washington, D.C. (up 1.8 percent).

St. Louis (up 1.8 percent).

Among U.S. metro areas with the least growth in annual wages were:

Philadelphia (up 0.4 percent).

Phoenix (unchanged).

San Diego (down 0.4 percent).

Wages for IT jobs grew 1.2 percent annually last year, and wages rebounded for the real estate and construction industries, with both showing a 12-month rise of 1.4 percent.

Similar to the U.S., most measures showed positive wage growth in Canada, as the country experienced 1.2 percent annual wage growth nationally.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow me on Twitter.

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