Wages

Pay Raises Don’t Keep Pace

June 28, 2018 By Twila Van Leer

With just about every economic factor pointing to a positive time for America, one element of the picture is lagging. Pay raises are not keeping pace in a growing economy, robbing some people of the benefits of the upswing.

Jerome Powell, chairman of the Federal Reserve, was asked during a news conference what was keeping pay from reflecting the general growth and he had no satisfactory answer. It’s a puzzle, he said.

With employment at the highest in several decades, there still are unfilled jobs as employers fail to find qualified workers. Those factors would logically portend an era of healthy pay raises, but it hasn’t happened, at least in the country’s leading industries.

Powell could offer only a guess: the economy’s relatively low productivity growth. In essence, he suggested, American workers aren’t generating enough extra value for each hour on the job.

Some economists lay the blame on failure of companies to invest in capital equipment that would improve productivity. Others say that earlier technological breakthroughs have not been duplicated.

Bottom line, as Powell said, “It’s a mystery. A puzzle.”

Part of the mystery, as Powell said in 2017 when he was a Fed governor, is that inflation remains below the central bank’s 2 percent target after years of monetary stimulus. He estimated that inflation will run slightly above that target over the next few years, fueled by President Trump’s tax cuts, low unemployment and a gaping federal budget deficit.

In the meanwhile, hourly wages are flat in many fields, according to the Labor Department, and have actually fallen slightly in others.

More New Jobs Than Skilled Workers

June 8, 2018 By Twila Van Leer

With 223,000 new jobs reported in the United States in May, the unemployment rate dived to a new 18-year low of 3.8 percent., the lowest since 1969. But the flip side is a shortage of skilled workers to fill that record number of available jobs.

The number of hires reported for the month was in excess of 200,000, which left some 20,000 jobs unfilled. The good news in the job market shows that the country’s economy is exhibiting plenty of vigor. In many industries, the addition of jobs has been accompanied by rising salaries.

The plentitude of jobs was attributed in large part to the retail marketing industry, which added 31,000 jobs to the total. Health care hirers accounted for 29,000, construction firms added 25,000 workers and manufacturers took on 18,000.

Economists were surprised by the healthy increases in construction and manufacturing, two areas of the economy that have complained most about worker shortages.

Although some job sectors saw improved worker pay, the big raises that were anticipated have not materialized. But wages are rising gradually. Hourly pay rose by 8 cents, to $28.92 an hour, in May, making the 12-month increase 2.7 percent.

The current economic expansion could become the longest ever if the indicators continue to show improvement for another year.

Some companies have offered higher pay and benefits, are providing training and established partnerships with vocational schools to widen the potential employee pool. In some instances, restrictions on felons have been relaxed.

If pay isn’t increasing as much as workers would like, they at least can rejoice in a slow inflation rate. The Fed has not been prone to increase the prime interest rate, which means people wanting to buy a new home or car are not affected by rising commercial interest rates. It is expected now that the Fed will only bump up the rate a small amount this year, unless there is a dramatic upturn in inflation.

The rosy May report is not expected to nosedive when the June figures come out, the gurus are guessing.

Some Companies to Share Tax Windfalls With Employees

January 1, 2018 By Twila Van Leer

Companies Share Tax Windfalls With Companies — The expectation is that the tax revisions will lead to higher profits, bigger dividend payments and share buybacks.

Some major American companies are announcing that they want to share the tax benefits they will get under the revised plan recently passed by Congress along with their employees. Analyses of the new tax plan show that the largest taxpayers, which include the companies, will reap the greatest relief, while middle- and lower-class taxpayers will see little effect.

AT&T, Comcast, Wells Fargo and Boeing are among the companies that have announced their intention to find ways to share the benefit with their employees.

Skeptics say such moves amount to public relations gestures, token steps to take the sting out of what they see as the inequitable rearrangement of tax brackets. The amount of money the companies will pass along to employees is a drop in the bucket in comparison to what they will acquire under the new law, they say.

The stock market reflects that sentiment. It has risen since the law passed, based on the premise that the savings will go to investors rather than to workers. The expectation is that the tax revisions will lead to higher profits, bigger dividend payments and share buybacks.

The revised tax plan reduced the corporate rate from 35 percent to 21 percent. It also created a provision that would exclude many foreign profits from taxation, another break for many of the large companies.

AT&T announced that it will pay a $1,000 bonus to each of its 200,000 workers once the law becomes effective. President Trump praised the action. But the token of generosity came when the Justice Department is suing to block a proposed merger between AT&T and Time Warner. Trump has declared that such merger of the communications giants would be bad for the country. The president said AT&T’s gesture is an indication that the $1.5 trillion tax cut will trickle down to the middle classes.

It is anticipated that other companies may jump on the bandwagon, coming up with ideas about how they can share the windfall they will reap from the new tax laws. Comcast already has announced it will follow AT&T’s lead in offering $1,000 bonuses to more than 100,000 employees. Wells Fargo has taken a different approach, raising its minimum wage to $15 per hour. The banking firm also will donate $400 million to charitable and community organizations.

Boeing’s plan is to put $300 million into enhanced job training, facility upgrades and charitable efforts.

But overall, such schemes to share the windfall with employees will remain “the exception, not the rule,” according to Senate Minority Leader Chuck Schumer.

As the Institute on Taxation and Economic Policy, a liberal watchdog organization noted, many of the large corporations have been holding large cash holdings for years that could have gone to workers. Boeing, for example, had $8.8 billion at the end of 2016. The company could have made a goodwill effort for employees at any time, the institute said.

Another indication that the large corporations recognize the huge benefit they will realize is the announcement of share buybacks amounting to $83.7 billion, Schumer’s office reported.

Pay Equity 200 Years Away?

November 22, 2017 By Twila Van Leer

Two trends in the job market suggest that the gap in paycheck bottom lines based on gender won’t be going away any time soon.

The estimate, based on current conditions, say that it will take at least 217 years for equity to become the norm.
That outlook comes from the World Economic Forum. The forum gathers statistical data from 144 countries in the world with input from the International Labor Organization, the United Nations and World Health Organization

As one indicator that wage equity is not an immediate likelihood, the forum reports that fewer women are currently entering the workforce. That reduces the competitive pressure on employers to give male and female workers the same salaries.

Although the international agencies report that women are doing as well as men in health and education matters, the effort to promote pay equity continues to fall short. Salaries are, in fact, becoming less equal.

Women make less than men in the same field, the agencies report, but that is only one aspect of the problem overall. Women are more likely than their male counterparts to do work at home gratis. Women tend to work in fields that offer lower average pay. They are much less likely to rise to the top ranks in any of the fields.

Iceland leads the world in gender equality when it comes to pay, the forum reported. Western European countries also are making strides toward equity.

Gender equality is both a moral and economic factor, according to Saadia Zahidi, head of education, gender and work for the World Economic Forum. She said the countries that are seeing wage gaps gradually closing recognize that there are dividends for a country’s overall economy in parity policies.

The United States, although it scores high overall, still has big gaps in workforce participation and wages, the forum reported. The group estimates that the U.S. could add $1.75 trillion to its economy by promoting pay parity. Globally, the estimated economic benefit would reach $5.3 trillion by 2025 if disparity were reduced by just 25 percent.