Wages for rank-and-file workers are rising at the fastest pace in more than a decade, a sign that one of the tightest labor markets in recent history is beginning to incentivize employers to increase pay.
Pay for the bottom 25 percent of wage earners, who account for 82 percent of the population, rose 4.5 percent in November from the year-ago period, according to data published by the Federal Reserve Bank of Atlanta. That’s the highest since July 2008. Wages for top earners, meanwhile, rose just 2.9 percent last month.
Overall, wages have accelerated this year by an average of 3.6 percent, as unemployment dropped, once again, to a half-century low. For employers, low employment means fewer people are looking for a job, limiting the supply of available employees and increasing competition to get the best workers.
According to data from the Bureau of Labor Statistics, the ratio of unemployed people to job openings is less than 1-to-1, compared to a decade ago, when it was 6-to-1.
“Low unemployment and a tight labor market with more than 1 million open, unfilled jobs is benefiting workers, with more reporting pay raises and finding better-paying jobs than each of the last three years,” Greg McBride, Bankrate's chief financial analyst, said.
There are currently about 5.8 million unemployed people in the U.S. and roughly 7.3 million job openings.
Still, managers continue to outearn their counterparts, with an average salary of $23.83 per hour in November, according to the Labor Department. Managers earned almost twice that rate.
One of the factors contributing to the rise in wages for low-earners is that a slew of states hiked their minimum wage rate in 2019 — and more are slated to do so in 2020. In fact, workers in 24 states will receive a pay raise next year, thanks to minimum wage increases.
According to a report published by the National Employment Law Project, a worker advocacy group based in New York, 21 states and 26 cities and counties are set to increase the pay floor for workers on Jan 1. By the end of the year, 24 states — including California, Maryland, Massachusetts, New York, New Jersey and Washington — and 48 cities and counties will raise their minimum wage, some well above the current federally mandated $7.25 per hour rate.
“These increases will put much-needed money into the hands of the lowest-paid workers, many of whom struggle with high and ever-increasing costs of living,” Yannet Lathrop, a researcher and policy analyst at NELP, said in a blog post about the increases.