The great question about the labour market these days is, well, where the Hell are the wage rises? We’ve subdued inflation, economic growth is good if not great, the unemployment rate is down to rates not seen for any length of time in 50 years, so wages should be soaring. Why aren’t they? One answer is that we’re not measuring matters properly and that real incomes are rising strongly. True, a view we accord to, but there’s more here too. And it’s actually Karl Marx who can aid us in understanding this matter:
Americans quit their jobs in May at the fastest rate since 2001, showing that workers feel so good about the economy they are willing to leave one company for another.
It helps to understand the real driving force underlying wage rises in general here:
Some 3.56 million workers left positions in May, the most in data back to 2000, and up from the prior month’s 3.35 million, Labor Department data showed Tuesday. That pushed up the quits rate, which measures quitters as a share of employed people, to a 17-year high of 2.4 percent from 2.3 percent. With more workers feeling assured of finding better employment, sustained wage gains may soon follow.
Yeah, but it doesn’t really work that way. The causation is the other way around.
The proportion of workers quitting their jobs, known as the quit rate, reached the highest level since April 2001. Quits are seen as a positive sign that workers are confident they can find another job. Most people who quit do so for higher-paying positions.
Not really, you don’t get unemployment if you quit, so people generally already have another – better paying – job before they do.
So, to Marx. As even he was able to work out, what raises wages is competition between employers. Imagine a world with a large number of unemployed – that reserve army of them. Some capitalist needs to expand production, he just hires a few more formerly unemployed. Or perhaps he starts making serious profits and his workers want some of them – they’re getting bolshie. So, he can fire them all and go hire the unemployed. Wages don’t rise either through the expansion of production, nor increasing productivity leading to higher profits. The capitalists get it all, the bastards.
Now imagine that there are no unemployed. Workers can strike for higher wages and often enough get them. Expansion of production means that workers have to come from somewhere. Somewhere they’re already employed. How do you get them? Offer higher wages than they’re currently getting. That is, higher wages come from competition between capitalists for the labour they can exploit.
Which brings us back to the present. That quit rate is rising to high, by historical standards, levels. People actually are being poached that is. And we have to assume that compensation (everything you get from a job, not just wages) is higher to tempt them to move. So, we should and do assume that worker compensation is rising. At which point we come to supposition. My inclination would be that wages aren’t rising all that strongly, Rather, it’s the other parts of compensation which are. It wouldn’t surprise me at all to find that vacation allowances are rising for example. But that’s just a personal guess.
The quits rate is up – people are being poached from their current employer. Wages, at least compensation from employment, must be rising in tandem.