3 ms·

For the employed, the current recession has pushed wages up

37 points by mcantelon 16y ago

gamble 16y ago
I am skeptical that employers have been raising wages. The average could have increased simply because job losses have been concentrated at the low end of the wage scale. Even if we are in a deflationary environment, that isn't necessarily good for the average person either. Their wages may be worth more in real terms, but deflation would increase the value of their debt as well. With so many underwater mortgages and a middle class riddled with consumer debt, prolonged deflation would be much, much worse than inflation.
- Alex63 16y ago
  I agree that deflation would be worse, at least for those of us with mortgages, etc. People on fixed incomes (and without debt) might view it differently - I wonder if a deflationary period would prompt baby-boomers to retire earlier?
- electromagnetic 16y ago
  My wage was raised by about 8% and my friends by around the same (same company). The company used the recession to lay off a few bad eggs and raised pay for everyone who stayed on. Big employers might not be raising wages, however small employers either made it or went broke in the recession (at least here in Canada). I can only really speak for the construction sector, but this has been the norm here. Bad companies have thankfully gone under and the companies left are making the profits. There's still work there from all the companies that went broke because they were skirting the margins before the recession, which means the companies that were doing well before the recession have been riding it out and absorbing the jobs of others. Right now we can't go fast enough, which is bizarre this early out of a recession.
blahblahblah 16y ago
Lies, damned lies, and statistics... There seem to be some serious flaws in their reasoning. First, as others have noted, it's likely that layoffs disproportionately affected low wage earners. Pay is a measure of the perceived value of an employee to the organization and the perceived value of the employee is precisely the criterion most likely to be used in determining who to lay off/fire. Without raising any individual's pay, simply laying off low wage earners raises median pay. Second, salaried employees are doing considerably more work to pick up the slack for all the positions that have been eliminated. Even if their absolute wages have risen, it's unlikely that their wages have risen in direct proportion to their increased productivity. Real wages, in terms of inflation-adjusted wages per unit of value added by the employee has likely fallen significantly.
gojomo 16y ago
This isn't too surprising; many government mandates and economic factors (such as runaway health costs) have been raising the cost of employees by a fixed amount per head. And technology often offers increasing returns to expertise and experience rather than headcount. Thus, if faced with a choice between hiring 5% more employees, or doing other things (such as capital investments or new incentives) to get 5% more productivity from existing workers, the latter is becoming more attractive. Hence, fewer employees -- but employees that are higher-paid and higher-skilled. (Many of the things intended to help low-wage and low-skill workers -- minimum wages, minimum benefits packages, new legal protections -- actually wind up raising the breakeven point for taking such workers on. Businesses then prefer other less-labor-intensive strategies to increase production, and the intended beneficiaries of these policies wind up worse off. But they still keep voting for the superficially-attractive policies. The bloodletting will continue until the patient improves!)

37 points by mcantelon 16y ago

I am skeptical that employers have been raising wages. The average could have increased simply because job losses have been concentrated at the low end of the wage scale. Even if we are in a deflationary environment, that isn't necessarily good for the average person either. Their wages may be worth more in real terms, but deflation would increase the value of their debt as well. With so many underwater mortgages and a middle class riddled with consumer debt, prolonged deflation would be much, much worse than inflation.

Alex63 16y ago
I agree that deflation would be worse, at least for those of us with mortgages, etc. People on fixed incomes (and without debt) might view it differently - I wonder if a deflationary period would prompt baby-boomers to retire earlier?
electromagnetic 16y ago
My wage was raised by about 8% and my friends by around the same (same company). The company used the recession to lay off a few bad eggs and raised pay for everyone who stayed on. Big employers might not be raising wages, however small employers either made it or went broke in the recession (at least here in Canada). I can only really speak for the construction sector, but this has been the norm here. Bad companies have thankfully gone under and the companies left are making the profits. There's still work there from all the companies that went broke because they were skirting the margins before the recession, which means the companies that were doing well before the recession have been riding it out and absorbing the jobs of others. Right now we can't go fast enough, which is bizarre this early out of a recession.

blahblahblah 16y ago

Lies, damned lies, and statistics... There seem to be some serious flaws in their reasoning. First, as others have noted, it's likely that layoffs disproportionately affected low wage earners. Pay is a measure of the perceived value of an employee to the organization and the perceived value of the employee is precisely the criterion most likely to be used in determining who to lay off/fire. Without raising any individual's pay, simply laying off low wage earners raises median pay. Second, salaried employees are doing considerably more work to pick up the slack for all the positions that have been eliminated. Even if their absolute wages have risen, it's unlikely that their wages have risen in direct proportion to their increased productivity. Real wages, in terms of inflation-adjusted wages per unit of value added by the employee has likely fallen significantly.

gojomo 16y ago

This isn't too surprising; many government mandates and economic factors (such as runaway health costs) have been raising the cost of employees by a fixed amount per head. And technology often offers increasing returns to expertise and experience rather than headcount. Thus, if faced with a choice between hiring 5% more employees, or doing other things (such as capital investments or new incentives) to get 5% more productivity from existing workers, the latter is becoming more attractive. Hence, fewer employees -- but employees that are higher-paid and higher-skilled. (Many of the things intended to help low-wage and low-skill workers -- minimum wages, minimum benefits packages, new legal protections -- actually wind up raising the breakeven point for taking such workers on. Businesses then prefer other less-labor-intensive strategies to increase production, and the intended beneficiaries of these policies wind up worse off. But they still keep voting for the superficially-attractive policies. The bloodletting will continue until the patient improves!)