The Labor Market – Bargaining Power, Wages, Inflation

From WPR yesterday, UW Madison experts:

Timothy Smeeding, a professor of public affairs and economics at the University of Wisconsin-Madison, told Wisconsin Public Radio’s “Central Time” that the tight labor market has helped low-wage workers the most.

Between 2019 and 2022, the lowest 10 percent of wage earners nationally saw their inflation-adjusted hourly wage grow by 9 percent, according to the Economic Policy Institute. That’s the fastest wage growth for the lowest-wage workers since 1979.

Smeeding said demand for workers exceeding supply is what led to that growth, especially as the pandemic waned and people began going out again. He expects that trend to continue as long as there’s a tight labor market.

“The good news is that there’s a lot of demand for low-skilled workers beyond bars and restaurants now (with) the expansion of infrastructure and construction,” he said.

What’s happened in leisure and hospitality, traditionally one of the lowest paid sectors?

Menzie Chinn, professor of public affairs and economics at UW-Madison, said that wage gains haven’t been evenly distributed by economic sectors. He noted leisure and hospitality workers have seen the largest wage gains since the pandemic, while wages for workers in all other non-farm sectors have seen slower wage growth.

“As far as we can tell, (leisure and hospitality workers) are beating inflation, at least in terms of the wage rate,” he said. “Now, I don’t know how many hours they’re working, and it’s going to be spotty because not everybody is going to be in a restaurant that saw their wages rise.”

Beyond wages, Laura Dresser, associate director of the COWS economic think tank at UW-Madison, said the tight labor market also gives workers more leverage to negotiate with their employers for more flexible hours or to confront workplace harassment.

Using nationwide statistics, here’s what we see about real (inflation-adjusted) wages:

Figure 1: Average hourly earnings in total private sector (blue, left log scale), and in leisure and hospitality (tan, right log scale), in 2020$/hour (CPI-all deflated). NBER defined peak-to-trough recession dates shaded gray. Source: BLS, NBER, and author’s calculations. 


25 thoughts on “The Labor Market – Bargaining Power, Wages, Inflation

  1. Moses Herzog

    I think we’ve lost some appreciation for great writing and great writers in this country. People are more fascinated by whining and figuring out what burdened minority they can claim status to. But anywayz…….. I enjoyed this interview and thought there was a chance some regular readers here might enjoy it also:

    1. Noneconomist

      After listening to Kevin McCarthy, I’ve decided to place all my important papers and documents in my downstairs bathroom. Since the door locks from the inside, there will be no danger of theft while I’m in there.
      With the documents here—under the sink?— I won’t need the safe deposit box at my bank where I need a bank employee to usher me through a locked gate before using my key and the bank’s to access the box.
      I bet Republicans also have lots more swell ideas on security. Can’t wait to hear them.

      1. pgl

        Funny. I put my documents in the bathroom locked up with my most important assets – the toilet paper.

        1. Moses Herzog

          That darned Noneconomist has some of the more cerebrally humorous comments on the blog. Damned if he didn’t tickle my funny bone a good number of times. Don’t tell anyone I said it, I’m trying to convince everyone here I’m the funny boy and it will ruin my swagger.

      2. Moses Herzog

        It’s not like it’s anything important~~like about America’s nuclear arsenal, America’s military strategies during war, secrets about American allies that our allies don’t want “out there” in public view. If things get real rough and someone tries to steal our most important government secrets from the secure installation of a Florida leisure resort, CoRev told me not to worry. CoRev has it “on good word” from his social circle that Lindsey Graham will send in his pack of personal favorites of male escorts to Mar-a-Lago and they will form a security perimeter around donald trump’s bathroom to defend the papers donald trump took for to apparently use for toilet paper and a shower floor mat.

        So, CoRev says “no worries”…… Team “Lindsey’s Buff and Shiny Male Escorts” is on the case.

          1. Moses Herzog

            Possibly time for you to get a new writing team. Repeating Mark Levin’s radio drivel isn’t quite working.

  2. Jacques

    It might be that wages seem to have gone up for leisure and hospitality workers because an increasing number of establishments are using computer systems to collect tips. Workers haven’t typically reported all their tips if received in cash for tax reasons. Tipping has also become all-pervasive since the pandemic thus having led to increased income in the fields.

  3. pgl

    Interesting discussion with lots of details. This EPI headline might surprise certain people:

    ‘Low-wage workers have seen historically fast real wage growth in the pandemic business cycle
    Policy investments translate into better opportunities for the lowest-paid workers’

    Of course the base started low so their wages are still not exactly high. And the interview notes the damage Republicans are generating by cutting support for child care assistance.

  4. ltr

    March 29, 2023

    The Covid-19 pandemic and the expansion of the mortality gap between the United States and its European peers
    By Patrick Heuveline


    The mortality gap between the United States and other high-income nations substantially expanded during the first two decades of the 21st century. International comparisons of Covid-19 mortality suggest this gap might have grown during the Covid-19 pandemic. Applying population-weighted average mortality rates of the five largest West European countries to the US population reveals that this mortality gap increased the number of US deaths by 34.8% in 2021, causing 892,491 “excess deaths” that year. Controlling for population size, the annual number of excess deaths has nearly doubled between 2019 and 2021 (+84.9%). Diverging trends in Covid-19 mortality contributed to this increase in excess deaths, especially towards the end of 2021 as US vaccination rates plateaued at lower levels than in European countries. In 2021, the number of excess deaths involving Covid-19 in the United States reached 223,266 deaths, representing 25.0% of all excess deaths that year. However, 45.5% of the population-standardized increase in excess deaths between 2019 and 2021 is due to other causes of deaths. While the contribution of Covid-19 to excess mortality might be transient, divergent trends in mortality from other causes persistently separates the United States from West European countries. Excess mortality is particularly high between ages 15 and 64. In 2021, nearly half of all US deaths in this age range are excess deaths (48.0%).

  5. Macroduck

    The Atlanta Fed’s Wage Tracker allows easy tracking of many of the dynamics at work in wages. One of the most remarked-upon features of the labor marker during the Great Quit was the wide gap in pay gains between job switchers and stayers. From the JOLTS data, we know that quits have slowed:

    I think this Is a a more reliable series than job openings for tracking the tightness of the job market. Anyhow, the difference in wage gains between switchers and stayers has begun to narrow, as well:

    Hit the “job switcher” button and keep in mind you’re looking at a 12-month average. Long averages give the impression that change is slower than it is. So a less tight labor market and a smaller premium for switching jobs is evident in the data.

    Note also that median wage growth, while still historical strong, is cooling. Median wage growth is displayed as a 3-month average, understating recent cooling by less that series displayed as 12-month averages.

    ADP likewise finds that the wage premium for changing jobs is shrinking:

    And oh, by the way, the Fed’s economic projections (SEP) today show end-2023 unemployment at 4.1% rather than 4.5% as in the March edition (currently 3.7%, so still a recessionary forecast), core PCE deflator 3.9% vs 3.6% in March and the funds rate at 5.6% vs 5.1% in March, implying an additional 50 basis points of tightening this year, instead of steady pick as in the March SEP.

    1. Macroduck

      When you stop glorifying the dispicable, racist, dishonest Xi regime, excusing enslavement of Uyghurs, oppression of Hong Kong Chinese, threat of violence against Taiwan, then you’ll have some slight ground on which to object to the behavior of others.

      For now, you’re simply poisonous, simply evil. Nothing said about you or too you can be worse than what you do.

  6. ltr

    June 14, 2023

    Do you think —– and — ——- “rolled around in the sheets” later after this photo, —??
    Do you think —– and — ——- “rolled around in the sheets” later after this photo, —??
    Do you think —– and — ——- “rolled around in the sheets” later after this photo, —??

    [ Enough of the pornographic imagery, enough of the vicious bullying. Enough of the crazed bullying. No person should be subject to such vicious bullying. ]

    1. Macroduck

      You deserve to be subjected to this and more. You apologize for a regime that uses far more than words against its victims. Whining hypocrite.

  7. ltr

    June 13, 2023

    There’s a new term for people like “—” (although it’s usually used to describe people on college campuses working in Gender Studies—the term is “cry-bullies”. Of course, it’s a way to force others to agree with you, or else you “concede” to being a monster. Those are the two choices “—” gives people. It doesn’t foster dialogue because some people in Gender Studies don’t want dialogue–and neither does — = “let tyranny reign”.

    [ Ceaseless vicious bullying, ceaseless destructive bullying. Endless viciousness, using gender and racial imagery to harm others. ]

  8. ltr

    June 13, 2023

    @ —
    “In this vast world, you may be like a small piece of toilet paper, but even so, you carry a big load of crap.”

    [ Imagine such viciousness. Imagine such bullying. Over and over and over. Imagine the need to degrade a person so. This is the way in which Jews were vilified and persecuted in Europe, leading to national expulsions and to the Inquisition and finally to the 1930s. ]

    1. Ivan

      The left were quite effective with their product boycotts. Should not be a surprise that the right would do their own – or that they could be effective. However, they are no more likely to be effective in the long term – people quickly forget and go back to old habits.

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