Raises rare despite lower unemployment

Despite a growing economy and lower unemployment recently, cost-of-living pay raises aren’t as common as they used to be.  Several factors may be entering the picture.

Mary Jo Fitzgerald, community expert with Glassdoor, says businesses aren’t quite used to the realization that the Great Recession is behind us.  “With wages growing as slowly as they have over the past few months and years,” she notes, “companies are more reluctant to hand out raises in the same way that they used to, say, a decade ago.”

Fitzgerald says the resumption of raises is probably not far down the road.  “I think looking forward, workers can expect wage growth to rise,” she says.  “It’s just going to take a while.  And so you may see [fewer] cost-of-living raises, and more merit-based raises.”  She recommends workers do some research about their industries and their locations to find out if they’re underpaid for the jobs they do.

Fitzgerald says demographic factors also play a part.  “As baby boomers are retiring, they’re at the highest part of their pay scale,” she points out.  “And they’re being replaced with younger workers who are at the lowest part of their pay scale.  And their wages are only going to rise throughout their career.” 

“The wage-growth puzzle is a bit of a mystery for economists right now,” Fitzgerald admits.  “Because we are in such a tight labor market with record low unemployment, we should be seeing wages rise faster than they are.”  She calls it “a bit of a head-scratcher,” but since the law of supply and demand also applies to labor, it’s just a “waiting game,” a matter of time, before raises start back up.

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