U.S. Job Market Not Looking Very Tight Based on Low-Skill Wages

This rising tide isn’t lifting many boats.

Wage growth in the U.S. has failed to pick up this year despite a steady decline in the unemployment rate. The sluggishness has been relatively broad-based across the labor market, including among low-skilled workers, who might seem to be the most likely candidates for bigger pay increases as labor becomes scarcer.

The bottom 20 percent of workers by average industry pay received a 3.9 percent increase in hourly earnings in October from a year earlier, marking an acceleration from a 3.4 percent advance in the year through October 2016. The detailed industry numbers for October were released on Friday along with the Labor Department’s main employment report for November.

However, the following chart shows that the entire pickup over the last year can be traced to a single industry: security and armored car services, which only accounts for 0.6 percent of private-sector employment, but has seen wages shoot up by almost 20 percent.

Removing security and armored car services from the picture knocks the 3.9 percent wage growth for the bottom quintile down to 3.3 percent. That means it’s been more than a year since workers in the other low-paying industries have seen any acceleration in wage growth.

The biggest employers of low-skilled workers are restaurants, general merchandise retailers, grocery stores, elderly care services, janitorial services and child day-care. Among those industries, restaurants are doling out the biggest pay increases (4.4 percent in the year through October), even though wage growth for those workers has been decelerating this year. General merchandise stores are giving out the smallest raises of the group at 1.4 percent.
Source: Bloomberg