The "weak wage growth puzzles economists. After all, as the labor market improves, workers should be able to get raises as employers compete for a tighter labor force."
McGahey lists four reasons for the suppressed wage growth:
- People are still out of work. In March labor force participation was 62.7%, the U.S. hasn't experienced a labor force participation this low since 1978.
- Job growth is too slow. It took 6 ½ to regain the jobs lost in the Great Recession.
- The jobs created pay worse that the jobs lost during the Great Recession.
- The suppressed wage growth is due to the long-term failure to share productivity gains between workers and businesses.
McGahey recommends that 'we won't see higher wages without two important policy changes: more government stimulus to create jobs, and changes in labor market rules to rebalance power between business and workers.'