Low-Wage Workers Finally Get a Raise

Daniel Becerril / Reuters

The labor market is near full employment. The jobless rate is low. The economy is adding tens of thousands of jobs each month, and—at last—wages and earnings are increasing for workers at or just above the minimum wage. Indeed, Walmart on Thursday announced that it would provide a wage hike to and expand benefits for employees across the country, with 85,000 workers with two decades of seniority at the big-box retailer getting a $1,000 bonus and a million workers in total benefitting. In addition, 18 states bumped up their minimum wages for the new year, providing an estimated $5 billion more a year to 4.5 million workers, the left-of-center Economic Policy Institute has calculated.

“It has changed my life, and I have noticed the changes,” said Darryl Johnson, a home health worker based near Seattle, whose hourly rate has gone from $13.50 to nearly $15 over the past 18 months. “I have more food at the end of the month, and I’m not trying to stretch those groceries for a week and a half. I’m feeding myself better, and you need to work to eat and get out there.”

Still, the recent improvements in the low-wage labor market underscore how slow the recovery has been for millions of families—how fragile they remain, and how much longer the expansion would have to continue to make up for lost decades of growth. Many rich Americans found that their fortunes bounced back fast after the Great Recession. Millions of poor Americans, by some measures, have still not seen their financial situations recover, let alone improve.

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But now that’s changing. Over the past few years, the unemployment rate has fallen precipitously for less-skilled and less-educated workers. The jobless rate for workers without a high-school diploma has dropped from 8 percent as of December 2016 to 6.8 percent last month, while it dropped from 2.3 percent to 2 percent for workers with a college degree over the same time period. Low-wage workers are also seeing big increases in their earnings, compared with middle-income workers, and the poverty rate is declining too. The long-term jobless, people with criminal records, individuals with a disability—they are getting hired, despite some economists’ fears that they would remain structurally unemployed even in a hot labor market.

A number of trends have coalesced to boost the fortunes of the working classes. In announcing that it would move its wage floor up to $11 an hour and expand its paid maternity and paternity leave policies, Walmart pointed to Trump’s massive corporate tax cut. “We are early in the stages of assessing the opportunities tax reform creates for us to invest in our customers and associates and to further strengthen our business, all of which should benefit our shareholders,” Doug McMillon, Walmart’s chief executive, said in a statement. “However, some guiding themes are clear and consistent with how we’ve been investing—lower prices for customers, better wages and training for associates and investments in the future of our company, including in technology. Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.”

But labor experts and economists are skeptical, characterizing this framing as more a marketing ploy than anything else. “With the labor market tight, most employers have been raising pay, especially now that states covering one-fifth of the U.S. workforce are phasing in $15 minimum wages,” said Christine Owens, the executive director of the National Employment Law Project, in a statement. “This low-ball announcement by Walmart after the corporate tax give away looks more like a ploy to promote the myth that corporate tax cuts are what raise wages.”

One key piece of evidence that it’s the economy, not the tax cut, pushing up Walmart’s wages: Other retail companies that Walmart competes with have already done so. Target, for example, boosted its starting wage to $11 an hour in October and has vowed to move it up to $15 by 2020.

Much the same is happening economy-wide. Businesses are struggling to fill vacancies, with nascent signs of labor shortages in a number of industries, among them healthcare and construction. “As the labor market has tightened, employers need to shift their strategies for hiring workers,” wrote Jed Kolko, the chief economist at the job-search firm Indeed.com, in a research note. “Some firms will offer higher wages; some will loosen their hiring requirements or invest more in training. This helps less qualified workers, who might now be considered for jobs that would have been out of their reach earlier in the recovery. That’s one reason why the biggest gains in employment in 2017 have gone to workers with less education.”

Additionally, there are the states and cities increasing their minimum wages, often under pressure from the labor-backed Fight for $15 movement or through popular ballot initiatives. California, for instance, passed legislation setting its state minimum wage at $11 an hour, directly benefiting 13 percent of its workforce and pushing $2.7 billion more a year into workers’ pockets, EPI has estimated. Maine added a dollar to its wage floor this year, and Hawaii 85 cents.

Though the bottom of the labor market has been doing better of late, the recovery remains uneven. Income growth—a broader measure than wage growth—remains anemic compared with 30 or 40 years ago, and has proven strongest for the very richest Americans. The bottom 50 percent of earners are making 12.6 percent of national income, down from 13.7 percent when the recession hit. The top 1 percent are making 20 percent, up more than a percentage point.

Johnson, for his part, said that his nearly $1.50 boost in hourly wages had helped keep his family afloat and reduced some of the pressure for him to work long hours. But he said that he would need $18 or $20 an hour to be comfortable—particularly given how expensive the Seattle area has gotten. “It’s okay, but it’s just not enough” he told me. “It’s just still not enough. I’m a little better now, but it’s not where I am comfortable. And I do want to be comfortable. Back a couple years ago, I was struggling just to make it, to pay all the bills. I’m at the point now where I’m not struggling but it’s still hard. Put it this way: I can’t put no money away.”

He still works 12 hour days, five days a week, he added.