By: Dr. Lynn Reaser
As job growth has picked up and the unemployment rate has fallen, the missing link in the labor market has involved wages. For the past five years, they have been rising about 2.0% per year. While the drop in oil prices has helped pull inflation down to about half that level, workers and the Federal Reserve have been frustrated that larger pay hikes have not yet appeared.
Over the next year, some pickup in wage growth should take place. As the jobless rate moves towards 5.0%, competition for key workers is likely to heat up. Technology firms are already seeing that pressure. On average, wages are likely to be up about 2.5% by year-end.
Each firm, however, will need to assess its own situation in terms of productivity gains, employee morale, and its ongoing financial stability. As a result, all employees might not see the gains they would like, but most should find themselves better off over the next two years.
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