Michael R. Strain | Bloomberg Opinion
Are wages determined by market forces, or do businesses get to decide what pay they offer to workers? Michael Strain believes that determining why wage growth has been sluggish for years is at the heart of the debate about the economy. Despite several other important factors, Strain argues that worker productivity remains the dominant force in setting wages. Mobility costs are much stronger in the near term than over longer periods of time, and intuitively there is a limit to how far an employer can push its wages below the market wage. The strength of market forces can be dispiriting for those who want wages to grow faster; after all it is much harder for government policy to spur productivity growth than to clamp down on anticompetitive corporate practices.
The economics and emotions behind slow wage growth
Michael R. Strain | Bloomberg Opinion
Unemployment continues to fall, and the number of jobs is increasing, yet wages are failing to rise. Michael Strain asks why this is happening and proposes several explanations for why wage growth is slower than we'd expect. Strain proposes that there might be “hidden slack" in the labor market and that the rate of employment for people in their prime working years is still below its prerecession peak, showing that the official jobless rate isn't giving the full picture. Another possibility he proposes is that the composition of the workforce is changing in ways that affect pay. Strain concludes that some combination of several factors is likely the culprit, making him hopeful that a healthy rate of wage growth is likely in the future.