Through the winter and spring, many economists expected wages to
This wage spiral would be the inevitable result of the nation's
low unemployment rate: companies would be forced to bid for scarce
workers, and wages would finally behave as they once did - rising
briskly for millions of people.
But the big wage increases never materialized, and now the
window of opportunity has passed. With the economy hanging on the
edge of a recession, the demand for workers has begun to ease.
Companies are creating fewer new jobs than earlier in the year,
a trend likely to show up again in the July employment figures, due
out Friday. The civilian unemployment rate might even begin to rise
from its June level of 5.2 percent, some forecasts contend.
``We just missed wage acceleration,'' said Roger Brinner, chief
economist at Data Resources Inc. He argues that Labor Department
data showed the beginnings of wage acceleration in this year's first
quarter, an argument that others dispute.
Wages have indeed risen more rapidly this year than last, as
Brinner notes. But when adjustments are made for inflation, both
hourly wages and total hourly compensation (including company-paid
health insurance premiums and other benefits) failed to budge.
The economic slowdown is temporary, of course. Eventually, the
economy will grow again.
And then the old question will return: why did wages fail to
rise, given an unemployment rate under 5.5 percent for 15 months?
Could it happen again?
Not since the early 1970's has unemployment been so low for so
long, and in those days wages did rise significantly.
``I was surprised by the fact that wages were more well behaved
than people would have anticipated,'' said Robert Parry, president
of the Federal Reserve Bank of San Francisco.
Parry and many other economists had believed that as labor
shortages developed, wages would accelerate and so would the
inflation rate, as companies raised prices to cover higher labor
Now economists are scrambling for explanations of the unorthodox
behavior of wages. Many factors are cited, ``but no one really
understands why wage acceleration did not take place,'' said Orley
C. Ashenfelter, a labor economist at Princeton University.
Some of the contributing factors are already well known, of
course, among them the mass layoffs in the early 1980's, the erosion
of union power, the frequency with which employers closed factories
and switched production to low-wage countries and the great concern
over job security.
In addition, some economists consider the low unemployment rate
Part-time employees and temporary workers, for example, count
among the employed, helping to hold down the unemployment rate. …