Sunday, September 5, 2010
Why are wages rising
In a time of economic recession, when you would expect austerity to set in and wages to be slashed , the exact opposite is happening. The average hourly pay for workers in the US increased another six cents to $ 22.56. What is anomalous is that although unemployment is still rampant, the employed are reaping the rewards of working increasingly, something which did not happen at all during the previous recessions. The explanations of this phenomenon range from companies passing on the benefits of their slightly more productive businesses to their workers to simply inflation. Another probable answer to this riddle is that since costs of health care have gone up significantly, almost by $500 for an average family, the employers are compelled to increase wages in an attempt to offset this. However the employment cost index indicates that the total value of employment benefits has risen sharply, which includes health care. Therefore the most probable answers to this odd situation are productivity and inflation.
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It could also be that since companies have slashed so many jobs that the majority of workers left are integral to the day to day running of the company. Firms need to pay them competitive wages to keep them from leaving for a more lucrative position.
ReplyDeleteThis article hypothesizes that increases in health care costs could either be absorbed by the company or passed down to the employee. If it is passed down to employees, it may be true that wages are rising, but perhaps not enough to cover for increases in health costs? Productivity and inflation seem to be the reason for the wage increase at the moment. However, with higher health care costs, we will have to see if the wage increase is, in fact, beneficial to those employees or if cost exceeds benefit.
ReplyDeleteI think the increase in wages are because the remaining workers can specialize their skills even more, or I should say, the machine to worker ratio increase, which means that workers can work with more capital and produce more than they did before, which in fact increase their productivity, which leads to increase in wage.
ReplyDeletePerhaps wages are rising because they fell so low early in the recession and are still having to make up for what was lost as the economy is recovering and businesses are worried about losing workers to competitors.
ReplyDeleteI find this to be very interesting that although we are in a recession, wages are still increasing. Furthermore, I tried thinking of some ways that this can happen and did not even think of the effects on health-care. It does make sense that wages can increase as a way to compensate workers on there paychecks- because we all know how expensive health-care is.
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