Economy
9:24 am
Fri August 2, 2013

Jobs Have Been Added, But Why Are Wages Stubborn?

Originally published on Fri August 2, 2013 10:32 am

Transcript

MICHEL MARTIN, HOST:

This is TELL ME MORE from NPR News. I'm Michel Martin. Later today, we'll hear more about Pope Francis' recent visit to Brazil and we'll hear about why he made headlines around the world. That's in just a few minutes. But first, back here in this country, we want to hear about today's jobs numbers. One-hundred sixty-two thousand jobs were added last month, bringing the unemployment rate down to 7.4 percent. That's even below last month's report of 7.6 percent. The report also shows, though, that wages are going down for many workers.

The average hourly earnings went down by about two cents in July, and that may not sound like much, but wages have been stagnant for years now. We wanted to talk more about this and what these numbers mean, so we've called, once again, Marilyn Geewax. She's NPR's senior business editor. Also with us is Roben Farzad. He's a contributing writer to Bloomberg BusinessWeek, and they're both with us frequently to talk about these issues. Welcome back to you both. Thank you both so much for joining us.

MARILYN GEEWAX, BYLINE: Hi, Michel.

ROBEN FARZAD: Thank you.

MARTIN: Roben, why don't you start us off with these jobs numbers at 7.4 percent? Now, is this a good number?

FARZAD: There's a lot of cold comfort in this number. It's that employers added fewer workers than anticipated in July and people are still dropping out of the workforce. Wages are moribund, and, yes, to a certain extent, joblessness hasn't this been slow since maybe the onset of the financial crisis. But we're not making nearly enough gains to cut into the unemployment rate.

MARTIN: Are there any sectors that showed particular growth?

FARZAD: Yes, retail, hospitality, leisure - specifically, the area that's very vulnerable to a minimum wage hike, which we're going to talk about. But again, there's a lot of cold comfort in that. There aren't quality jobs, quality high paying jobs, that are in abundance in that sector.

MARTIN: And speaking of pay, Marilyn, wages are actually going down?

GEEWAX: Yes, this report has wage data in it, and we see that hourly wages are down about two cents, to $23.98. And that's very disappointing. All the data show that over the past two years, wages just have not been rising. They're going up, typically, 1.9 percent annual rate. Well, gosh, you know, you look at inflation and it's more than 2 percent, so you're really just barely treading water, and in fact, falling behind a little bit. But, Michel, I just want to point out that there are different buckets of workers. I think you can think of it in three different ways. There's the average hourly worker who is seeing this wage compression, where you're barely keeping up with inflation. And then there are the CEOs, that's the chief executive officers, and their pay has really been just shooting up.

MARTIN: I was going to ask you about that because...

GEEWAX: Well...

MARTIN: ...There is an exception to this rule of wage stagnation, and that is CEOs...

GEEWAX: Yes.

MARTIN: ...People at the very top level. What's the trend there?

GEEWAX: Up 16 percent last year and this year, it'll probably be even more. The typical pay is a little over $15 million a year for CEOs. But there's a third category of workers and those are the highly skilled workers whose skills are really in demand and they're doing well. If you have the right skill sets, this can still be a good economy. For example, I was looking at the data for the petroleum engineers. These are kids right out of school. You're just finished with your engineering degree. They hand you a sheepskin. Starting salaries are running at about 93,500 a year. So that's pretty good for a kid.

For Harvard MBAs this year, it's about $120,000 a year as soon as you get out of school. And it's not just people with college degrees. Even if you're a skilled truck driver and you're willing to work in North Dakota, in the energy sector, people make 60,000 a year or more with high school educations, but they're tough jobs and they're very specific skills.

MARTIN: The president started talking about this week and I don't think he was talking about long-haul truck drivers. I mean, he talked about the growing gap between highly paid executives, let's say, and everybody else. This is what he had to say. He talked about this last week in Galesburg, Illinois.

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PRESIDENT BARACK OBAMA: This growing inequality, it's not just morally wrong. It's bad economics 'cause when middle-class families have less to spend, guess what? Businesses have fewer consumers.

MARTIN: Roben, it was one of three speeches that the president gave around this issue this week. Tell me how you react to that. What do you think he's hoping to accomplish here?

FARZAD: He wants there to be this idea, this general consensus, that it's not just a zero-sum game. If you increase the minimum wage, if you increase wages for the middle class across the board, that it's going to circle back to the rest of the economy. You're going to have more hale consumers, more disposable income. And so if you can foment that sort of consensus as Obama and say that it's not a zero-sum thing, there is potential maybe to get a minimum wage hike past Congress.

MARTIN: Is that the main goal of this exercise, is to raise the federal minimum wage?

FARZAD: I think that's an important goal of this. Obama proposed, in February, raising it to $9 or so. And it's disproportionately important in this economy. There's a statistic that nearly 70 percent of the jobs created during the second quarter were in the lowest paying sectors, such as retail, trade or leisure and hospitality.

MARTIN: If you're just joining us, I'm speaking with Roben Farzad - he's a contributing writer to Bloomberg Businessweek - and NPR's Marilyn Geewax. We're talking about the latest jobs numbers and also talk about the wages in this country, which have been stagnating. Marilyn?

GEEWAX: I just wanted to point out that the last time we had a minimum wage increase was pretty much exactly four years ago. It was in July of 2009 and the wage went to $7.25 an hour. The reason that the president and others are focused on raising that wage is because it serves as kind of a floor. Even if you're making, let's say, $8.50 an hour, if the floor went up to $9 an hour you'd get a raise. I mean, you don't have to be right at the minimum wage to benefit from a minimum wage increase. Once it pushes up, it'll push all of the wage spectrum up. And, for example, right now, the typical fast food worker makes about $9 an hour. But if we had a higher minimum, they'd probably go up to more like 10 or $11.

MARTIN: It's interesting that the president's remarks also came at a time when there were the latest in what has become a series of strikes by fast food workers in different cities around the country. I mean, typically, these had been, like, one or two-day strikes, mainly to call attention to the issue. Marilyn, tell us, what's some of the debate about this?

GEEWAX: Well, unions are pushing for this. They're trying to help organize these workers. There are no unionized fast food workers in this country because people tend to keep these jobs a fairly short amount of time, in many cases. So it's difficult to organize. But unions see an advantage in helping these workers because if fast foods workers made more, it would help create this upward pressure on all wages. It's sort of catching fire in a lot of cities.

There have been a lot of protests about this, but the companies point out that their customers don't have much money. I mean, you look at McDonald's earnings and they're not great. Their stock price has been under pressure. Their earnings are under pressure, and they say that when people come in to buy the dollar menu type foods, they can't afford to pay more to their workers or they'd have to charge more to their customers.

MARTIN: So they're saying that their customers, themselves being lower wages...

GEEWAX: Right.

MARTIN: ...That passing on the cost of these wage increases would hurt those consumers. But they don't make the same argument about CEO pay, do they? I wonder if the public draws that connection. I don't - Roben, do they?

FARZAD: I don't think that's the case. Burger flipping, largely, is looked at as that transitional job, the province of minimum wage pay. And this is open to a lot of controversy, actually. Some are saying that, indeed, it would hike prices and crowd out McDonald's consumers. And there are other studies that would say that the dollar menu, for example, would only go to a $1.17 and that wouldn't put out McDonald's consumers, the rank-and-file. So there are other levers that McDonald's can pull.

MARTIN: In the couple of minutes we have left, I want to talk about the levers that both sides are trying to pull in this. I mean, Marilyn, I'm going to ask you this question about - you see the president giving speeches about this issue, and he made it both - he said it's both a moral issue and an economic issue. Is there any evidence that the political figures like himself make a difference in this question, make a difference in setting wages?

I mean, I know that, for example, in this area - in the Washington, D.C. area, where Walmart is trying to build a number of stores, the D.C. City Council has made a very controversial move to insist that stores like Walmart pay, what they call, a living wage. It's a wage that would be higher than is demanded of other employers in the city - very controversial bill, which is still sort of being discussed. Is there any evidence that political figures like the president, though, really do have that much to say about wage rates?

GEEWAX: Whenever there's a survey taken, overwhelmingly, the public supports having a higher minimum wage. People didn't want to talk about it that much when the economy was really in bad shape because everybody knew it was more important to create new jobs than to push up wages when we were in the worst of the recession. But now that we're four years into a recovery, the president and other political leaders are pushing this wage issue. They know it's popular, but there's a great deal of resistance from businesses.

They don't want to hear about a forced minimum wage hike, but we do see around the country, states have been increasing their state levels of minimum wage. So that's become quite common. And then, of course, as you say, there are some big cities where they are trying to force, especially the larger employers - Walmarts, Home Depot, other big employers like that - to pay more like $12.50 an hour instead of a minimum wage.

MARTIN: Roben, final thought from you about this. What do you see in terms of - in the wage picture?

FARZAD: I think it's curious when you ask a person who's not making minimum wage who's better off. They might say that they are, indeed, in favor of increasing the minimum wage. Sure, pay these guys some more. But it does recourse back to their own salary, and they're saying, at some point, if prices are going up, I'm not having any sort of traction with my boss in terms of getting a raise, so what about me? Marilyn points out that increasing the minimum wage increases the floor, generally, on wages at large. But at some point, you get into a territory where everybody is going to want a raise, and how sustainable is that? And it's interesting to see at what point the conversation hits that level.

MARTIN: Roben Farzad is a contributing writer to Bloomberg Businessweek. We caught up with him at his office in Richmond. Marilyn Geewax is NPR's senior business editor. We caught up with her at our studios in Washington, D.C. Thank you both so much for speaking with us.

GEEWAX: You're welcome.

FARZAD: Thank you. Transcript provided by NPR, Copyright NPR.