Wages to Rise — More for Some than Others
After years of little or no income growth, wage gains are finally beginning to gather a bit of steam.
Wages will pick up more quickly come 2015, accelerating until annual gains hit 4% by January 2017.
For many employers, that will be a bitter pill to swallow, especially if productivity growth doesn’t keep pace. Small businesses, especially, are already feeling the pinch of higher wages. The number of small businesses that have raised compensation recently or are planning to soon is approaching a normal level for an expansion, according to a survey by the National Federation of Independent Business.
For the economy as a whole, though, it’ll be a plus. Wage and income gains have been slow to pick up following the Great Recession, and that’s kept a check on consumer spending, which accounts for two-thirds or more of GDP. In the 18 quarters after each of the previous five recessions, consumer spending grew at a 4% average annual rate. This time, it’s rising at just half that pace. That’s put a damper on business spending growth as well — firms see no point in investing to boost production if consumers aren’t willing or able to purchase more.
So, who’s likely to get the most extra dough? The usual suspects, of course…IT and health care workers, though not everyone in these fields will benefit. The more highly educated and technically trained will do better. For example, nurse practitioners, who have graduate-level education, will receive bigger pay increases than registered nurses (bachelor’s degree level). RN’s will do better in turn than licensed practical nurses (associate’s degree level). In the computer field, pay for network architects, systems designers and custom programmers will rise more than for user support personnel.
Also, those in the construction industry, with more building of homes and commercial, industrial and utility facilities. The long hiatus in construction took a heavy toll on the labor supply. Housing didn’t start to pick up even a little until 2012, six years after it began to plunge, and all other construction took three years to start its recovery. Skilled tradesmen left the sector in droves, seeking a living in other industries. Now they’re in short supply, as all construction sectors start picking up at the same time. Look for wages to rise also in manufacturing businesses that are related to construction — makers of cement and concrete, for example — and in services such as architecture and engineering.
Financial sector employees, too. The continued need for credit and asset analysis and the stress-testing of financial institutions will keep wage growth up in this industry for analysts and examiners, and the bull market run will continue to help compensation for brokers and advisors.
Providers of professional and business services, particularly those in fields requiring engineering, legal, scientific and other technical expertise. There’ll be more upward wage pressure in management services, with managers of all types in high demand, and for market researchers and consultants. Regulatory compliance officers will also be in demand, reflecting the increasingly long reach of Uncle Sam and his state and local relatives.
Highly skilled manufacturing workers, such as welders and computer numerically controlled machinists, as factories increasingly rely on automation with fewer, but more-skilled, workers.
Employees of industries that are experiencing a demand-driven cyclical bounce back, such as airlines, delivery services, and direct mail advertising.
And those willing to take jobs disdained by others, such as long-haul truck drivers, who are in short supply because of their grueling hours and travel schedule.
Among those at the other end of the spectrum: Wage growth will lag for elementary and middle-school teachers, bakers, public relations specialists and others in fields with a plethora of qualified candidates eager to step in. It will also be slow for occupations such as cashier, refuse collector, parking lot attendant, retail worker and general laborer — any position requiring few or no skills.