Pay rises for low-wage U.S. workers gain speed, support recovery

Thu Apr 2, 2015 11:11am EDT
 
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By Jason Lange

WASHINGTON (Reuters) - America's lowest paid workers are getting bigger raises that are outpacing the gains of many of their better-off peers, a trend that suggests the benefits of U.S. economic growth are finally trickling down, boding well for the resilience of the upturn.

Employment data USJOB=ECI due on Friday is expected to confirm that rising path, underscored on Wednesday by McDonald's Corp (MCD.N: Quote) announcement that it planned to hike wages. Major retailers Wal-Mart Stores Inc. (WMT.N: Quote), TJ-Maxx and Target(TGT.N: Quote) have already announced pay rises.

The increases are still far from the levels needed to get back to the trend in earnings growth from before the 2007-9 recession.

Yet the firming of wages should give some reassurance to the Federal Reserve as it looks for signs of a broad-based economic recovery while it considers raising interest rates for the first time since 2006.

Wages in leisure and hospitality, the sector with the lowest average earnings at $14.23 an hour, rose 3.2 percent in the year through February, well above the private sector average which has remained nearly constant at 2 percent, according to a Reuters analysis of payroll data collected by the Labor Department.

Retail workers, who occupy the second rung from the bottom on the income ladder, are close behind with a 2.8 percent gain.

By comparison, annual wage increases in the leisure and hospitality sector averaged at just 1.3 percent in the five years after the recession's end in June 2009, the slowest pace for any sector tracked by the Labor Department.

The increases at the bottom come as earnings growth has cooled in high-income industries, such as finance, where wages grew 2.6 percent in the last year compared to 2.9 percent average annual growth in the five years the followed the recession.   Continued...

 
Job applicants listen to a presentation prior to the opening of a job fair for veterans and their spouses held by the U.S. Chamber of Commerce and the Washington Nationals baseball club at Nationals Park in Washington December 5, 2012. REUTERS/Gary Cameron/Files