With construction booming and help-wanted signs everywhere, it is clear that the state’s economy is strong, but one key indicator has lagged—wages. That may be changing, though. As the country marks 10 years since the Great Recession, the latest U.S. Bureau of Labor Statistics figures show that wages are finally increasing, which has economists wondering why it took so long and why those gains still pale in comparison to record-breaking stock market gains.
Russ Thibeault, president of Applied Economic Research in Laconia, says corporate America has prospered, but working America has not. “I think wage gains are mediocre at best,” he says. “We are 10 years into this recovery, and we are bragging about wages going up 3 percent a year.”
Brian Gottlob, principal of PolEcon Research in Dover, says it has been a mystery as to why the gains haven’t been stronger, but at least part of it has to do with lower productivity growth. Productivity, simply put, is output or gross domestic product (GDP) divided by hours. “We’ve had really strong hiring, solid job growth, and only a little better GDP growth … what does that tell us? If you are adding workers and GDP doesn’t grow, it could be because the growth has been in occupations where the GDP gains are harder to come by,” he says.
Gottlob says that for many people, the internet dramatically increased individual productivity but the output cannot be measured as easily as it can be in manufacturing, where productivity can be increased just by producing higher value or using automation.
Today’s productivity doesn’t compare to the 1990s, Gottlob says. “Back then we saw real productivity gains that had a lot to do with the makeup of the labor force. We had a peak of people in the most productive years of their careers, from age 35 to 55. Now we have them exiting the labor force.”
Thibeault says that demographic shift also plays in to lackluster wage growth. “In education, for example, there are retiring baby boomers who earn around $70,000 per year being replaced by younger workers earning $30,000,” he says. The growth in the retail and lodging industry, a sector that is doing well, has led to higher employment, but those jobs tend to have lower wages.
According to the U.S. Bureau of Labor Statistics (comparing Q3 2017 to Q3 2018, the latest figures available), wages increased in Merrimack (3.2 percent) and Rockingham (1.8 percent) counties, but decreased in the state’s largest county, Hillsborough (-1.6 percent). Even so, Hillsborough’s average weekly wage of $1,113 was higher than the national average of $1,055 and significantly higher than half the counties in NH. The average weekly wage in NH is $1,040.
It’s About Hiring
Aggregate wage growth for NH doesn’t look good because it is affected by the workforce shortage, says Gottlob. “We have a lot of demand for high-wage, high-skill jobs that are going unfilled and a lot of demand for low-wage, low-skill jobs that don’t pay as much, but are being filled,” he says. So though it looks like NH is adding more low-skill jobs, Gottlob says that is only because the workforce supply for the low end is there. There is also a mismatch between job openings and employee skill level, he says. There are about 16,000 job openings in NH, Gottlob says, and of those there are 13,380 candidates vying for 6,132 positions requiring less than an associate degree. When a two- or four-year degree or higher credential is required, there are 9,522 openings and just 5,531 candidates.
According to Gottlob, the rising tide is lifting some boats, which again is not reflected in aggregate numbers. “What is really happening with wages on the ground is a very complex story,” he says. “Individual occupations tell a different story.”
Gottlob says data from NH Employment Security shows that system software developers had wage gains of 10 percent over 2016 levels. Earnings for cashiers went up 8.3 percent; automotive service technicians and machinists gained around 9 percent. However, cooks, who saw a 5.4 percent increase, and retail salespeople (up 4.1 percent) were not far ahead of inflation of 2.8 percent. “The bad news is, it doesn’t say whether the [wage] growth is keeping up with the cost of living. Housing is up, and rents are up significantly,” Gottlob says.
It’s Still a Buyer’s Market
As the national unemployment rate drops to a 50-year low, there is more pressure on companies trying to fill vacant positions. Thibeault says many are making do with fewer workers, which may be driven by an underlying concern among businesses that things could slow down.
“This recovery has been disappointing in terms of wage growth, and theories are the declining unions, and insecurity and fear. The recession was painful, so even now people are reluctant to push for raises,” he says. “Workers are reluctant to change jobs because if you’re the last one in, you’re the first one out if layoffs happen.”
Thibeault says this allows companies to maintain the status quo and not feel obliged to offer raises or higher wages in all but the highest-demand fields. “Even 3 to 3.5 percent of wage growth is mediocre in such a low unemployment rate. In past recoveries, we’ve seen 4 percent wage growth,” Thibeault says. “Hopefully we are at the point where wage growth is going to be stronger. The unemployment rates are so low, businesses will have to offer more eventually.”