National news outlets have been reporting recently about the increase in the average hourly pay since the economy began its robust recovery from the COVID-19 shutdown.
The Washington Post said this week that wages are rising rapidly because many businesses are not able to hire enough workers. This is a classic example of supply and demand: When there are too few people to supply the necessary labor, employers raise their wages to attract more workers.
“Overall, nearly 80 percent of U.S. workers now earn at least $15 an hour, up from 60 percent in 2014,” the Post reported. “Job sites and recruiting firms say many job seekers won’t even consider jobs that pay less than $15 anymore. For years, low-paid workers fought to make at least that much. Now it has effectively become the new baseline.”
The biggest surprise about rising pay is that some of the largest increases have gone to workers in traditionally low-wage industries.
A chart with the Post story tracked pay over the past 2½ years. Some of the changes in average hourly pay for non-management employees include: restaurants up about $2 to $15.50, grocery and liquor stores up $1.40 to $15.00, and gas stations up almost $2 to $13.95.
It should be stressed that these are national averages. In high-cost places such as New York or San Francisco, the wages would be higher; in low-cost places such as most of Mississippi, considerably less. The wealth of an area has a big impact not only on how high the pay is but also how expensive it is to live there.
Larger companies continue to set the trend of higher wages. CVS recently announced that its starting pay will increase from $11 per hour to $15 next year. The Post reported that when large companies do this, smaller ones tend to raise their pay to keep up.
This has created one of the fastest periods for rising rank-and-file wages in the last 40 years. Economists believe that once the COVID-19 pandemic subsides and labor markets return to normal, these higher pay rates will remain, since history indicates wages rarely fall after they increase.
One obvious downside to wages rising this fast is inflation. When business expenses rise, they are passed on to customers. That means higher prices in the grocery aisles, on restaurant menus and lots of other places, eroding some of workers’ wage gains. That’s not ideal, but that’s how the economy generally works.
