Twenty seventeen likely was the best year in almost a decade for worker pay hikes. But that's not saying much. A year’s worth of data will in on Friday in the week ahead with the release of the December employment report.
Average hourly earnings have been steadily rising since 2014, albeit from a very low level. Paychecks have been creeping up, but just barely ahead of the official inflation rate. In November, average hourly earnings increased 2.5 percent from a year earlier. Inflation grew by 2.2 percent, eating up most of the pay hikes. These two economic forces — meager earnings increases and low inflation — feels like stagnation even if the economic data tells us something different.
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The Bureau of Economic Analysis says the U.S. economy grew by 3.2 percent in the third quarter. That is the fastest growth in two-and-a-half years. Some forecasts expect the economy grew by at least that much in the final quarter of 2017.
As the New Year begins, 18 states and 20 cities increase their mandated minimum wage. Some of those increases are the usual cost of living hikes, but others are larger. A couple of cities will require companies pay workers at least $15 an hour. Before the year is out, another three states and 18 cities and counties will follow with minimum wage increases of their own, according to the National Employment Law Project. The worker advocacy group figures once all the minimum wage hikes take effect in 2018, about 15 and a half million workers will see a bump in their hourly pay. That’s one in 10 employed Americans.
President Trump and Congressional Republicans based their support for cutting corporate taxes, in part, by betting companies will spend part of the savings on higher wages. Corporate profits before taxes already were at record highs before the tax bill. It remains to be seen if lower taxes will lead to higher wages. After all, record high pre-tax profits hasn't led to big pay bumps.
With consumers responsible for more than two-thirds of the American economy, a lot is riding on fatter paychecks in 2018.
Tom Hudson hosts ‘The Sunshine Economy’ on WLRN-FM; @HudsonsView.