Real wages fell in Q2 despite low unemployment, Tax and Jobs Act
Since 2006, wages have risen 12.9 percent overall in the U.S. However, when inflation is factored in, “real wages” have actually dropped by 9.3 percent.
Despite high levels of employment and the passage of the Tax and Jobs Act, real wages fell in the second quarter, declining the most in seven years.
That’s according to the 2018 PayScale Index, which tracks quarterly and annual trends in compensation and finds that in Q2, despite a hot job market and the Tax Cut and Jobs Act, wages actually fell 0.9 percent compared with Q1.
“The Q2 Index shows the benefits of recent changes to the tax policy are largely reaped by business owners, not employees. Many corporations are using the additional money to buy back stock rather than increase wages,” says Katie Bardaro, Vice President of Data Analytics and Chief Economist at PayScale.
Related: Tax cuts aren’t likely to increase wages anytime soon
Since 2006, wages have risen 12.9 percent overall in the U.S. However, when inflation is factored in, “real wages” have actually dropped by 9.3 percent—so that the paycheck of today’s typical worker can’t buy the same amount that it could back in 2006. Further, “real wages” for Q2 of this year actually fell by 1.8 percent, with inflation factored in, and dropped 1.4 percent year over year, again with inflation factored in.
Bardaro points out that there are a few exceptions. “We are seeing higher wage growth for certain jobs as the tightening of the labor market continues and demand for certain talent outpaces supply,” she says. ”Therefore, our current strong economy disproportionately benefits employees that are in demand, in addition to shareholders and executives, while the average worker is left behind.”
Last quarter wasn’t good for most workers, with wages falling in 80 percent of industries, and with 12 of the 15 industries experiencing a decline. In addition, 13 out of 19 job categories saw wages fall since the previous quarter and 22 out of the 31 metropolitan areas reviewed also saw wages fall.
Wage growth, in cities where it occurred, was highest in San Jose and Cleveland, with the least growth happening in Orlando; accounting and finance saw the biggest growth—2.5 percent—while tech held steady. The largest decline in wages—2.9 percent—was in the transportation and warehousing industry.