Businessweek Archives

A Deceptive Climb In Wages?


Economic Trends

A DECEPTIVE CLIMB IN WAGES?

July's 0.6% jump in average hourly earnings has apparently set the financial markets on edge. With this gauge up 3.2% over the past year, compared with a 12-month rise of 2.75% a year ago, many participants are worried that tighter labor markets are finally prompting employers to give workers larger pay hikes.

Economist Richard B. Berner of Mellon Bank Corp. believes the acceleration probably owes more to changes in the composition of employment than to a genuine increase in wage rates. Many recent layoffs, particularly in manufacturing, he speculates, involved low-cost temporary workers employed by the personnel-supply industry. With relatively fewer temps on payrolls, average pay per hour would naturally look higher.

In 1993 and 1994, notes Berner, many employers were hiring temps faster than full-time employees to avoid committing to more expensive, harder-to-lay-off, permanent employees. Now, the once-fast-growing share of such temps in total payrolls has started to decline.

If Berner is right, gains in average hourly earnings could well slow again as the economy picks up steam, since hiring of low-cost temps will probably accelerate as well.BY GENE KORETZ


Soul Searcher
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus