There’s an extra silver lining when the job market gets tighter.
Payday is finally starting to get a little brighter.
Not bright enough that workers feel like they’ve got money to burn. But bright enough that they can start to feel like their nearly decadelong battle with stagnant paychecks is finally coming to an end.
And for that, you can thank the Buffalo Niagara region’s slow, but steady job growth, which has finally absorbed enough of the excess labor that was thrown out of work during the recession.
Instead of a market where employers can pay whatever they want and grateful workers dare not decline, the pickings have gotten slim enough that companies no longer have a clear upper hand in setting pay. And the better your job skills, the more leverage you’re likely to have in negotiating your pay.
“We’re starting to have pressure on the availability of skilled labor,” said John Slenker, the state Labor Department’s regional economist in Buffalo.
“When companies get to the point where they need to hire workers to expand, or increase their profits, they may be in line to pay more,” he said.
For now, they only have to pay a little more. If you adjust for inflation, the real average weekly wage rose by 1.1 percent in 2014 and another 1.7 percent during the first three quarters of last year. It’s now $861 a week, according to the U.S. Bureau of Labor Statistics.
That may not sound like a lot – and the increase amounts to an extra $23 a week over two years – but it’s a lot better than the stagnant paychecks we endured for most of the previous decade.
Consider this: In 2004, the real average weekly wage here was $834. In 2013, it was $838. In other words, inflation ate up any pay raise local workers received during that time.
But the more robust wage growth during each of the last two years shows that’s changing, and it’s because the Buffalo Niagara job market is finally back in better balance.
Gone is the glut of workers who lost their jobs during the recession. It took almost four years of slow hiring, but more than 23,000 local workers who were out of a job in the aftermath of the Great Recession have finally been able to get back to work. In fact, the pool of a little more than 30,000 unemployed workers in the Buffalo Niagara region last month was smaller than it has been during any February going all the way back to 2001.
That does two things to push up wages. First, it makes it harder for employers to find good workers, especially ones with skills that are in short supply. That forces them to pay more, either to keep the workers that they have from leaving for a better offer elsewhere, or to hire the new workers they need to replace retiring employees or grow their business as the economy continues along its slow growth path.
Second, it gives workers more confidence, Slenker said. When times are tough, workers who have a job tend to hang on to it at all costs. Even if they have a chance to jump to a better-paying job elsewhere, they may be reluctant out of fear that their job security might not be as great when they’re now at the bottom of the seniority list. But when the job market brightens and workers feel more confident, there are more opportunities to move on to something better – and less anxiety about doing it.
The same thing is happening nationally, only the wage growth is a little stronger. After going nowhere from 2007 to 2013, real average weekly wages across the country rose by 1.4 percent in 2014 and 2.5 percent through the first three quarters of last year.
Demographics also may be holding the average weekly wage down, said Frederick Floss, a SUNY Buffalo State economist. As older workers retire at their peak earnings – and that’s happening a lot here – they often are replaced by entry-level workers at the bottom of the pay scale. That depresses the average wage to an extent, although those retirements also open up the chance for other workers to move up into better-paying jobs.
Technology, by allowing employers to invest in new equipment to boost efficiency rather than hire more workers, also depresses wages.
That means the upward pressure on wages won’t accelerate until employers start having trouble finding workers with the skills they can’t do without. Skilled trades like mechanics, construction workers and welders all are in growing demand today, Slenker said.
And, of course, the economy needs to keep growing. A recession – and the ensuing rise in unemployment – would quickly put a damper on wages.
“It is those labor shortages that will start to cause wage inflation,” Floss said. “We’re getting to a point where, hopefully, we’ll start to see an increase in real wages before we see a downturn.”