Jamie Dimon, chief executive of JP Morgan Chase, this week announced a raise for his bank’s lowest pay employees. The company’s worst paid workers currently earn $10.15 an hour. By next February their pay will increase to at least $12 an hour, a jump of 18 percent. Dimon’s announcement follows widely reported wage hikes at Starbucks, Target, Walmart and other employers with sizeable numbers of low-pay workers.
These pay hikes signal further tightening in the nation’s job markets, including the market for low-wage workers. The drop in the unemployment rate below 5 percent has made it harder for employers to fill job vacancies, putting pressure on them to boost pay, both to attract new workers and to retain the ones already on their payrolls. Although highly compensated men have obtained the biggest pay increases in recent years, men and women earning bottom-end pay have fared better in the past year compared with workers in the middle of the earnings distribution.
The good news on the wage front tells us two things. First, the tightening of the job market is finally translating into gains for ordinary workers. More workers who want jobs are finding them. And adults who’ve managed to hang on to jobs are now enjoying faster growth in paychecks. Between 2011 and 2014, hourly pay gains averaged a little less than 2.0 percent a year. Since the end of 2014 they’ve averaged about 2.5 percent. The improvement in nominal pay gains has been magnified by exceptionally slow consumer price inflation. In the two years ending in May, real hourly pay has climbed 1.9 percent a year.
Second, the recent tilt in pay gains in favor of low wage workers shows that increases in the legal minimum wage can have an impact. Even though the federal minimum wage has remained at $7.25 an hour for the past seven years, 29 states have minimum wages above that level; 11 have a minimum equal to or greater than $9.00 an hour. Not surprisingly, low-wage workers in states that have recently raised minimum wages have seen faster gains than those in states that have left minimums unchanged. Since a growing number of states and localities are boosting minimum wage levels, this trend toward faster pay gains at the bottom may continue for a while.
The recovery from the Great Recession has been slow and disappointing, but it has been lengthy. One indicator that has been slowest to recover is wages. At long last wages are climbing, both in the middle and at the bottom of the pay scale.