As US Employment Improves, Workers Still Await Pay Raises

Like millions of Americans, Mark Castricone feels like he’s due for a raise. An adjunct professor at the University of South Florida, Castricone earned $21,000 a couple of years ago from teaching philosophy courses at the university and a nearby community college. Last year, he made just $16,000. This year, he expects annual earnings around $22,000.

Castricone has a master’s degree and is just a dissertation away from earning a Ph.D. in philosophy. But on at least one level, he matches the millions toiling away in blue-collar fields such as retail, fast food and healthcare. As this month’s federal jobs report highlights, average hourly earnings have stagnated nationwide -- inching forward by just 2 percent over the last year. Even as unemployment dips below 6 percent, the lack of wage growth persists.

What's Going On?

“For the last few years, people have been saying wages are going to take off,” says David Blanchflower, a labor economist at Dartmouth College. “And of course, they haven’t.”

In theory, declining unemployment means the labor market is tightening -- a scenario in which more jobs exist than there are workers to fill them. In such a landscape, bosses feel pressure to offer higher wages in order to attract and retain employees. Likewise, workers feel more confident asking for raises or higher starting pay. By at least one key indicator, the bidding wars over wages, should have started by now: Today, the official unemployment rate slides toward 5 percent, down from its peak of 10 percent during the recession.

That number is deceiving, Blanchflower says. It doesn’t account for two large groups: the underemployed -- those who have part-time jobs but would rather be working full-time -- and the discouraged -- those who have stopped looking for work altogether. These forces have put “significant downward pressure” on wages, says a recent paper that Blanchflower co-authored.

Mark Hamrick, Washington bureau chief for Bankrate.com, agrees there’s plenty of slack in the labor market. But he suggests there’s still reason for optimism on wage growth. Stock market gains, increasing Treasury yields and the declining unemployment rate are positive signs. He also points to recent pay raises in the private sector. Walmart, McDonald’s and Target, some of the largest employers in the country, have all granted workers modest pay increases in recent months -- a sign, Hamrick says, that companies feel the need to attract higher-quality employees. “They’re doing it for business reasons and business reasons only,” Hamrick says.

A Gloomier Outlook

Others are less optimistic because they see more structural forces playing a larger role in the wage puzzle -- namely, globalization and a decadeslong decline in American workers’ bargaining power.

It’s not just the fact that employers can easily outsource production to lower-cost states or countries, Blanchflower says. But the possibility alone serves to tame demands from labor: “The very fact there’s that fear means workers have less bargaining power.”

Another key part of the story, says Richard McGahey, an economist at the New School, is the steady decline in union membership. Labor agreements that held employers to higher pay and benefit standards have disintegrated over time. These contracts once covered wide swaths of the workforce in key industries -- steel and automobile manufacturing, for instance -- and put upward pressure on wages that extended beyond the unionized workforces.

As labor’s voice has withered in the workplace, its political influence has waned. That means union-backed policies aimed at full employment -- and wage growth -- like mass federal investments in infrastructure and jobs, have less of an audience in Washington.

Castricone, the philosophy professor, feels the lack of bargaining power firsthand. This fall, he expects to teach at the University of South Florida Honors College, where colleagues say the going rate for adjuncts of $3,750 per class, per semester hasn’t budged in years. As universities have accelerated their reliance on part-time faculty, they’ve encountered relatively little pushback from those filling the positions. More than half of faculty are now adjuncts, compared with 30 percent in 1975.

“Most of us have this hope we’re not going to be an adjunct that long,” Castricone says, and “we love our jobs so we’ll take crappy pay.” Many adjuncts also tend to have successful academic and professional track records and believe they’ll be able land full-time professorial gigs soon enough.

“You think you’re going to keep beating the odds,” Castricone says.

Frustration may be starting to boil over, ever so slightly. In recent years, thousands of adjuncts have joined labor unions, forcing college administrators to meet them at the bargaining table. Castricone backs an ongoing drive at his university, and hopes the existence of a labor contract will get him and his colleagues the higher pay and benefits they believe they deserve. “I think without one," he says, "we’re less likely to be taken seriously.”