Wages are Finally Rising to Match the Workforce: Here’s Why

In the past several years, we, as an economy, have been working to recover from the effects of the great recession. The good news is that, while there have certainly been aspects that have lagged during the recovery, things have been getting better in a number of ways. One particular sign of good news that has happened recently is that wages have been starting to climb, which has been one part of the recovery that has been stagnant, and left a lot to be desired. Here is an economic explanation as to why this is happening.

Positive and negative recovery

The most consistent positive aspect of recovery is that jobs have continuously been added each quarter. This has steadily lowered the rate of unemployment, thankfully, which spiked in 2009. This growth of jobs has been able to be driven up by modest gains in the GDP, which raise the amount of jobs required to run the economy. However, one element that has been incredibly stubborn during this recovery is wages, which have been unable to rise with rates of inflation and job growth. This has led to criticism about the quality of jobs that are being created, and whether the standard of living will really be able to rise because of them.

October news

The good news, however, is that this trend is finally starting to change for the better. In addition to the 271,000 jobs that were added in October, which was far higher than the predicted 180,000 jobs that were expected to appear. wages have been rising. Specifically, October brought the unemployment rate down to 5% and brought about a $0.09 rise in wages across the United States. Obviously, there is still a lot of ground to cover, in order to bring wages up to match the increase in jobs. However, this increase does signify the beginning of an inevitable trend in economics that is being driven by the increase of jobs.

Why this is happening

Essentially, this is a great example of the essential law of economics: supply and demand. To put it in a simple way, if you continue to add enough jobs to the market, the demand for labor resources will continue to rise, which causes the price of labor to increase. So, as a natural rule, if you continue to add more and more jobs, wages will eventually have to follow in order to meet the current demand of labor. As more jobs become available, workers are presented with more options for employment, which provides an incentive for employers to pay more. As long as more jobs continue to be added, the wages will steadily rise to meet the increase in demand.