Why wages will stagnate for another 14 years

Yahoo Finance

There's no doubt that the U.S. economy has recovered from the Great Recession, reclaiming the 8.7 million jobs that were lost. But apparently they aren't the same jobs because the average annual wage for new jobs is 23% less than the average annual wage of jobs lost during the recession, according to a new report from the U.S. Conference of Mayors. And there was no wage growth in the latest monthly jobs report, which also showed the economy gaining 209,000 jobs.

Related: Here's why the recovery feels like a recession

"We're stuck in a kind of trap where we see a slowly accelerating economic recovery, but on the wage side it is basically still flat except for those top earners," says Tyler Cowen, economics professor at George Mason University, referring to the top 20% of earners whose wages are rising.

Cowen says wages are fundamentally tied to the productivity of workers, which is affected by foreign competition and technology innovations.

But U.S. productivity since the mid-1960s has more than doubled while wages overall are essentially flat, according to Gerald Friedman, economics professor at University of Massachusetts-Amherst.

Cowen tells Yahoo Finance in the video above that slow wage growth will likely continue. "If you look at the typical American wage, it was as high in the year 2000 as it is today. That's about 14 years of stagnation," he notes. "In my view it is quite possible we will be seeing another 14 years of exactly that same pattern."

So what can people do to buck this trend and get jobs where wages are rising rather than stagnating or falling?

"You either have to work really well with computers or really well with other people -- skills that machines can't replace," says Cowen. "That's the future of our labor markets." He says those jobs are in management, personal services and technology.

 More from Yahoo Finance

Howard Davidowitz on J.C. Penney: “This company is on track to go broke”

Here we go again? Wall Street buying risky mortgages

Wanted, dead or alive: The earning potential of dead celebs

 

Rates

View Comments (58)

Recommended for You

  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • How to throw away a fortune

    If you start saving as soon as you enter the workforce, you will have roughly $279,000 at retirement. What if, instead, you had opted for a tax-deductible IRA? You might lose 25% to taxes when you cash out your IRA in retirement.

    The Wall Street Journal
  • Tesla prevails in top Massachusetts court over direct sales

    Massachusetts' highest court on Monday threw out a lawsuit seeking to block Tesla Motors Inc from selling its luxury electric cars directly to consumers in the state, enabling it to bypass traditional dealerships. The state's Supreme Judicial Court unanimously concluded that the Massachusetts State…

    Reuters
  • Big Minnesota insurer leaves Obamacare site

    The "Blue Ox" of Minnesota Obamacare is calling it quits. PreferredOne, the insurer that sold nearly 60 percent of all private health plans on Minnesota's Obamacare exchange, on Tuesday said it would leave that marketplace. PreferredOne's plans were the lowest-cost options on that exchange, known…

    CNBC
  • The dollar just reversed a five-year trend

    “A lot of investors have forgotten that in a bull market, you tend to see your economy strengthen, the dollar strengthen and equities go with it,” said Craig Johnson, senior technical analyst at Piper Jaffray. Driving the dollar strength is an influx of capital from Europe, where economic…

    Talking Numbers
  • Stocks Headed For Mixed Start; RadioShack Surges

    Stocks Headed For Mixed Start; RadioShack Surges Stock futures pointed to a narrowly mixed open for the stock market today amid economic worries. Nasdaq 100 futures rose 2 points vs. fair value, while S&P 500 futures slipped 1 point. Futures on the Dow

    Investor's Business Daily
  • United Offers $100,000 Buyouts to Flight Attendants

    Employees who accept the early-exit plan will be eligible for lump-sum payments, said a spokeswoman, Megan McCarthy, who declined to disclose the formula needed to reach the maximum. United also is recalling 1,450 furloughed attendants, most of whom took voluntary leave one to two years ago, she…

    Bloomberg
  • A Scottish 'Yes' also means exit from EU, NATO

    A Scottish 'Yes' also means exit from EU, NATO BRUSSELS (AP) — If Scottish voters this week say Yes to independence, not only will they tear up the map of Great Britain, they'll shake the twin pillars of Western Europe's postwar prosperity and security — the European Union and the U.S.-led NATO…

    Associated Press
  • Play

    What You Need to Know Before Buying Alibaba Shares

    Investors hoping to make a killing when Alibaba debuts its IPO should keep a few finer details in mind. The Intelligent Investor columnist Jason Zweig discusses on the News Hub with Sara Murray.

    WSJ Live
  • Ranking the Biggest U.S. Banks: A New Entrant in Top 5

    Ranking the Biggest U.S. Banks: A New Entrant in Top 5 Quarter after quarter, year after year since the financial crisis, the rankings of five largest banks have remain boringly consistent: J.P. Morgan Chase & Co., Bank of America Corp., Citigroup Inc

    The Wall Street Journal
  • Microsoft to Buy Minecraft Maker Mojang for $2.5 Billion. This Is Why

    Microsoft Corp. (MSFT), maker of the Xbox video-game console, agreed to acquire Mojang AB, the software company behind the popular game Minecraft, for $2.5 billion, in a bid to boost its Xbox and mobile businesses. Microsoft, the world's largest software maker, said Stockholm-based Mojang will join…

    Bloomberg
  • Russian billionaire placed under house arrest

    A billionaire Russian tycoon was placed under house arrest Tuesday in a money-laundering case that has drawn comparisons with a government crackdown on Russia's Yukos oil company more than a decade ago. The Investigative Committee, Russia's top investigative agency, said that Vladimir Yevtushenkov,…

    Associated Press18 mins ago
  • China's Xi pledges closer defence ties with Sri Lanka

    China's Xi pledges closer defence ties with Sri Lanka China's President Xi Jinping Tuesday announced increased defence and maritime security cooperation with Sri Lanka, whose Beijing-funded strategic port developments have caused unease in neighbouring India. Xi said his proposal for a 21st century…

    AFP
  • U.S. Hepatitis Problem to Continue Driving These 4 Top Stocks

    For a variety of reasons, the cases of chronic hepatitis in the United States have surged dramatically over the past 20 years. Currently, it is estimated that more than 3.2 million Americans are infected with hepatitis C, and approximately 75% to 85% will develop a chronic infection.

    24/7 Wall St.
  • Hong Kong Cancels Morning Trade as Typhoon Kalmaegi Moves to China

    Hong Kong's stock market and banks were set to resume operations today after Typhoon Kalmaegi missed the city and made landfall further southwest, on China's Hainan Island. Hong Kong lowered the No. 8 signal, the third highest on its storm scale, at 10:40 a.m., with the forecast still calling for…

    Bloomberg
  • Here is when Fed officials see liftoff in interest rates

    Here's a handy guide to the latest thoughts of the 17 top Federal Reserve officials about the timing of the first rate hike. The Federal Reserve turned incrementally more hawkish in their public comments since the July Fed policy meeting, which is only natural now that the first rate hike is likely…

    MarketWatch
  • Play

    What the Fed Meeting Means for Bonds

    Janet Yellen & Co. are expected to hint at their timetable for raising interest rates. Here's how investors should prepare ahead of the meeting.

    WSJ Live
  • 10 Cities Where Homebuyers Pay Cash

    The portion of sales conducted exclusively in cash sales varied widely across the United States. Although demographics of home purchasers are not specifically tracked, all-cash homebuyers usually fall into three categories, Daren Blomquist, vice president at RealtyTrac, told 24/7 Wall St. Blomquist…

    24/7 Wall St.
  • 10 Things You Need To Know Today

    President Bill Clinton hold up some steaks at the 37th Harkin Steak Fry in Indianola, Iowa, September 14, 2014. China Is Slowing. Here's the roundup of the latest crummy data dump from Westpac's Jonathan Cavenagh: "Over the weekend, China released industrial production (IP), fixed asset investment…

    Business Insider