Even as economy expands, wages stagnate for many

WASHINGTON — Call it the no-raises recovery: Five years of economic expansion has done nearly nothing to boost paychecks for typical workers as the rich have gotten richer.

Meager improvements since 2009 have barely kept up with a similarly tepid pace of inflation, raising the real value of compensation per hour by 0.5 percent — the weakest growth since World War II. The increases averaged 9.2 percent at a similar point in past expansions, according to Bureau of Labor Statistics data compiled by Bloomberg.

Federal Reserve chairwoman Janet Yellen has zeroed in on faster wage growth as a priority.


Stagnant earnings also explain an economy that’s having trouble sustaining a rebound in housing and consumer spending, said David Blanchflower, a professor of economics at Dartmouth College.

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‘‘The bottom line is we’re a million miles from full employment,’’ said Blanchflower, a Bank of England policy maker from 2006 to 2009. ‘‘Workers are struggling, and they don’t see signs that things are suddenly going to change.’’

Households in the top 20 percent of US socioeconomic groups saw their incomes grow by an average of $8,358 a year from 2008 to 2012, versus a $275 annual decline for the lowest 20 percent, according to Bureau of Labor Statistics data.

The discrepancy gained visibility after the publication of French economist Thomas Piketty’s bestseller ‘‘Capital in the Twenty-First Century.’’ It catalogs the widening global inequality between the rich and everyone else and has sparked worldwide debate.

In the United States, stagnant wages are linked to a question puzzling economists and policy makers alike: How many able and willing workers are still on the sidelines? The issue may be among the topics Yellen and other central bankers discuss this week at their annual symposium in Jackson Hole, Wyo., where the focus will be on labor. Until the economy burns through this excess capacity, employers have little incentive to give raises.


Recoveries in the past exhausted that supply far faster than the current rebound, generating broad-based compensation increases that outpaced inflation and encouraged consumer spending.

If the economy had followed the historical relationship between joblessness and earnings, real wages would have been 3.6 percentage points higher by mid-2014, given how much unemployment has declined, according to a Chicago Fed study released last week.

The jobless rate was 6.2 percent in July, down from a post- recession high of 10 percent in October 2009.

‘‘We’re sort of in uncharted territory,’’ said Guy Berger, a US economist at RBS Securities. ‘‘This isn’t fully behaving like prior cycles.’’

The abnormality reflects the depth of the 18-month contraction. It displaced millions of Americans who, even with a recent pickup in hiring, are still making their way back to gainful employment. The lack of wage increases also helps explain why consumers don’t seem to be on stronger footing this far into the expansion.


‘‘The scope for improvement is limited,’’ Berger said. ‘‘But real wage growth could make a difference.”