Measures of U.S. wage growth which have surged despite staggering levels of unemployment during the coronavirus pandemic reflect disproportionate job losses among low-income workers, Federal Reserve Bank of San Francisco President Mary Daly argues in a new study that she co-authored.
Although the unemployment rate jumped to a multi-decade record 14.7% in April, median weekly earnings increased by more than 10% in the second quarter over the same period last year.
This rise does not mean wages are increasing, but is occurring as more low-income workers than higher-wage earners lost their jobs during the pandemic. That left an overall pool of higher-earning workers from which to calculate the data, Erin Crust, Mary Daly and Bart Hobijn wrote in an economic letter published Monday on the San Francisco Fed’s website.
Hobijn is a visiting scholar at the San Francisco Fed and a professor of economics at Arizona State University, where Crust is a student.
“In the months following the onset of Covid-19, workers in the bottom 25% of the earnings distribution made up about half of the exits to nonemployment. In contrast, the top half of the distribution only accounted for about a third of the exits,” the economists wrote.
When separated out of the overall picture, earners who remained employed full time throughout the pandemic saw their median weekly earnings slow in the second quarter, further indicating that the moves in the aggregate data are being skewed by the disproportionate impact to jobs along the wage spectrum.
“It is important to realize that what goes up must come down,” the economists wrote. “While the recent job losses of low-wage workers have pushed up wage growth during the onset of the Covid-19 crisis, their job gains during the recovery will instead be a drag on aggregate wage growth.”
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