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Why wages remain stagnant after years of economic growth


A fundamental question economists argue about is why wages remain stagnant after a number of years of economic growth. Under the laws of supply and demand, the more people or firms that want to hire someone, the higher the wages should be.

This article from Slate discusses the problem correctly in terms of particular labor markets for specific types of jobs. Most nurses, for example, are not looking for jobs anywhere in the country. They are looking at hospitals or nursing homes in the city where they live.

Anyone with relatives or friends in different cities in different parts of the country knows that we actually have many labor markets and economies. We are used to describing the price of houses In different places, but less used to describing local labor markets except rural folks saying "no jobs here"

The great economic booms in America have come from people moving from a place to a place. People moved to California for the gold rush, and they stayed. People moved from the South to the North for heavy manufacturing, such as steel and automobile production.

Seattle is a hot city with major growth and a gigantic well known employer. But it is also home to tens of thousands of recent emigres from Somalia and Ethiopia, helping to fuel economic growth. A hundred years ago, Seattle's emigres came from several East Asian countries.

Our largest cities, mostly on the coasts, are filled with many small employers and immigrants. Other cities not on the coasts that feel that vibe and benefit from growth are Chicago, Atlanta, Denver, Las Vegas and Phoenix.

In the Great Lakes region, we have many cities that experienced an influx of growth in the early to mid twentieth century, primarily for low skill but difficult manufacturing work, such as Detroit, Pittsburgh, Cleveland, Buffalo. These cities attracted both American immigrants from the US south and Eastern European and Irish immigrants in large numbers.

Those cities and smaller versions of them must reinvent their attitudes to attract new industries and new generations of newcomers. As long as political and economic power in those communities is wielded by people living in an earlier era, and rooted to the same rules of jobs, they will continue to shrink.

I am not from Michigan, but I have lived here 28 years. I am now seeing the forces of modernity fight for a new economy in Detroit for the first time. I am Impressed by the civic commitment of the mortgage lender Dan Gilbert and the vision of Mayor Duggan. That does not mean I agree with everything they do. But population for jobs, housing and retail and restaurants really are arriving into the downtown.

Time will tell how much economic spin off and whether city population growth will occur.

Here is a link to the article, "Why is it so hard for Americans to get a decent raise", by Jordan Weissmann, 1/16/18

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