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It's the great economic conundrum of our day: if the unemployment rate is so low, why aren't wages growing faster? The law of supply and demand tells us that as labor gets scarce, wages should rise. Yet, as we saw in the latest jobs figures on Friday, average U.S. hourly earnings have barely exceeded inflation for three years running.

What's going on? The answer may lie in the Wage Growth Tracker (below), an alternative gauge produced by the Federal Reserve's Atlanta bank. It substantiates what a lot of people have suspected: that older, higher-paid workers are leaving the workforce and being replaced with cheaper, younger workers who hold little bargaining strength when they can be quickly replaced by automation.

Expand chart

Data: Federal Reserve Bank of Atlanta; Chart: Lazaro Gamio / Axios

A level deeper: Automation technology has held down the wages of lower skilled workers for more than four decades, by giving employers a fallback option when labor gets too expensive. Recent employment growth has been bringing these workers back to the labor market, but their power to negotiate higher wages remains weak.

An enduring headwind: BMO economist Sal Guatieri theorizes that the growing number of applications for automation will keep wage growth low for the foreseeable future. "New automation is working its way up and down the skills chain, threatening a wider range of jobs than in the past, including many non-routine positions," he writes.

Be smart: The upside of automation is that it should increase the productivity of the workforce, which has historically been a necessary (although not always sufficient) condition for wage growth. But some leading economists say this relationship has broken down, and that we shouldn't be surprised if shareholders reap future gains of higher productivity while leaving workers no better off.

Go deeper

Supreme Court declines to hear case on qualified immunity for police officers

The Supreme Court on March 5. Photo: Olivier Douliery/AFP via Getty Images

The Supreme Court on Monday declined to hear an appeal for a lawsuit brought against Cleveland police officers that challenges the scope of qualified immunity, the legal doctrine which has been used to shield officers from lawsuits alleging excessive force, Reuters reports.

Why it matters: The doctrine has been the subject of scrutiny from civil rights advocates. Eliminating qualified immunity was one of the key demands of demonstrators during nationwide protests in 2020 following the killing of George Floyd.

Updated 2 hours ago - Politics & Policy

Capitol review panel recommends more police, mobile fencing

Photo: Olivier Douliery/AFP via Getty Images

A panel appointed by Congress to review security measures at the Capitol is recommending several changes, including mobile fencing and a bigger Capitol police force, to safeguard the area after a riotous mob breached the building on Jan. 6.

Why it matters: Law enforcement officials have warned there could be new plots to attack the area and target lawmakers, including during a speech President Biden is expected to give to a joint session of Congress.