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Amid the tightest labor market in a generation, long-strapped Americans are seeing only small wage hikes, and economists say companies seem determined to hold onto wide profit margins for as long as they can before forking over more to workers.

Expand chart
Wages rose much more steeply in the late 1990s, the last time unemployment was as low as now. Data: BLS, BEA, Jared Bernstein analysis; Chart: Axios Visuals

Why it matters: Stubbornly flat wages and living standards are one reason for broad political disgruntlement in the U.S.

Quick take: Economists have struggling to grasp why companies are not feeling forced to pass on bigger wages to attract and keep workers despite two years of steadily dropping joblessness, reaching 3.9% last month, the lowest since 2000.

But an increasing consensus is this simple conclusion — because they can.

  • "As long as firms have the clout to hold back pay increases, they will," Jared Bernstein, chief economic adviser to Vice President Joe Biden during the Obama administration, told Axios today.

The background: In the 2000 plunge of joblessness, wages increased by 4% on average. Today, companies across industries and the country complain of an employee shortage, but on average raised wages by just 2.6% last month, maintaining a long period of relatively flat compensation, according to the U.S. Bureau of Labor Statistics. Among reasons that economists cite:

  • A new underlying structure: Productivity growth is lower, people are more or less permanently out of the work force with drug addiction and criminal records, and unionization numbers are much smaller.
  • Business trends: Companies are becoming more automated and industries more concentrated, says Martha Gimbel, research director at Indeed. "It may just be that these structural factors are making it more difficult for workers to benefit," she tells Axios.

But, but, but ... Mark Zandi, chief economist at Moody's Analytics, tells Axios that less-watched statistics show more accelerated wage increases. Zandi cites the Employment Cost Index, which shows a 2.9% wage increase last quarter.

  • He predicts that the number will rise to 3.5% by this time next year and closer to 4% by the end of 2019.
  • "It's accelerating and is consistent with the state of the labor market," Zandi said.

Go deeper: Bernstein did a mashup of five government wage measures (chart above) that shows the far steeper wage increases in 2000. Read his Friday column in the Washington Post.

Go deeper

45 seconds ago - Technology

Jack Dorsey to step down as Twitter CEO

Photo: Joe Raedle/Getty Images

Jack Dorsey will step down as CEO of Twitter, the company announced Monday. He will be succeeded by CTO Parag Agrawal.

The big picture: Dorsey is also the CEO of financial payments company Square, which he co-founded in 2009, and has become a crypto evangelist in recent years.

Tracking the pandemic's unequal impact

Expand chart
Data: Morning Consult/Axios; Chart: Will Chase/Axios

The pandemic was bound to hit the most economically vulnerable among us the hardest. New polling data from Morning Consult, out this morning, shows the degree to which those difficulties were more concentrated among people of color.

Catch up quick: The Morning Consult/Axios Inequality Index has tracked the economic experience of adults in three wage groups since May 2020. We began publishing the findings in May of this year, and six months in, we’re slicing the data a little differently — and looking at inequality between ethnicities.

2 hours ago - Health

WHO says Omicron poses "very high" risk

World Health Organization Director-General Tedros Adhanom Ghebreyesus speaking in Geneva in October. Photo: Fabrice Coffrini/AFP via Getty Images

The World Health Organization said Monday in a new risk assessment that it believes the COVID-19 Omicron variant poses a "very high" risk to the globe because it may be more transmissible than other strains of the virus.

Why it matters: Though the WHO acknowledged there are still many uncertainties associated with the variant, the agency said it believes the likelihood of potential further spread of Omicron around the world is "high."