- REUTERS/Noah Berger
In notes this past week, Bank of America Merrill Lynch, JPMorgan, and the Federal Reserve Bank of Atlanta all laid out good news regarding the paychecks of low-wage workers.
In a note on the growth of subprime auto loans, BAML economists Emanuella Enenajor and Lisa Berlin showed reason for optimism based on wage-growth metrics from the Bureau of Labor Statistics’ employment report.
“Finally, the lower-income consumer, the demographic segment most likely comprising subprime borrowers, has been experiencing strong income growth,” the note said.
“Average wage growth of the bottom 10% and bottom 20% of employment categories has been accelerating at twice the pace of all other jobs.”
- Bank of America Merrill Lynch
JPMorgan’s Robert Mellman used the weekly earnings report from the Bureau of Labor Statistics to break out the improvement in income for those in the bottom tenth of earners.
Here’s Mellman’s breakdown (emphasis added):
Usual Weekly Earnings indicates that median earnings for those at the first decile (10% on the earnings distribution) had been declining irregularly relative to median earnings (50% on the earnings distribution) through the prior expansion and through the first few years of the current expansion. But the lower-wage workers have been regaining some of the lost ground over the past few years. The gains have not been dramatic. But the declining trend was reversed and modest gains have been realized.
Basically, the gap between what middle- and low-income workers make had been getting wider and wider from 2004 to 2013. Now that trend is starting to reverse. The study also showed that low-wage occupations have seen a marked improvement in wages since late 2014 as well.
Additionally, data from the Atlanta Fed outlines that this catch-up is most likely not because of declining middle-class wage growth but rather an actual increase in wages for low-wage workers.
A blog post by Ellyn Terry, an economic analyst for the Atlanta Fed, presented the case that, based on the Atlanta Fed Wage Growth Tracker, middle-income workers have seen improving wage-growth trends, and low-wage workers have also been beneficiaries.
“Wage growth overall has moved higher over the past year, driven primarily by those working in low- and middle-wage jobs,” Terry said.
Based on this, one can assume that the shrinking gap between median and low-wage earners is being closed by increasing wages at the bottom tenth rather than declining wages for the median.
Now, to be sure, the bump in the minimum wage in various cities and states is a contributing factor, but since these measures are aggregates for the entire US, it is safe to assume that the improvement is from more than that one cause.
Based on all these measures, it appears that workers at the lower end of the income scale are getting some relief.