By Dr. Brian G. Long, Ph.D., C.P.M.
The question keeps coming up, so here are a few comments:
If we had been blessed with a normal recovery from the 2009 recession, we would not be having this discussion. The problem is the length of the recovery. In any recession, wages do NOT start to rise again until we return to near full employment. In the last ten recessions, we have generally returned to full employment in about 18 to 36 months. For the 2009 Great Recession, we are just now beginning to get back to where we started. The best clue that we are now approaching that stage is the appearance of numerous “help wanted” signs in the windows of many retailers. In the industrial world, firms will advertise for new positions and ALSO advertise higher wages. “Help Wanted” indexes are now at a 20 year high, and we are starting to see wages evolve into a seller’s market. Statistically, wages ARE starting rise, but just like the recovery, the increases will be slow.
The second problem inhibiting wage growth I have mentioned many times before. We have approximately 80,000 jobs in Michigan that can’t be filled because we do not have TRAINED candidates to fill them. Many of these are high paying jobs, like CNC operators and Certified Welders, but they are not jobs requiring a college degree. Our current average wage would be MUCH higher if we could fill these positions. But these jobs DO require vocational training, some of which may be beyond high school. Although their intentions are good, Michigan has elected a series of inept members to the State Board of Education. Over the past few years, the State Board has seriously constrained or eliminated vocational education programs by overloading the curriculum with draconian math and other requirements that have amplified the high school dropout rate. So we are increasing the dropout rate, and at the same time graduating students that are not prepared work in a 2015 environment. Almost everyone knows that the multitude unskilled jobs of the 1970s are gone, and that today’s workforce requires skills. But we keep turning out unskilled high school students like it was still 1975. Again, the school administrators are frustrated, but the Michigan Merit Curriculum has their hands tied.
A third factor relates to 21st century HR practices. In today’s word, multiple on-line data bases are available to tell the employers what wages and salaries “ought” to be. With enterprise software, these salary estimates get cemented in to the short-term business plan, and getting HR to shake from what they rightly or wrongly see as the “going rate” is difficult. In fact, they will stick to the rate even if means losing a good employee to competition. Because good people who ask for a raise are often turned down UNLESS the data base shifts. As I put it last month, few firms have money to retain people they would like to keep but can’t easily promote or offer more money—even if it will take two people to replace them. As the saying goes, to get a raise or a promotion, you have to move to another company. Again, sad but true.