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The bank told customers on Thursday in a note that wages for low-wage workers rose 5.3% year-on-year in the second quarter. For the third quarter, data is not yet complete, but preliminary readings are on track for a peak of 6% in three decades.
Some industries posted even larger wage increases in the second quarter, including a 13% year-over-year spike for non-supervisory leisure and hospitality workers. Since March, industry wages have risen 22%, mainly because emergency unemployment benefits included in the US bailout have had a larger effect on the supply of labor to jobs. lower salary levels. The surge in wages can also be attributed in part to growing demand for low-wage workers as the service sector has started to recover following an increase in immunization, according to the report.
But Goldman Sachs has warned that these wage metrics “cannot be taken at face value” because they are skewed by the pandemic.
As the economy recovered from the Covid crisis, employers struggled to find workers amid persistent labor shortages. To attract employees, many employers have increased wages.
The growth in wages of low-wage workers is driving inflation for low-skilled consumer services, including hotel accommodation, food and dry cleaning services.
But if the wages of low-wage earners continue to rise, it will likely help boost inflation even more, as companies are footing customers the bill for their increased overheads. A key measure of inflation, the PCE price index, which tracks consumer spending, rose 4.3% in the 12 months ending in August, marking the fastest rise since January 1991.
Some consumer services have admitted to raising their prices in response to wage pressure. Chipotle (GCM), for example, hiked prices from about 3.5% to 4% in June after raising employees’ hourly wages from about $ 2 to an average of $ 15.
While rising wages are a good thing for low-wage workers who have struggled with stagnant pay as corporate profits have skyrocketed, low-wage growth could indicate inflation is not so transient than the Fed might wish.
But wage increases alone were not enough to get some workers back to work: Although job gains looked promising over the summer, the United States added just 235,000 jobs in August. , because of the Delta variant.
Further wage growth could normalize given the end of unemployment benefits, or if there is better than expected growth in the labor force. If wage growth continues to rise and put upward pressure on inflation, consumer prices could continue to rise until 2022.
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