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Minimal wages

US jobs plentiful but too cheap for comfort

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Daniel Indiviglio
US jobs were plentiful again in December but too cheap for comfort. Strong employment growth last year was marred by a late hit to wages. The workforce participation rate and low-paying new jobs could be to blame. Minimum wage initiatives might help, though they have their own drawbacks. Sluggish earnings growth makes Republican attempts to redefine the work week look even more ludicrous.

The overall news was good. December job increases of 252,000 fell far short of November's 353,000 figure, but the 2014 average of 246,000 new workers a month was the highest since 1999. The unemployment rate also dropped to 5.6 per cent in December, the lowest it has been since it matched that level in June 2008.
 
The one blemish in Friday's jobs report was that average hourly earnings decreased five cents to $24.57, wiping out most of November's six-cent gain. Those earnings grew only 1.7 per cent overall in 2014, barely beating inflation.

One reason may be that labour participation is still low. It was roughly flat all year and well below levels prior to the 2007 to 2009 recession. A possible explanation is that many well-compensated retirees have been replaced with younger, less expensive workers.

The lowest-paid among them, though, will probably get raises in 2015 as 21 states boost the minimum wage. That should increase hourly earnings but could also impede employment growth. Bosses forced to shell out higher wages may cut jobs or hours to hold down labour costs.

That possibility makes a Republican-backed proposal to reduce health care coverage particularly ill-timed. The US House of Representatives on Thursday passed a Bill that would require employers to provide health insurance for employees who work at least 40 hours a week, rather than the 30 hours a week currently provided for under the 2010 Affordable Care Act. Employer expenses might drop, but bosses would also have a further incentive to cut worker hours and avoid paying for health care.

The Bill amounts to little more than counter-productive meddling. Congress might want to just get out of the way and let the economy hum.

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First Published: Jan 11 2015 | 10:22 PM IST

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