World Economy

US Economy Sluggish

US Economy SluggishUS Economy Sluggish

It’s almost starting to sound like a broken record at this point: the economy is sluggish, wages aren’t increasing, and the middle class is struggling. This isn’t news to anyone. The matters at the heart of America’s economic woes are complicated and have roots in a number of different issues. This is why there is no “magic bullet” solution, and it’s also the reason why policymakers are unable to turn things around with a snap of their fingers.

While the unemployment rate has fallen considerably and a number of other economic indicators are showing that things are falling into place, one area that has not seen any improvement — and that is likely slowing many other areas of the economy — is wages. And the wage issue isn’t relegated only to the American economy. Global wage growth slowed to 2% during 2013, or a drop of 0.2% from 2012, according to CNBC. American wage growth has been similarly sluggish, with average hourly earnings bouncing around the $24.50 mark, as it has been for some time.

There has been some progress in the area of wages, particularly at the bottom. Minimum wage increases were passed by voter initiative in a number of states during the 2014 midterm election, and a series of cities have taken it upon themselves to raise their own wage floors, sometimes to as much as $15 per hour. The issue is that the promise of raises for workers is simply not materializing.

  Tax Incentive

Legislators have handed down tax incentives, among other things, in an effort to get a trickle-down effect which would, ideally, spur hiring and wage increases, but it just isn’t happening. This has led to increasing levels of income inequality and the widening of the wealth gap.

But there may be some good news around the corner. It looks like we may be hitting an area of critical mass, in which employers will finally need to start boosting employee pay. According to The New York Times, along with some new data from the National Federation of Independent Businesses (NFIB), there is reason to be optimistic that the much-needed wage boom is nigh.

A survey from NFIB reveals that, by and large, businesses are much more optimistic about the economy than they were just a few months ago. On top of that, a growing percentage plans to hire more workers, and a considerable chunk (22%) reported raising compensation, as opposed to just 2% who reported lowering it. “The reported gains in compensation are still in the range typical of an economy with reasonable growth, and labor market conditions are suggestive of a tightening, which will put further upward pressure on compensation,” the survey says.