Are Salaries Going Up? Why Workers Shouldn't Expect A Raise in 2017

Workers may have gotten used to fatter paychecks and deeper pockets in 2016, when the average hourly wage grew by 10 cents. But if they were expecting more raises to follow into them into 2017, they’ve probably been disappointed so far.

The average hourly wage for Americans rose to $25.97 at the end of 2016, nearly a 3 percent increase. That’s also the most wages have grown in the past seven years, since the height of the recession.

But that pace of wage growth slowed at the beginning of the new year, when the average hourly wage increased by just three cents to hit $26.

Despite the relatively disappointing wage growth numbers in January, the jobs report released in February showed that the job market added a seasonally adjusted 227,000 jobs in the first month of the new year. The tightening labor markets could drive increased wage growth as the year continues. Experts won't know more until March 10, when jobs numbers for February will be released.

President Donald Trump campaigned on the promise of more jobs and better wages, saying he inherited a “mess” from President Barack Obama.

“To be honest, I inherited a mess,” Trump said to journalists in February. “It's a mess. At home and abroad, a mess. Jobs are pouring out of the country; you see what's going on with all of the companies leaving our country, going to Mexico and other places, low pay, low wages, mass instability overseas, no matter where you look.”

The numbers show that not only did wages grow under Obama’s presidency, the unemployment rate dropped, as well. In October 2009, at the height of the recession, the unemployment rate stood at 10 percent. When Obama left office in January, only 4.8 percent of Americans were unemployed.

Still, slow wage growth indicates that the economy has not fully recovered from the recession after the stock market made an unwelcome plummet in September 2008, nearly 10 years ago. Because of the stresses on the labor market since the crash, employers have been being cautious about giving raises to their coworkers — many employers argue they simply don’t have the resources to do so.

Until wage growth increases by 3.5 to 4 percent, U.S. workers will not see the benefits of economic growth in their pockets, according to the Economic Policy Institute, a nonprofit think tank specializing in labor issues.

In 2007, before the recession, wage growth hit that 3.5 to 4 percent mark for the majority of that year. In June 2007, for instance, wage growth for all nonfarm employees was 3.81 percent, and for production and nonsupervisory workers, it reached 4.13 percent, according to EPI analysis of data from the Bureau of Labor Statistics.

And if the recession had never hit and wage growth had stayed at the 3.5 percent target throughout the past 10 years, the average hourly wage of private employees would be $29.17 today — three dollars more than it actually is.