Wage Growth Studies

We’ve wrapped up the holiday season and stepped into 2025, what does the data tell us about where we’re headed? Our December SmartMatch Employment Report shows that while overall employment was up 7.6% YoY, we saw a slight dip of -0.1% MoM, the first in over a year. Median hourly wages continued their steady climb, reaching $42.20 (+4.5% YoY), but not all sectors felt the same momentum. Winners: Tech: Median hourly rate hit $63.50/hour (+3.7% MoM). Demand for skilled talent shows no signs of slowing. Construction: Annual wage growth of +6.9% YoY highlights the resilience of this sector. Lagging sectors: Retail & Hospitality: A soft holiday season with just +3.8% YoY employment growth and wages dipping -0.1% MoM—proof that consumer confidence impacts business decisions. Casual workforce: Employment rose +13.3% YoY, but average hours dropped significantly (-10.7% QoQ), showing more shifts, but fewer hours. What stands out to me? Workers aged 45–54 saw the highest wage growth (+5.5% YoY), but younger employees (18–24) saw reduced hours (-1.3% YoY), indicating that employers may be opting for experience and stability in uncertain times. This data shows that while optimism remains, businesses are still navigating increased costs, compliance pressures, and shifting workforce expectations. The question for 2025 is: how do we build resilience and growth? Check out our full report here: We’ve wrapped up the holiday season and stepped into 2025, what does the data tell us about where we’re headed? Our December SmartMatch Employment Report shows that while overall employment was up 7.6% YoY, we saw a slight dip of -0.1% MoM, the first in over a year. Median hourly wages continued their steady climb, reaching $42.20 (+4.5% YoY), but not all sectors felt the same momentum. Winners: Tech: Median hourly rate hit $63.50/hour (+3.7% MoM). Demand for skilled talent shows no signs of slowing. Construction: Annual wage growth of +6.9% YoY highlights the resilience of this sector. Lagging sectors: Retail & Hospitality: A soft holiday season with just +3.8% YoY employment growth and wages dipping -0.1% MoM—proof that consumer confidence impacts business decisions. Casual workforce: Employment rose +13.3% YoY, but average hours dropped significantly (-10.7% QoQ), showing more shifts, but fewer hours. What stands out to me? Workers aged 45–54 saw the highest wage growth (+5.5% YoY), but younger employees (18–24) saw reduced hours (-1.3% YoY), indicating that employers may be opting for experience and stability in uncertain times. This data shows that while optimism remains, businesses are still navigating increased costs, compliance pressures, and shifting workforce expectations. The question for 2025 is: how do we build resilience and growth? Check out our full report here: https://lnkd.in/gwMTKbSf

The December 2025 Employment Cost Index came out today. This chart tracks year-over-year growth in salaries and wages (ECI) for management & professional workers (orange) versus all other workers (blue) going back to the early 1980s. Management/professional roles are about 40% of employment, but they account for a disproportionate share of total labor costs — so when this line moves, it matters. A few things jump out: 1) The 2021–2023 labor-shortage era is unmistakable. Wage growth surged for both groups — but non-professional workers briefly saw some of the fastest gains in the series. That was the “workers finally have leverage” moment. 2) That surge ended. Since 2023, pay growth has cooled for both groups. It may still be cooling. 3) The next divergence may favor non-professional workers again. The college labor market is softening faster — unemployment is rising more for college grads, and AI is a plausible contributor through slower hiring and substitution in some white-collar work. Meanwhile, immigration policy is constraining the inflow of workers into many non-BA occupations, which is likely to show up as renewed shortages — and faster wage growth — in manual occupations. My bet: shortages in manual roles will reemerge, and over the next few years we’ll see the blue line run above the orange line more often. #labormarkets #wagegrowth #recruitment #AI

Wage growth is cooling off Labor cost pressures will continue to ease in the coming quarters as the balance of power shifts away from workers and to employers. We extended Heise, Pearce, and Weber's (2024) labor market tightness study by expanding the regression window through Q3-2025, adding five additional quarters beyond their original sample ending in Q2-2024. The HPW Index—a composite measure combining the quits rate and vacancies-to-effective-searchers ratio (V/ES)—has declined significantly from its pandemic-era peak of approximately 2.8 in early 2022 to -0.06 in Q3-2025, marking the first negative reading since the pre-pandemic period. This represents a substantial normalization in labor market conditions, with the index now sitting just below historical average of zero (by construction, the standardized index has mean zero over the estimation sample). The HPW Index's trajectory suggests that labor market tightness has fully unwound its extraordinary post-pandemic surge, with conditions now consistent with or slightly below the 1994-2025 average. While there may be some residual momentum in wage pressures, the 0.90 correlation between the HPW Index and smoothed wage growth suggests that wage growth should continue moderating in coming quarters as the lagged effects of reduced labor market tightness work through.

Are Seafarers Being Left Behind? The Economic Reality of Wages vs. Inflation at Sea Over the past three decades, seafarers’ wages have failed to keep pace with global inflation, resulting in a sharp decline in real income and purchasing power. While nominal salaries have occasionally increased through ILO and ITF adjustments, these revisions have consistently lagged behind the cost-of-living growth—diminishing the attractiveness of maritime careers across all ranks and vessel types. ⸻ Wage Growth vs. Inflation Between 1990 and 2025, global inflation rose by approximately 200%, whereas the ILO minimum wage for an Able Seaman increased from around USD 300 in the early 1990s to USD 700 in 2025—a nominal rise of just 133%. This means that, in real terms, today’s seafarers earn significantly less than their counterparts three decades ago. From 2015 to 2025, wages grew by only 18%, while inflation surged by nearly 35%, translating into an effective real-term pay reduction of roughly 17%. Annual wage increments averaging 1–3% have been insufficient to offset inflation rates of 5–9% commonly seen in recent years. ⸻ Key Factors Behind Wage Stagnation Several market and structural dynamics have contributed to the growing disconnect between pay and inflation: • Weak freight markets in bulk and container shipping have constrained profit margins and wage budgets. • Nationality-based pay differentiation persists, leaving seafarers from developing nations with lower real incomes despite USD-based earnings. • Automation and digitalisation priorities have diverted shipowners’ investment focus away from human capital. • Incremental union agreements—such as the ITF’s planned 6.2% rise over 2026–2028 fail to align with global cost-of-living trends. ⸻ Strategic Considerations for Maritime Employers To maintain competitiveness and workforce stability, maritime companies and policymakers should consider the following measures: • Inflation-Indexed Wage Mechanisms: Introduce annual salary adjustments linked to global inflation indicators published by the IMF or ILO to preserve real income value. • Data-Driven Pay Benchmarking: Conduct transparent wage surveys—similar to Spinnaker’s model—to benchmark compensation across nationalities, vessel types, and ranks. • Reduction of Nationality Pay Gaps: Transition toward equitable pay structures based on skill and experience rather than nationality to improve fairness and retention. • Strengthened Collective Bargaining: Collaborate with unions under the Maritime Labour Convention (MLC) to institutionalize regular, inflation-adjusted wage reviews. ⸻ Conclusion Seafaring continues to offer competitive nominal wages compared to many shore-based professions. However, stagnant wage growth amid sustained inflation has substantially weakened real earnings and morale.

Several years after the big inflation shock, have advertised wages caught up with consumer prices? The answer depends a lot on where you live. For a new blog post with Guillermo Gallacher, we constructed a cumulative real wage index to track whether the purchasing power of wages advertised in job postings has fully recovered from the 2021-23 inflation surge. Here's where things stand as of January 2026: 🇺🇸 US: 100.8 - Real posted wages are slightly above their Jan 2021 level ✅ 🇬🇧 UK: 99.5 - Essentially recovered ✅ 🇨🇦 Canada: 97.5 - Still catching up 🇯🇵 Japan: 97.5 - Still catching up too 🇪🇺 Euro area: 96.2 - Further to go The euro area average hides huge variation. The Netherlands 🇳🇱 (99.7), Germany 🇩🇪 (99.1), and Ireland 🇮🇪 (99.1) are close to full recovery. Italy 🇮🇹 is the clear outlier at 89.9 - posted wages remain roughly 10 percentage points behind cumulative inflation. In the US, posted wages kept pace with consumer prices throughout this period. High demand for workers kept the labour market tight, and advertised pay adjusted swiftly. Though 1% real wage growth in 5 years isn’t that impressive, considering that real GDP increased 14%. As wage growth slows across the board, the remaining gaps in other countries may become harder to close, depending on how inflation trends going forward. Full analysis below - including data on how quickly wages adjust across countries and what this means for employers and employees 👇

Wages vs Inflation in Pakistan (2021–2025): What Prevented a Deeper Social Crisis? This chart compares nominal wage increases with implied real wage changes across income percentiles in Pakistan between 2021 and 2025. Source is Labor Force Surveys 2021 and 2025 by Pakistan Bureau of Statistics Inflation adjustment uses official CPI indices What the data shows Nominal wages rose most for the poorest Between 2021 and 2025, wage increases were highest for lower-income workers, reaching 55–58% in the bottom decile. Wage growth then declined steadily across the income distribution, falling to around 26% for the top 5%. This likely played a stabilizing social role While these increases were largely eroded by inflation, higher nominal wage growth at the bottom may have prevented a sharper deterioration in living conditions. In a period of extraordinary price shocks, this wage pattern likely acted as a social shock absorber, reducing the risk of widespread unrest that often accompanies sudden real income collapses among the poorest households. Inflation overwhelmed wages nonetheless Using PBS CPI indices, cumulative inflation over the period is approximately 55%. Once adjusted for inflation, real wages turn negative for almost the entire income distribution, with only the lowest income groups coming close to breaking even. Middle-class squeeze remains the dominant story Households in the middle of the distribution experienced persistent real wage losses of 10–15%, despite nominal increases. This helps explain rising economic anxiety, downward mobility concerns, and dissatisfaction among salaried urban households. Interpreting the top end with caution High-income wage estimates come with limitations Wage calculations for the top 5% should be interpreted carefully: High-income individuals are harder to reach in surveys, leading to smaller sample sizes and greater uncertainty. Income at the top is often underreported or deliberately withheld, especially where earnings come from multiple or informal sources. As a result, observed wage growth at the top likely understates total income dynamics for higher-income households. Important Note on Inflation Adjustment The inflation adjustment used in this analysis is based on headline CPI published by the Pakistan Bureau of Statistics (PBS) and does not vary by income group. In practice, lower-income households typically face higher effective inflation because a larger share of their spending is on food, fuel, and utilities—items that experienced above-average price increases during 2021–2025. As a result, even for the lowest income percentiles, nominal wage increases may not have translated into real wage gains. 2021–2025 was NOT a period of real wage growth — but nominal wage protection at the bottom likely helped preserve social stability (to the extent there was stability) Ahmed J. Pirzada in continuation of work you have done in more professional manner.

Wage Growth Is Cooling — and It’s Showing Up First Where It Matters Most The latest Atlanta Fed wage tracker highlights a meaningful shift beneath the surface of the labor market: wage growth for the lowest-paid workers has slowed sharply, now converging toward overall wage growth for the first time since the pandemic recovery began. For most of 2021–2023, the lowest quartile of earners saw the fastest pay increases — a combination of labor shortages, rapid job switching, and aggressive competition for service-sector workers. That gap has now closed. A few important takeaways grounded in current data: 1. The wage-price spiral risk has weakened. The Fed’s biggest worry in 2022 was that strong wage gains at the bottom would keep service inflation sticky. With low-income wage growth now falling below 4%, that pressure is easing materially. 2. Labor market cooling is broadening. The deceleration isn’t just a high-income story. Slower growth at the bottom suggests reduced turnover, slowing hiring, and softer demand for new workers — consistent with the trend in job openings and quits. 3. This supports the Fed’s pivot toward rate cuts in 2025. A key condition for easing is moderation in wage growth relative to productivity. The latest figures show exactly that: cooling wages without a collapse in employment. 4. The social dynamic is shifting too. The wage compression of 2021–2022 temporarily narrowed inequality. As growth at the bottom slows faster than at the top, that trend is beginning to reverse. The bottom line: This chart isn’t signaling stress — it’s signaling normalization. Wage growth is returning toward pre-pandemic ranges, easing inflation risks and giving policymakers more room to cut rates, but also reminding us that the post-COVID wage boom for the lowest-paid workers is fading. Breaking the inflation cycle will have to be painful for the lower income bracket over short/medium-term. Source: Financial Times

Americans who switch jobs are seeing pay gains nearly double of those who stay put Wed, April 3, 2024 at 12:14 PM EDT·3 min read Switching jobs has become increasingly rewarding for workers in 2024. New data from ADP released Wednesday shows the median year-over-year pay increase for job switchers was 10% in March, the highest rate of growth since July 2023. Meanwhile, job stayers saw an annual wage gain of 5.1% during the month. Overall, the spread between the two figures widened for the second month in a row. In addition to the wage data, the ADP data showed a surprise 184,000 job additions in March, per ADP, up from the 155,000 seen in February and higher than the 150,000 that economists surveyed by Bloomberg had expected. ADP's chief economist Nela Richardson  said the numbers show continued signs of resilience in the labor market. "You're still seeing a pretty solid, maybe even good to great jobs market for 2024," Richardson said on a media conference call Wednesday morning Wages vs. inflation Wage increases have been a closely tracked metric by economists in the Federal Reserve's fight against inflation. The prevailing concern has been that if wage growth continued to rise, it could increase consumer demand for goods and services and send prices higher. Richardson doesn't think ADP's recent data signals the start of a "wage-price spiral. But she acknowledged that "wages and wage growth could keep inflation higher for a bit longer This, Richardson said, could make the Fed's path trickier. Recent hotter-than-expected inflation readings have added to these concerns as investors fear sticky inflation could push out the Fed's interest rate cuts. And all else equal, continued wage growth won't help ease such fears It could challenge the ability of the Fed to cut quickly, and I think they already know that Richardson said. Still, Richardson and other economists have noted that strong jobs numbers like those seen in ADP's release on Wednesday have overall been a positive for the economic story at large. Given the Fed's cautious approach to cutting, strength in the labor market has been considered a key to the economy avoiding recession while the Fed keeps rates restrictive to help fight inflation. The March jobs report is expected to show 215,000 nonfarm payroll jobs were added to the US economy last month with the unemployment rate falling to 3.8%, according to data from Bloomberg. In February, the US economy added 275,000 jobs while the unemployment rate hit 3.9%. "With payroll growth still flying north of 200K, there is altitude to lose before the Fed is faced with a more menacing trade-off between the employment and price stability sides of its mandate," Wells Fargo's team of economists wrote in a research note previewing the release. New data shows the median year-over-year pay increase for job switchers was 10% in March, the highest rate of growth since

The employment cost index (ECI), the Fed's preferred measure of wage growth, showed cooling in private-sector wage growth during the 2nd quarter; at 3.4% annualized, we're around where we were before the pandemic. This will probably be reassuring for the Fed as they pivot into interest rate reductions over the next few meetings. (The first rate cut is probably coming in September.) Unlike the average hourly earnings (AHE) wage measure we get in the monthly jobs report, the ECI tries to adjust for workforce composition changes over time - so measured wage growth is less distorted by changing shares of low/high paying jobs. This gives a better read on supply/demand-driven wage pressures. The minus is the ECI is less timely than AHE. (We get July data for AHE this Friday; today's ECI data is for Q2.)

Today, we're introducing Square Payroll Index, a new economic indicator that uses data from Square sellers to track wages (+tips+overtime) in the restaurant and retail sectors. Restaurant and retail workers are among the most common jobs in the United States, but there's surprisingly little public data on their wages and growth trends. The federal government publishes a monthly jobs report, but it only posts wage growth averaged across all Americans, and their sector-specific data comes out on a multi-month lag. In a dynamic economy, this falls short of the needs of workers, business owners, and policymakers who need to make decisions based on the latest information. Square Payroll Index fixes that. Check out our data, and read my analysis of our first release: why I think the post-pandemic job market boom is over. Data: https://lnkd.in/ecBu7cUm My full analysis: https://lnkd.in/etkxy7-5 Press release: https://lnkd.in/er-FVXai