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Wage hikes not enough to boost broader US salaries


Hikes in the minimum wage take effect this week in about 40 US states and municipalities but they will not be enough to boost US salaries more broadly, economists say.

Congress has not approved a federal minimum wage hike since 2009, and it was not indexed to inflation, so state and local governments stepped in to help workers on the lowest end of the pay scale make up some lost ground.

Washington state’s minimum wage will rise to $11.50 an hour, the highest in any state, while some are phasing in increases to get to a “living wage” of $15, compared with the federal minimum of $7.25.

In all, 18 states and nearly two dozen municipalities are raising their base salaries, but economists say the move affects a relatively small segment of the American labour force.

They say policies that could have a broader impact on wages include direct employment programmes, like infrastructure projects, especially in regions of the country that have not yet recovered from the recession.

An expanded earned-income tax credit which would boost earnings for higher-wage workers could also help, they say.

Other policies unrelated to wages include standardizing state licensing criteria for professions like hair dressers.

This would allow professionals to move to areas with more vibrant economies without having to pay to fulfil new licensing requirements.

Another more technical change would be to clamp down on the use of non-compete clauses which firms increasingly include in employment contracts.

Such clauses keep workers from moving to competitors or starting their own businesses.

Even with the US economy in its eighth year of recovery, and with solid hiring pushing the unemployment rate to a 17-year low of 4.1 per cent, wage gains have been far more sluggish than economists and policymakers expected.

The gains have not been widely shared, either.

The US final employment report for 2017 showed average hourly earnings increased 2.5 per cent to $25.63, just ahead of consumer price increases.— AFP

Heather SCOTT

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