If low-wage workers were low-cost workers, they wouldn’t be the last workers hired and the first ones fired—quite the opposite. Eric Morath and Julie Jargon of The WSJ report that the pay of the lowest-paid workers is finally beginning to rise faster than median pay—evidence that the economy is growing relatively more willing to employ these workers again. The last time that happened was during the 2006 to 2008 economic peak when employers had nowhere else to turn for workers. Since then, the wages of low-wage workers have grown more slowly than the median—evidence of relatively restrained demand for these workers when other higher-wage workers were available to be hired. It wasn’t until the spread between their wages and the median widened that employers once again turned to them for employment. Based on this pattern, it’s hard to believe that low-wage workers are low-cost workers and that employers mustn’t pay them lower wages to make them competitive with alternatives all things considered. I explain the economics in more detail here.
