Biggest US Wage Growth in Decade for Lowest-Paid Workers

United Auto Workers assemblyman works on a 2018 Ford F-150 truck being assembled at the Ford Rouge assembly plant, in Dearborn, Mich., on Sept. 27, 2018 Carlos Osorio/AP

The incomes of the bottom 25 percent of U.S. wage-earners are rising at the fastest rate of all groups of employees, according to data published by the Federal Reserve Bank of Atlanta.

The wages of the lower-most quartile grew by 4.5 percent in November from a year earlier, according to the Fed, while wages for the top 25 percent increased by 2.9 percent over the same period. The last time the wages of the bottom 25 percent of wage-earners grew at 4.5 percent was in August 2008, and before that, in October 2002.

Dynamic wage growth among the lowest-earning cohort is indicative of an increasingly tightening labor market.

Median wage growth, broken down into quartiles. Federal Reserve Bank of Atlanta/Current Population Survey/Bureau of Labor Statistics

The Atlanta Fed also found that the highest wage growth in November was noted for workers in finance and business services (4.1 percent), followed closely by manufacturing (4.0 percent), and construction and mining (4.0 percent).

Employees in the education and health industries experienced the lowest earnings gains in the same month, coming in at 3.0 percent.

The month of November also saw a convergence of wage growth to 3.6 percent overall among the three groups of high-skill, mid-skill, and low-skill workers.

More Workers to Qualify for Overtime Pay in 2020

An additional 1.3 million workers will see an increase in pay in the new year, after new rules from the Labor Department go into effect on Jan. 1, 2020.

Under new federal rules, more workers will be eligible for overtime pay if they log more than 40 hours a week, after the department raised the threshold—the first time in more than 15 years—for when employees are exempted from being paid overtime.

The new threshold will rise to $684 per week or $35,568 a year, which is a 50 percent increase from the current threshold of $455 per week or $23,660 a year. The rules will also allow employers to cover up to 10 percent of the threshold with bonuses and commissions that are paid at least annually or more frequently.

The purpose of the new threshold is to exempt executive, administrative, or professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements, the department said. It added that the new threshold would take into account wage and salary growth since 2004.

Sustained Labor Market Strength

The number of Americans filing applications for unemployment benefits fell last week, in a sign of ongoing labor market strength.

Initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 222,000 for the week ended Dec. 21, the Labor Department said on Dec. 26.

In November, the U.S. unemployment rate fell back to 3.5 percent, the lowest in nearly a half-century, the Bureau of Labor Statistics said.

“Notable job gains occurred in health care and in professional and technical services,” William W. Beach, commissioner of the Bureau of Labor Statistics, said.

Unemployment rates were lower in November in seven states, higher in five states, and stable in 38 states and the District of Columbia, the Bureau of Labor Statistics reported Dec. 20. Seven states had jobless rate decreases from a year earlier, two states had increases, and 41 states and the District of Columbia had little or no change.

Figures show that in January 2019, the unemployment rate among men 20 years old or older was 3.7 percent, while the jobless rate for women in the same age bracket was 3.6 percent. In November, the unemployment rate for both combined fell to 3.2 percent.

By comparison, joblessness among the cohort of 16- to 19-year-olds ticked down to 12 percent in November, compared to 12.9 percent in January. Peak unemployment for this group in the past two decades hit 27.2 percent in October 2009.

Joblessness among African Americans reached historic lows in 2019, falling to 5.5 percent in November from 6.8 percent in January.

Labor market strength is underpinning consumer spending, keeping the economy on a moderate growth path, despite headwinds from trade tensions and slowing global growth that have weighed on manufacturing.

Janita Kan and Reuters contributed to this report.