A Steady Job Beats a Higher Paycheck

Workers feel good about the economy because they value stability over wage growth.

 

One of the anomalies of the current U.S. economy is that workers seem more satisfied with it than economists are. It comes down to their view of the labor market: Workers are right to welcome its stability, and economists are right that wage growth is lacking.

Economists have two main data points in their favor. Wage growth is currently at about  3 percent, compared to 4 percent during the strong parts of the past two cycles. And the employment-to-population ratio for workers aged 25 to 54 still hasn’t returned to its high from the last cycle, let alone the all-time high from 2000.

Despite this “hard economic data,” the “soft economic data” — public sentiment — shows that the economy and labor market are perceived to be about as good as they’ve ever been. Gallup has been asking the public every month since 2001 what it considers the nation’s most important problem, and in November only 13 percent responded with an economic problem. The just-completed midterm elections were largely a referendum on health care and President Donald Trump, not on the economy.

Job market sentiment continues to outpace the hard economic data as well. The Conference Board’s monthly consumer confidence survey in November showed that 46.6 percent of respondents say jobs are “plentiful,” compared to only 12.2 percent who say that jobs are hard to get. The last time that differential was so great was during a two-year period from 1999 to 2001.

Given the choice between today’s labor market and 1999’s, I would take today’s. The labor market of the late 1990s was hot, but it was also unstable, fueled by speculative technology companies and investments. Today’s labor market may not be quite as robust, but what it lacks in strength it makes up for in stability.

As a worker, I’d rather be in a labor market with lots of job postings, a low level of jobless claims and a sustainable level of wage growth. It’s certainly preferable to being in one fueled by speculative excess, where I have to constantly worry about when the mania is going to collapse. I’ll take 3 percent wage growth today with good prospects for being employed tomorrow over 4 percent wage growth today and unemployment tomorrow.

There remains an unresolved debate about what central banks should have done in response to the dot-com boom of the late 1990s and the housing boom of the mid-2000s, two cycles marked by excessive speculation but acceptable levels of inflation. Were there ways to curb the excesses without harming the labor market or the economy at large? Given the lack of above-trend inflation, should the Federal Reserve have run looser monetary policy, supporting the labor market even if it meant even wilder, potentially destabilizing levels of speculative excess? In cycles like that, policy errors may have been unavoidable.

The good news for workers today, and perhaps why their optimism is higher than some economic data might suggest, is that there’s no reason why this labor market can’t continue for at least several more quarters. The excesses of the past couple years have been in financial markets, not in the real economy. Bubbles in cryptocurrencies, cannabis and private technology companies should not lead to a heavy-handed response from the Fed. Household leverage remains low, and business investment remains modest.

In 2019, a labor market with an unemployment rate below 4 percent and slightly higher wage growth may not be enough to satisfy those who are fixated on the economic performance of 1999. But most workers would probably take it.

Can the Strong Job Market Help You Get a Raise?

By Daniel B. Kline

A green sign that says "salary increase just ahead" in front of blue skies.

1. Just ask

It sounds silly, but if you don’t speak up, your boss likely will assume that everything is great. Don’t just set up a meeting and ask for more money. Arrange an appointment and lay out a case for yourself.

List your accomplishments and why you should be paid more. It’s fine to mention that wages have gone up across your industry, but that should only be a small piece of your argument.

2. Don’t take no for an answer

If your boss tells you he or she believes your work doesn’t merit a raise, don’t let that stand. Ask for specific areas for improvement and for regular progress meetings.

In the case where you’re told “there’s no money in the budget,” ask for a promised raise to be worked into the next budget. If your boss agrees, try to get a specific amount negotiated or the promise of a meeting before budget season.

3. Gauge your worth

Look for a job with the idea that your preference would be to stay, but that you’re willing to leave. You may surprise yourself and find a much better situation. It’s also possible you’ll get a better offer that you can bring back to your current employer.

This isn’t a well to go to often, and it’s not one to undertake without considering the consequences. If you use this tactic, you may find that your employer doesn’t want you at a higher price — or that nobody is willing to pay you one.

4. Leave

In my first job, I went from a low-level part-time assistant to managing editor of a magazine in one move. As you might imagine, I was paid way less than the previous managing editor. Even though I received nice raises on a percentage basis, I still made much less than other comparable editors.

Since my boss wasn’t going to give me a $20,000 raise, my only real option was to leave. When I did, I got somewhere near market value because to the new company, I wasn’t a young kid who got a big job he may not have deserved. I was an experienced editor with a lot to offer.

Be your own advocate

It’s important to understand your worth and take an active role in managing your career. That doesn’t mean you have to job hop or eke out every nickel possible. Instead, find a company that values you and pays you a fair wage so that you can be professionally satisfied.