When Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill Wednesday and Thursday he will likely be peppered with questions about why wages are not rising at a more rapid pace. But he may have to leave lawmakers guessing.
That's because economists aren't sure why wages haven't increased at a faster pace even though the labor market is tight. A tight labor market is often a precursor to a big pickup in pay as employers enter into bidding wars to attract and retain workers.
Adjusted for inflation, average hourly earnings for non-supervisory workers rose 1.7% in December from a year earlier, according to the government. While earnings rose five consecutive months through December and are rising at the fastest rate in years, economists say they aren't sure why the gains haven't been larger given the jobless rate, at 4.5% in December, is near a five-year low.
"It has been curious in this cycle why wage growth has lagged," ClearView Economics head Ken Mayland says.
Bernanke likely will be asked about the slow growth in workers' wages when he delivers his twice-yearly testimony on the economy to lawmakers. A number of Democrats, including Senate Banking Committee Chairman Chris Dodd, D-Conn., have promised to make workers' wages, particularly the divide between the haves and the have-nots, a focus of the hearings. Bernanke is scheduled to testify to the Senate today and to the House on Thursday.
http://www.usatoday.com/money/economy/employment/2007-02-14-wages-usat_x.htm?csp=15