Historically, tight labor markets have led employers to agree to pay workers more. In other words, it turns out it’s more economical to increase wages and benefits than to find new workers or risk losing current workers.
The unemployment rate, a key indicator of the health of the labor market, had remained below 4% for two years as of November, the last time it reached this level in the 1960s. And after years of lagging behind, hourly wage growth began to outpace inflation this spring, boosting living standards for workers, especially low-income workers.
“The labor market in 2023 was really about resilience,” said Daniel Chao, chief economist at job site Glassdoor, adding that the tight labor market could create a ripe environment for more workers to go on strike. He pointed out that it was created. “We entered the year facing significant headwinds. However, as the year progressed, the labor market was able to continue moving forward strongly.”
Heading into 2023, many Wall Street forecasters were predicting a recession. The Federal Reserve has been aggressively raising interest rates to combat inflation, and there is widespread speculation that the unemployment rate will rise as labor demand weakens. Those concerns lingered into the first months of the year, when 160,000 people were laid off in the tech industry in the first three months of the year and a series of bank failures briefly sparked fears of a broader economic meltdown.
But stronger-than-expected consumer spending encouraged employers to maintain healthy hiring levels and eased fears of a recession. Intense competition for workers has led employers to continue raising wages, with the bottom 25% of wage earners seeing the biggest increases this year, according to data from the Atlanta Fed.
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Justin Wolfers, an economist at the University of Michigan, calls 2023 “a banner year for the working class and low-wage workers,” saying that the post-COVID-19 economic recovery will be most difficult for people at the bottom of the income scale. He pointed out that it was strong.
“Low unemployment is the most important thing that will improve the status of American workers,” he said. “The second important thing is that they were able to negotiate significant real wage increases.”
Labor market strength played a key role in a series of strikes this year that helped secure the strongest union contracts in decades across a variety of industries.
“When the labor market is tight, the risk of union activity is lower because there is a greater chance that you will be able to find another job within a reasonable period of time, even if your employer retaliates,” said the former Labor Department economist. said union president Heidi Schierholz. Economic Policy Institute, a Washington-based think tank.
Notably, 11,500 screenwriters resigned in May, followed by 160,000 actors in July, bringing Hollywood to a standstill for the first time since the 1960s and ultimately leading to streaming bonuses and artificial intelligence This is to ensure protection against use.
Then, 45,000 workers at Detroit’s three largest automakers staged the auto manufacturing industry’s most destructive strike in decades, demanding at least 25% pay raises and the right to strike over factory closures in four and a half years. won.
meanwhile, 75,000 Kaiser Permanente health care workers missed three days of work in October, the largest medical work stoppage in U.S. history, and California is facing more than 20 percent raises over four years and a new $25 an hour minimum wage. obtained.
Shenika Brown, who cleans beds and operating rooms at a Kaiser hospital in Irvine, Calif., expects her hourly wage to jump from $20 to $25 an hour when her contract is reflected in her next paycheck. he said. This year, she regularly worked 16-hour shifts from 7 a.m. to 11:30 p.m., which meant she wasn’t able to see her 3-year-old son when she got home.
“I was missing out on a lot of time with my family,” Brown said. “The question was, ‘Do I put gas in my car or do I eat this week?'” I ate 25-cent noodles. All eating out had to be canceled. The situation will change with this salary increase. ”
Even the mere threat of a strike forced employers to agree to spectacular wage increases. In Nevada, a powerful culinary union has given about 40,000 workers a 32% pay raise on five-year contracts, the largest increase in nearly 90 years, after workers authorized a strike this fall. The union announced that it had won.
Among them was Maria Vedra, who had been a housekeeper for the past 17 years at the Mandalay Bay Casino on the Las Vegas Strip. Her new contract increased her pay by $3 an hour to $24.62 an hour.
The raise will allow her to save up for a trip to Cancun, but her family’s finances are still tight because “inflation is too high,” she said.
Some economists say these historic wage increases aren’t as strong as they appear on paper, as inflation eats away at workers’ paychecks. Although inflation has fallen in recent months, prices for many products are significantly higher than they were before the pandemic.
Still, labor economists, historians and sociologists say the labor movement’s momentum is more than just a reaction to overheated labor markets and inflation. Workers are adapting to the riskier working conditions they have endured during the pandemic, after decades of seeing wages remain relatively stagnant as corporate profits and executive compensation soar. In the four years leading up to the auto strike, pay for CEOs at the three major automakers increased by 40%, compared with 6% for employees, union officials said.
“Workers became militant because they really understood that their employers were doing a very good job,” says Rebecca Givan, a labor studies professor at Rutgers University. “And unless workers fought back, they couldn’t get their share of it.”
The U.S. Chamber of Commerce argued that this year’s strikes have caused “collateral damage to many local businesses and communities,” including higher costs for consumers and hurting small businesses.
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But workers’ sentiment is reflected in polling data. Support for American labor unions has soared over the past decade after hitting record lows during the Great Recession. According to a 2023 Gallup poll, 67% of Americans said they supported unions.
The popularity of these movements masks the continued weakness of the labor movement, as measured by the steady decline in union membership over the past four decades. Labor union representation in 2022 hit an all-time low, with the union membership rate of U.S. workers at about 10.1%, down from 20.1% in 1983.
And U.S. union density is likely to decline again in 2023, perhaps because workers are increasing faster than workers are joining unions, said Economic Policy Institute director Shielholz. Stated.
In fact, in 2023, the vast majority of American workers did not participate in strikes or work stoppages. But millions of workers benefited from significant wage increases, thanks in part to easing inflation (inflation was 3.1% in November), plentiful job opportunities and employability. Change jobs. In 2023, the labor market will continue to grow due to strong job creation in service-providing industries such as healthcare, education, and state and local government, even as growth in industries such as manufacturing, retail, and professional and business services slows. were able to maintain an advantageous situation. .
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The more vulnerable groups of workers are faring significantly better than in previous periods of economic recovery. The unemployment rate for black workers, often twice the rate for whites, hit a record low of 5% in May, but has since risen to 5.8%. The unemployment rate for people without a college degree is also near an all-time low. Higher wage earners typically recover losses faster, as they did after the 2008 recession, but the pandemic recovery has upended that logic.
“When the economy slows down, the working class is the first to be hurt,” said Wolfers, an economist at the University of Michigan. “It is noteworthy that this recovery has greatly benefited production and non-supervisory employees.”
By many measures, the labor market is returning to 2019’s pre-pandemic normal, a period defined by low unemployment rates and strong wage increases for low-wage workers. And economists expect the labor market to continue growing at a healthy pace in 2024.
This, combined with new union contracts expiring, could lead to a new wave of strikes in the new year. Union contracts covering tens of thousands of AT&T wireline workers, Hollywood TV and film staff and Boeing workers are set to expire at the end of the year, potentially leading to another wave of strikes.