Why improved economic climate has not resulted in as many job opportunities and pay raises?


Our economy is doing very well. Stock market is reaching record high levels but jobs market has not expnded in proportion to that. Salary increases are still lagging. What are the reasons behind this gap?

Job Analysis
Growth Strategies
Economic Research
Arvind Shrikant Tripathi, PMP, MBA, MBB, MSIE, CMQ/OE
38 months ago

4 answers


Two responses:

There is a secular change in the labor market as automation increasingly eliminates jobs, even in developing countries. Coal mining is a case in point - taking off mountain tops is more cost-efficient than drilling while utilizing fewer workers. Even if the government of the United States manages to resuscitate coal, it will not bring back many coal jobs.

Rewarding shareholders remains a constant in corporate life. Executive pay plans are designed to align executives with shareholder return. That means maximizing profits, share buy-backs and dividends. An increase in labor costs is antithetical to maximizing total shareholder return.

Lawrence Laier SPHR
37 months ago
Excellent response! Thank you. - Arvind Shrikant 37 months ago

Fundamentally, the stock market typically is a leading indicator, not lagging nor near-term influence.

Salaries are influenced by one or more of the following:
* supply and demand (e.g. for a construction or service worker - rates go up with surges in demand, or gaps in skilled people)
* seasonal or infrequent occurrences -- in some industries, bonuses or raises happen only a end of year, or based on a business result achieved at conclusion of a project.
* macro-economic statistics - like cost of living or inflation

Stock market reflects analyst views or actual results on company financials, competitive alternatives for investments (where else can I get a better return with commensurate risk?), and others.

Also, there's a time lag for many companies who have labor contracts, or need to issue salary increases/raises in systematic way. With thousands of employees, budgets get set, raises only issued at set times, etc. (bureaucracy or however you wish to describe).

Re: the number of jobs - market for those seeking employment -

Similarly, this doesn't necessarily tie directly with economic results, as the inputs to that good outcome could be driven by automation, technology advances, worker productivity, etc. Also, in some industries, good economic results only indicate that some downturn or dip is going to occur in the near future (cyclical - especially where inventories get accumulated, later sold and only built up in a short window ahead of the next surge).

I observe great inconsistencies (dis-continuities) in the job market and employment situations. Example: We hear a lot about insufficient skills among the workforce - at the same time, very skilled people are being deemed 'not a fit' because of age, perceived salary expectations, likelihood to change jobs, and others. Firms that have open reqs and cite 'lack of skills' are themselves inflexible many times.

Another fallacy about 'how hot the market could be' has to do with churn -- people changing jobs, which make fuel the notion about jobs being available (more, as in a higher number of openings), while in reality the 'system' is staying relatively level.

In sum, with industry variations, skill differences and the rapid change in many business situations, it's difficult to generalize about jobs in the economy, in my view.

Michael Franken
37 months ago
Excellent response Michael! Very thougthful. - Arvind Shrikant 37 months ago

For sure automation eliminates jobs as mentioned, plus competition increased and new markets pop up with a huge workforce available for cheaper prices. outsourcing services led to save costs, different companies can rely on external services providers for the same services, there is no need to train people for every position. Some services are provided by companies located in markets where salaries are cheaper.

Paolo Beffagnotti
37 months ago
Thanks. - Arvind Shrikant 37 months ago

organizations still want to play it safe? Reward shareholders first or is it something else?

Arvind Shrikant Tripathi, PMP, MBA, MBB, MSIE, CMQ/OE
38 months ago

Have some input?