Despite Recession, Hourly Wages Are Going UP — Here’s Why

Just in case you’ve been sleeping for two and a half months: the economy is underwater just about everywhere right now as governments continue to limit economic activity to the bare minimum.

But it’s not all doom-and-gloom out there — hourly wages are actually rising according to the latest available data. But there may be some negative consequences when all is said and done. Hourly wages are going up in America for an absolute torrent of reasons, which is pumping more money into the system and accelerating the stock market. But let’s see what’s going on when it comes to what’s on the ground…

Traditionally Low Paid Employees Got a Temporary Infusion

Lower paid employees such as grocery store employees and coffee shop workers got “hazard pay” (sometimes known as “hero pay”) for continuing to work during the pandemic. This is temporary, but provided a much needed reprieve during the time. Unfortunately, since this was a temporary infusion, things are about to go back to the status quo, and it may be interesting to see what happens when it does.

Some employees are getting cash bonuses, and many of the companies delivering these bonuses (such as Wal-Mart) are doing unexpectedly well due to the pandemic because of the increased reliance on grocery stores over restaurants and fast food services.

Many Lower Paid Jobs Lost—Temporarily

Hourly wages are also increasing because many low paid jobs have been discontinued. Higher paid workers are switching to remote work, while lower paid workers are being furloughed or simply laid off. This has the impact of raising the general hourly wage because only higher income workers are even working during the coronavirus pandemic.

But those who aren’t working are getting unemployment at a rate of $20 to $24 an hour. This is far greater than some of them may have been making before, with many places having a minimum wage close to the federal minimum.

To understand how this influx of money is being spent, we can look at how people spent their stimulus: 31% on savings, 18% on debt, 16% on food, 11% on housing, 10% on gas, 9% on cash purchasing, 9% on groceries, 9% on entertainment, and 3% on clothing. That’s a lot that’s going into savings — which isn’t re-circulating — but it’s also a lot that goes into increasing stability.

The Ultimate Consequences: Higher Wages, Lower Jobs

Ultimately, the pandemic has stripped away many lower paying jobs that may, in fact, be unnecessary in the future. Reports tentatively state that about 40 percent of job loss may become permanent. That’s a significant amount of people who simply won’t be employable.

At the same time, that might not be a bad thing.

Higher hourly wages for employees who are employed, and lower jobs overall, may mean a return to a time when single-income households were the norm — and when parents were more readily able to stay at home. By stripping away jobs that don’t matter and paying skilled professions more, the economy may be able to continuously offer skilled workers more, and allow workers who aren’t essential to stay at home and contribute on a domestic level.

Presently, it’s unsure how things are going to go. What is known is that there is a stratification occurring, in which many are suddenly making nothing at all, and others are making far more than they were before. Where the economic chips will fall is anyone’s guess.

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