Employment Is Up. Paychecks, Not So Much Hopes that wages may finally be solidly on the rise were dashed in Friday's jobs report. While employers added 252,000 new jobs, average hourly earnings actually dipped.

Employment Is Up. Paychecks, Not So Much

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SCOTT SIMON, HOST:

The U.S. economy saw the strongest job growth since 1999 last year. That's according to the latest statistics out of the U.S. Labor Department yesterday. The country gained another 252,000 jobs in December. That sounds good news, but as NPR's Chris Arnold tells us this latest jobs report also dashed some hopes for bigger paychecks.

CHRIS ARNOLD, BYLINE: If American workers had to pick a song to play for their bosses, a good choice might be this little number from the faux-rock band Spinal Tap.

(SOUNDBITE OF SONG, "GIMME SOME MONEY")

SPINAL TAP: (Singing) Do I have to come right flat out and tell you everything. Give me some money. Give me some money.

ARNOLD: Money is the rub with this recovery. Employers are hiring more people. That's good, but overall the real wages that they're paying remain flat, and this jobs report in particular was disappointing. A month ago it looked like wages were starting to pick up, but now those November numbers were revised lower and in December wages actually fell a bit.

HARRY HOLZER: So there is this ongoing puzzle and economists are trying to figure this out.

ARNOLD: Harry Holzer is a former chief economist for the Labor Department. He says the puzzle is that the official unemployment rate has now fallen to 5.6 percent. And, historically, that's meant that there's enough demand for labor to push up wages. So...

HOLZER: How can it be that we haven't seen any growth, adjusted for inflation, so far? Probably the real answer to that is that there's still more slack in the labor market.

ARNOLD: In other words, the unemployment rate just isn't as good a yardstick this time around. Many workers have dropped out of the labor force or are working part time. That's not captured in the unemployment rate figure. Now, just about everybody agrees that if employers keep hiring more workers at some point wages will rise, but the question then is by how much? Holzer says if you look back at the 30-year period after World War II...

HOLZER: The rising tide was lifting all the boats, so you had strong wage growth year-in, year-out, and over a 30-year period, you know, the average worker's earnings were more or less doubled.

ARNOLD: Since the early 1970s, though, it's been a very different story. Holzer says overall wages, adjusted for inflation, have only risen 20 percent since 1973. And when you look at big chunks of what used to be the middle-class - take, working-age men with a high school education - their wages haven't risen at all. In fact, they've fallen.

HOLZER: All less-educated men are earning less than they did 40 years ago. That's just a really new story in American history. You know, people ought to know that that's really different than anything we've experienced in the past.

ARNOLD: And that's troubling to both liberal and conservative economists. Michael Strain is a labor economist with the American Enterprise Institute.

MICHAEL STRAIN: I'm very concerned about it. I think that taking kind of the short-term view, there's a policy response, which is for the Fed to continue its campaign of stimulating the economy.

ARNOLD: Longer-term, most everyone agrees it'll be important to better educate and train the American workforce. Higher skills mean more money and a better future. For his part President Obama yesterday spoke at a community college in Tennessee.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT BARACK OBAMA: I'm announcing an ambitious new plan to bring down the cost of community college tuition in America. I want to bring it down to zero.

(APPLAUSE)

OBAMA: We're going to - I want to.

ARNOLD: The president called for two free years of community college for all Americans.

(SOUNDBITE OF ARCHIVED RECORDING)

OBAMA: I want to make it free.

(APPLAUSE)

ARNOLD: Betsey Stevensen is a labor economist on the president's Council of Economic Advisers. She says, basically, college is the new high school when it comes to having skills to get a good paying job. And a century ago, of course, we made high school free.

BETSEY STEVENSEN: When we decided to make high school free and universal, the rest of the world laughed us and called us wasteful.

ARNOLD: But Stevensen said it paid off big-time and the administration's hoping free community college would as well. Chris Arnold, NPR News.

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