Recently, there was some good news for blue-collar America: Raises and bonus checks were raining from the sky on the heels of a new tax reform bill. It was was a welcome reprieve for thousands, who had sat by and watched Republican leaders and President Trump push hard for fresh tax cuts. Those tax cuts, America was told, would give businesses and employers more operating capital. And from that capital, they would most certainly raise wages and hire more employees.
Once the ink was dry on the bill, and many big companies had seen their tax rates drop to 21% from 35%, the trickle-down began. Many companies, mostly large corporations, announced bonuses and raises for employees. It was a big, public, display of groveling and thanks for a tax cut that would, in some instances, save billions.
And yes, thousands of American workers benefitted in the form of cash infusions and small raises. But not everyone — most of the companies handing out cash prizes and pay bumps were large corporations. The list includes names like Comcast, Apple, and Walmart. These are giant corporations that employ tens of thousands. In that sense, a lot of people had good cause to celebrate the passage of the tax bill.
But what about everybody else? If the economy is humming, then where are their bonuses and pay bumps? That question has been floating around for a few years now, and there isn’t an easy answer. But we’ll try to answer it with some help from a new study that provides some partial answers. First, though, we’ll talk about the raises we are seeing, and why they’re not quite what they seem.
Next: All of those bonuses aren’t what they seem.
Raises and bonus checks
- Companies handing out bonuses include Walmart, Apple, and AT&T.
First, the good news: People are getting more money. As mentioned, a lot of big companies are handing out bonuses and pay bumps. It’s happening across different industries, and people working in retail jobs at Walmart are celebrating alongside people working in tech at companies like Apple. It’s not a bad thing, so keep that in mind. The question, however, is whether these public displays are sincere and actually related to the tax bill’s passage. As it turns out, it’s a mixed bag.
Next: What are these big companies actually doing?
…But that’s just groveling after the tax bill.
- Most of these bonuses are double-edged.
While some companies touted and celebrated their raises and bonuses, the truth, as it turns out, was a bit more complicated. In the case of AT&T, for example, which handed out $1,000 bonuses, were actually already on the hook for those checks due to a contractual obligation. And Walmart? It raised pay and handed out bonuses too — but simultaneously laid off thousands and closed dozens of stores across the country.
Next: Corporate profits were already at all-time highs.
What about the buzzing economy?
- Tax cuts were the cherry on top — because the economy was already firing on all cylinders.
The mystery at the center of the middle class’ struggles isn’t actually new. We have companies handing out bonuses and small pay raises — again, a good thing. But we should have seen this happen already, and naturally, if market forces were behaving as expected. Basically, unemployment is very low (near full employment) and that should put upward pressure on wages. But we haven’t seen it. So, if you’re one of the millions of workers who isn’t getting a bonus check or a significant pay raise, you’re probably wondering what the hell is going on. We may have some answers.
Next: A new theory.
A new theory
- A new study points to the artificial scarcity of labor as the primary reason we’re not seeing pay bumps.
Interestingly enough, a group of labor economists recently pointed to a worker shortage as the main reason that wages are still growing so slowly. Essentially, the paper argues that hiring power is too concentrated among a small handful of companies across several different industries. These companies, as a result, have effective monopoly powers in the hiring market and are using that power to pull the strings and keep wages low.
In other words, employers aren’t competing for labor, which is the primary engine for wage growth.
Next: A surprising finding.
A shortage of workers?
- Does a worker shortage seriously explain things?
So, is there actually a worker shortage? Doesn’t a worker shortage typically mean that wages would go up as employers have to scramble to find labor? Yes, and yes. Again, it’s an artificial shortage of workers. We know, for example, that there are still millions of unfilled jobs out there, and that there are lots of people who still need jobs. But the wrench in the gears, in this case, is that there are employers with so much power in the hiring process that they’re able to have an outsized influence on wages overall.
Next: It’s actually not a new development.
- Yes, we’ve seen this kind of thing before.
While the study is saying that we’re seeing a monopolization of hiring on a macro scale, we don’t know for sure — it’s still a working paper. But there is reason to believe it because we’ve seen this exact sort of thing before. When employers refuse to compete for labor, wages stay low. And we’ve seen this in Silicon Valley, where a number of large tech companies did exactly that to keep high-priced programmers and tech employees’ salaries lower. So, it’s possible we’re seeing this in other industries.
Finally: Should you get your hopes up for a substantial raise?
Don’t get your hopes up
- Does this mean your odds of getting a raise are lower than anticipated?
Given the current state of the economy and the pro-business bonanza, you probably should be hoping for a raise. But the big issue here is that you probably already should’ve gotten one — and this takes us right back to the central issue that wages still aren’t rising even though they should. If the tax bill wasn’t enough to get your boss to open their wallet, and the economy currently buzzing on top of that? You should probably temper your expectations. Though it’s not impossible that you could get that much-deserved bump sometime soon.
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