We keep adding jobs and the unemployment rate is extremely low. So why don’t overall wages rise more that 2-2.5% year over a year? Holding constant the retirement of high paid baby boomers and millennials entering the work force at starting salaries, we should still normally see more wage growth and tightness in the labor market. However, this quandary is really not such a puzzle. One key reason is likely that some of today’s fastest growing companies use lower price to attract customers. If they sell goods and services cheaper than existing competitors, they can’t succeed without keeping their own costs down. Labor is one the biggest single costs for most firms, and therefore, it becomes very difficult for labor to demand or for owners to offer higher wages than necessary.
