Modest Rise in Pay Expected During Year

From Reuters

U.S. wages are likely to pick up only moderately this year, as fierce business competition mitigates the nation’s strong job growth low unemployment rate, economists said.

The strong competition at home and from abroad, plus reduced union influence, should forestall a wage surge, although the cost of benefits like health insurance are likely to keep rising, the economists said.

Audrey Freedman, an economist at the Conference Board, a private nonprofit business research organization, said she expects wages and salaries, which account for about 60% of the economy, to rise about 5% in 1989, after rises of 4.1% in 1988 and 3.3% in 1987.

“Wages are accelerating, but it’s not panic time,” said David Wyss, chief financial economist at Data Resources Inc. “It’s a gradual acceleration in response to a gradual tightening in the labor market,” he added.


The latest rises, while not the near double-digit gains of 10 years ago, have caught the eye of policy makers. Any gains put pressure on inflation.

Federal Reserve Chairman Allan Greenspan said recently that the 0.6% jump in January consumer prices probably reflects the fact that rising wages finally are becoming embedded in the cost structure of the economy.