Six charts to explain why most people's incomes are finally rising

Workers connect drill bits and drill collars on Endeavor Energy Resources’ Big Dog Drilling Rig 22 in the Permian basin outside of Midland, Texas.
Brittany Sowacke | Bloomberg | Getty Images
Workers connect drill bits and drill collars on Endeavor Energy Resources’ Big Dog Drilling Rig 22 in the Permian basin outside of Midland, Texas.

After struggling to make ends meet since the Great Recession, American households are finally getting a raise.

For the first time since 2007, the median U.S. household saw a healthy bump in income last year — up 5.2 percent to $56,500 from $53,700 in 2014, according to a Census report released Tuesday. Much of that gain came from the drop in the unemployment rate that created more paychecks for American workers.

Those gains helped cut the number of people living in poverty to 53.1 million, extending a decline that has continued since 2009 despite a slow economic recovery. The latest drop is the largest annual percentage point decline since 1999, Census officials said.

Most researchers caution, though, that the official rate doesn't paint a true picture of poverty trends because it doesn't account for non-cash benefits, including food stamps and refundable tax credits.

But the Census data on incomes confirm what other fresher monthly numbers are showing. Millions of workers are getting raises, some bigger than others.

If you're not one of them, there may be an explanation for why you're getting left behind.

In the years just after the financial collapseof 2008 and the mass layoffs of the Great Recession, most people felt lucky to have an income — even if it wasn't growing. Employers quickly recognized that their workers were more concerned about job security than holding on to any hopes for fatter paychecks. So wage growth shrank.

That mood began changing by the end of 2012, when a falling jobless rate made it easier to find a better-paying job. Employers began seeing isolated shortages of workers with the skills they needed for hard-to-fill jobs. And when an employer is ready to hire, an unfilled job costs them lost profits.

Since then, when the scales between worker supply and demand began to tip, wage growth has picked up.

The latest monthly read on the growth of American paychecks, released late last month, showed that overall wages rose by just 3 cents to $25.73 an hour last month, for an annual gain of 2.4 percent.

Payrolls rose by 151,000, less than the 180,000 that some economists were expecting. The jobless rate held steady at 4.9 percent.

Though the monthly numbers were weak, the longer-term trend in wage growth has been much stronger for many American workers. But not for all of them.

Ongoing job cuts in the oil business, for example, have kept a lid on wage gains for that industry, where hourly workers are making just 0.8 percent more than they did a year ago.

Workers in high-demand tech jobs are faring much better. Hourly earnings in the information sector are up 4.3 percent from a year ago.

Even relatively low-skilled jobs such as restaurant and hotel positions are seeing strong gains as those industries continue to add jobs.

In the last year, payrolls in the Bureau of Labor Statistics leisure and hospitality sector, one of the fastest-growing industries, have risen by 2.7 percent. Hourly wages for those workers are up 3.9 percent, just shy of the gains for high-tech jobs.

Still, those industry averages don't tell the whole story; a lot depends on where you work. One of the starkest income divides is playing out between rural and urban workers, where high-growth cities are creating some of the best-paying jobs with the biggest salary increases.

"There a huge urban-rural divide today in wage growth," said Andrew Chamberlain, chief economist at Glassdoor, a job-listing site that collects salary data. "It's becoming harder to earn a living wage and have a fulfilling career in rural areas."

But not all cities are seeing wages grow. Some of the biggest wage gains are flowing to cities where the jobless rate is below the national average, including San Antonio, Cincinnati and Indianapolis.

In cities with higher unemployment than the national rate, wages are falling, including Detroit, Pittsburgh and Houston.

The overall rise in wages after years of stagnation represents several factors at work.

With the national jobless rate now lower than 5 percent — and even lower in some states and metro areas — employers in those labor markets are having a harder time finding qualified workers. As demand for skilled workers overtakes the supply, the cost of hiring them goes up.

When employers boost salaries for new hires coming in the door, existing workers are more likely to ask for a raise — or go looking for work elsewhere. That's becoming more common in fields where salary information is widely available, said Chamberlain.

"In a world where there's some transparency, where people know what their co-workers make, that may be true," said Chamberlain. "But in a world where there's pay secrecy, which is the way things are in many companies today, that's harder to find out."

Some workers aren't waiting for a raise, preferring to job-hop their way to a bigger paycheck. In this labor market, those job hoppers are generally better off than workers who decide to stick it out with their current employer, according to an analysis of the BLS jobs data by the Atlanta Federal Reserve.

The last time job hoppers did significantly better than those who stayed put was during the late stages of the early 2000s boom. (Job hopping also paid off well during the 1990s boom, when some employers offered signing bonus for hard-to-fill positions.)

The gap has opened up again, with "job switchers" seeing an average 12-month wage bump of 4.2 percent, compared with just 3.0 percent for "job stayers," according to the Atlanta Fed's analysis.

One key difference that hasn't changed for those getting the biggest raises: They're better educated.

Workers with college and advanced degrees have gotten hired faster during the jobs recovery, and they're now seeing bigger gains in wages than those with less than a four-year degree.

There's also a big disparity in paycheck growth among different age groups, and between men and women. Some of the biggest gains in wages are showing up in paychecks for older workers, who already earn substantially more than younger employees.

Those gains for older workers are much bigger for men than women, according to the latest quarterly data from the BLS.

While some economists expect the pace of hiring to slow, wages will likely continue to rise as long as the overall job market remains tight.

Still, employers have to see profits rise to continue handing out raises. Overall, labor productivity has been lagging the growth in wages; in the second quarter, it fell by 0.6 percent.

That measure may also play a big role in determining which occupations see the biggest wage gains in the future.

"Productivity is what pays all the bills in the long run," said Chamberlain. "The areas where we're seeing workers get more productive are scalable businesses, like tech and finance, where you can reach a million people around the world because of your work."