Show Me the Money: Wage Growth Hits Three-Year High

Economists may still be lukewarm about the recovery but here’s an encouraging sign: Wage growth just hit a three-year high, according to a new report from PayScale.

Cuba Gooding Jr. in Jerry Maguire
Source: Youtube
Cuba Gooding Jr. in Jerry Maguire

National wage growth jumped 1.4 percent in the first quarter from a year earlier, according to PayScale, the highest it's been since the fourth quarter of 2008.

Of course, that means we’re back where we were in about 2008 — but at least things are going in the right direction.

In fact, wages have been going up at a good clip for the past four quarters, PayScale reports. When wage growth goes up in an industry, that’s a reflection of demand in the industry — companies are willing to pay more to retain talent in those areas.

“Things are looking good,” said Katie Bardaro, the lead economist for PayScale. “For the first time in a while, people can start to feel confident about where the economy is heading.”

She cites three specific factors for the optimism: Employment has been going up for the past few months, consumer spending is going up and wages are going up.

What’s more, we’re seeing decent growth, not just snail-paced growth.

“In general, the recovery can no longer be qualified as sluggish,” Bardaro said.

So let’s cut to the chase: Who can really say “Show me the money” like Cuba Gooding, Jr. in "Jerry Maguire?"

Pay increases are strong in jobs related to energy, particularly high-skilled jobs, as the price of gasoline rises. Plus, workers in mining, oil and gas exploration and utilities are seeing “substantial pay increases,” according to PayScale. Mining, oil & gas exploration saw wages jump 4.9 percent in the first quarter from a year ago, while the utililies industry saw a 3.9 percent increase.

More important, sectors that took a huge hit during the recession — transportation and construction — saw a noticeable improvement in compensation. They came in third and fourth for annual pay growth, according to PayScale, with growth of 2.2 percent and 1.9 percent, respectively. In fact, the construction industry beat out previous winners such as health care and IT for annual pay growth in the first quarter, according to PayScale. Pay for health-care jobs, IT, science and biotech went up just 1.5 percent.

That being said, it doesn’t mean demand or wage growth for health care and IT are drying up — those industries remain strong, Bardaro said.


Of course, when there are winners there are always losers and in the first quarter, that was the food-service industry. After being flat to lower for two years, wage growth there has declined for two straight quarters.

Bardaro attributed that to a few factors: First, going out to eat at restaurants is one of the first things consumers cut back on in tough times, so the restaurant business has been down for the past few years, as have tips from the people who were still going out to eat.

Second, this is an industry where you have a low ceiling for wage growth: You get to a certain point in your pay increases and employers don’t necessarily feel the need to keep raising your pay. They can hire a new waiter, waitress or dishwasher for less money.

Recent college grads, pay attention to this next part: Geographically, the strongest areas for wage growth and job demand were Seattle, Houston, Philadelphia and Washington, DC.


Those areas are dominated by industries that are doing well. So, in Seattle, that’s IT, biotech and engineering; in Houston, of course, it’s oil; in Philadelphia and DC it’s a lot of biotech and research.

Also, Bardaro said, those areas are likely to continue to see solid growth in 2012.

“The areas that were strong performers and weathered the recession will likely continue to be strong growers,” Bardaro said. “Whether it’s extremely high growth is a little up for discussion but in no way do I see them dropping or falling flat.”

Large companies still gave out the biggest raises, with pay up 2.5 percent at large companies, compared with 1.7 percent for medium companies and 0.7 percent for small companies.

This recession, and the blow the job market took as a result, is a good lesson for college grads to do their homework on what industries they seek to go into, as well as what cities they seek jobs in.

That’s not to say if you hate hospitals you should go to medical school, it’s more to say that if you’re an accountant, lawyer or other profession that can be employed across a variety of industries, your job outlook is better for doing those things at a health-care or oil company than, say, a food-service company. Likewise, there are more job opportunities in certain cities that have thriving industries.

Any way you slice it, the report is an encouraging sign for the job market — and the economy.

“I think people no longer have to whisper about the recovery, they can actually say it out loud in conversation,” Bardaro quipped.

You don’t have to tell me twice.


Let’s do this.