New Hires Getting Left Behind on Pay

From the Real Time Economics blog at WSJ.com:

The weak pace of hiring in May cast a big cloud on the future of consumer spending. But the outlook dims more when you consider even those fortunate to get jobs are generally earning less than the average worker.

Economists ... found that new-hire pay is starting to lag behind that of embedded workers...

It also suggests that, with so many job-seekers in the labor markets, businesses are able to offer lower starting salaries for higher-skilled, professional jobs.

Slower income growth will limit future gains in consumer spending, which remains the main engine of growth in the U.S. economy....

The pay gap is another example of how the Great Recession has split the consumer sector. Even if they are now back at work, people who lost their jobs over the past few years have fallen further behind workers who stayed employed.

Worse still, in the long run, few of the left-behind workers make up the lost ground, putting consumer spending, home-buying and tax collections at risk. Each percentage-based pay raise will give them a smaller dollar amount than the average worker. So, not only do the new workers not catch up, the pay gap can widen over time.

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Link: http://blogs.wsj.com/economics/2012/06/05/new-hires-getting-left-behind-on-pay/