Which Way Are Wages Headed?

A key: Worker views of job security

By most counts, the employment picture in the U.S. couldn't be much better. The jobless rate is hanging in at close to a 30-year low. Although manufacturers affected by Asian woes are no longer expanding, overall job growth remains healthy. And both the average duration of unemployment and the number of workers who have been working part-time involuntarily hit cyclical lows in August. Yet, even as their own situations improve, Americans still believe that job security is a major problem confronting workers.

According to a new quarterly nationwide survey of U.S. workers inaugurated in August by Rutgers University's Heldrich Center for Workforce Development and the University of Connecticut's Center for Survey Research & Analysis, some 59% of the respondents say they are very concerned about job security for "those currently at work"--that is, for workers in general. An additional 28% indicate they are "somewhat concerned." (Interestingly, only 31% say they are very concerned about the performance of the stock market.)

That doesn't mean that people are fearful of being laid off. When asked about their own jobs, 55% of workers report that they are very satisfied with their job security; 31% say they are somewhat satisfied. But a fifth doubt that working hard would guarantee them a job until retirement, and less than half expect to be working for the same employer in five years. "People may be feeling more secure in today's strong labor market," says Carl E. Van Horn of Rutgers University, "but the perception of declining job security in the economy is still very much alive."

The issue, of course, is more than academic. With wages rising more rapidly over the past year and the jobless rate so low, fears of a sharp inflationary acceleration in labor costs are rampant in financial circles. Many observers, including Federal Reserve Board Chairman Alan Greenspan, have attributed slow wage growth in the current expansion to "greater worker insecurity." If workers become more secure and less docile, so the reasoning goes, inflationary pressures will escalate.

Whether this is happening yet is open to question. Survey results aside, a key measure of worker security--the quit rate, or voluntary job leavers as a percent of those unemployed--continues to languish below the levels reached in earlier expansions, suggesting that workers still lack confidence about job prospects. The acceleration in wage growth over the past year appears to be more the result of employers bidding for scarce workers than of employees putting pressure on their bosses.

If the economy slows in the months ahead, as many forecasters are predicting, wage pressures should abate. And worries about job security will probably grow. Indeed, one ominous trend from the standpoint of workers is a sharp pickup in layoffs by U.S. companies. According to Challenger, Gray & Christmas Inc., which tracks such announcements, planned job cuts through August are up 37% from last year.