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INTRODUCTION
Using a broad definition of compensation, this course examines different factors that impact the U.S. labor market and how they form compensation trends.
Globalization has been one of the enduring themes of how workers in the low to middle income distribution have seen their jobs disappear, and even for those that did not lose their jobs, how their wages stagnated for decades. Global supply chains are not going to go away but, as U.S. companies have come to recognize that offshoring can be risky, some manufacturing is coming home.
Even though some manufacturing is returning to U.S. shores, it will not necessarily provide employment for experienced workers. Automation and sophisticated tools are part of the new manufacturing landscape. The new plants require fewer workers with higher skills that are in short supply. There is a pressing need to provide relevant training for young entrants to the workforce and to reskill older workers.
Companies must do better at having a dialogue with local community training centers so the right apprenticeships, vocational education and training, and certifications are available to support their staffing needs. They must also provide incentives to their current employees to reskill for the new jobs. If job candidates lack a formal education, companies need to be more flexible and hire those who have acquired skills through experience and on-the-job training.
If the labor market can close the gap between the demand and supply of skilled workers, it would help to boost U.S. productivity. Higher productivity is the path to higher wages over the long term and, in some sectors of the economy, AI is starting to have an impact.
During the pandemic there were disruptions and changes in the U.S. labor force. There was already a tight labor market before the pandemic, and this situation worsened in some sectors. In response to the labor shortage and high inflation as the U.S. was exiting the pandemic, wage growth spiked, particularly for those at the low end of the wage distribution but has now settled to more normal levels, and current projections are for modest pay increases in 2026.