One of the things that seems mystifying to many economists is that while we have seen an economic expansion of sorts since 2010 (the end of the great recession) we have not seen significant wage growth or increased inflation.
The following chart shows workforce participation percentages since 1950. The climb in the early pare of the graph represents the increased participation of women. However since its peak around 2000 we see about a 5 point drop in participation that continues.
source: tradingeconomics.com
To a large extent these are discouraged workers, people who lost "good" jobs and now exist on things like Government benefits (disability etc.) or have joined the underground economy managing to get by.
Many of them could, or would return to the workforce under the right conditions. Those conditions include better paying jobs. In effect they create a pool of available applicants primarily for low skill opportunities.
Our economic models rely primarily on data based on the industrial era of America. In that era, expansion meant more workers as the vast majority of work was in fact performed by them. As we enter the post industrial era, we see a change, not fully recognized in most models.
Much of the work is now automated and expansion does not necessarily lead to additional high paying industrial jobs. We do however see job creation and there is upward pressure on many skill positions. What we do not account for is the creation of low skill service jobs that are being created.
These jobs are generally fairly easy to fill and consequently low paying.
Replacing a high paying industrial job with a lower paying service job may help the unemployment rate, but it doesn't exert a lot of wage pressure. Further, we have those non-participating workers who effectively increase the number of available candidates while not being reflected in unemployment statistics.
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