U.S. Wages Grew 4.4 Percent in Fourth Quarter 2020 Due to Low Wage Job Loss as COVID-19 Continues to Disrupt Labor Market

Wages for U.S. workers grew 4.4 percent over the last year, increasing the average wage level by $1.27 to $30.19 an hour, while employment growth demonstrated a continued downward slide by -7.9 percent according to the ADP Research Institute® Workforce Vitality Report (WVR) released today. The average wage growth is higher than expected as a result of significant job losses among low wage earners, which increased the average. However, higher income groups experienced flat wage growth compared to lower income groups, as most of the job losses came from low wage jobs.

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“The headline wage number masks the turbulence in the job market caused by COVID-19,” said Nela Richardson, chief economist, ADP. “When you look deeper at the data, it shows that the significant job losses we’ve seen in the lower income positions has inflated the overall average wage growth. For that reason, it looks like wages are growing at a healthy clip, when for the majority of workers, wages were either mostly flat or barely growing above inflation at year-end.”

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“Additionally, even prior to the pandemic, wages by gender showed disparity among males and females, and that wage inequality widens as they progress in their careers, with males in the lead. For job holders who kept the same job through the 2020 pandemic, female workers made $8 less than male workers in December.”

Employment growth year-over-year continued a downward slide with -7.9 percent due to COVID-19. Leisure and hospitality was the hardest hit industry with a decline in employment growth by nearly 24 percent. Finance industry employment growth fared the best among all industries with a drop of 1 percent. Across industries, the overall wage growth slowed compared to the initial months of the pandemic. Additionally, job-holders’ wage growth also slowed, likely due to wage freezes or job cuts as a result of the pandemic.

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