A report from the Bank of America Institute found that lower-paid, hourly workers who changed jobs in July saw their fastest wage growth in more than three years. The three-month moving average wage increase for these job switchers reached 12.5% during that month. While this pay growth remains below levels seen during the pandemic, the data indicates increased mobility for workers in lower-income brackets.
The trend occurs as the pay gap between lower-income and higher-income households narrows. In August, after-tax wages for lower-income households grew by 4.7% year-over-year, compared to a 3.5% increase for higher-income households. Economists attribute these gains to a "skills mismatch," where employers are willing to pay more to recruit workers with specific qualifications, and a surge in demand for labor in sectors like AI data center construction.
In contrast, wage growth and mobility have slowed for white-collar workers in industries such as finance, technology, and real estate. Experts from The Burning Glass Institute and ADP Research noted that many professional workers are practicing "job-hugging," or staying in their current roles, due to weak job growth and concerns that artificial intelligence (AI) is automating their positions. This has created a surplus of applicants in these fields, reducing the frequency of outside offers.
For hourly workers in sectors like leisure, hospitality, and warehousing, the data suggests that moving to a new employer currently offers a higher financial return than staying in a current role. Conversely, higher-income earners generally see better wage gains by remaining with their current employers. Workers in specialized trades, such as electricians and HVAC specialists, may notice higher pay offers specifically driven by the construction of facilities required for AI infrastructure, which command a premium over standard residential or commercial work.
While lower-income households are currently seeing faster percentage growth in their paychecks, the total dollar amount remains lower than higher-earning peers. The Federal Reserve was scheduled to meet in September to discuss interest rates, a decision that could further influence borrowing costs and hiring trends across these industries.