If you’re hoping to make more money in 2020, your dream could become a reality. According to a January 2020 analysis by Goldman Sachs, wage growth is continuing to accelerate this year, with earnings expected to grow by 3.5% by the end of the year, CNBC reported. That could serve as a nice boost to your current paycheck.
But the rise in wages isn’t due to employers becoming more generous. Rather, it’s the result of several factors of the current economic climate.
1. The Unemployment Rate Is Expected To Decrease
Goldman Sachs predicts that the unemployment rate will drop from its current rate of 3.5% to close to 3%, CNBC reported. Unemployment has not reached 3% since 1952, according to Bureau of Labor Statistics data.
Why This Matters
“At the heart of our wage growth (and inflation) forecast is a view that declining slack will significantly boost wage growth,” Goldman Sachs economist Daan Struyven told CNBC.
A tight labor market typically leads to wage growth, which could be good news for your wallet.
2. There Are More Jobs Available Than People To Fill Them
There are a million more job openings in the U.S. than there are unemployed people, CNBC reported.
Why This Matters
Daniel Zhao, a senior economist at Glassdoor, told CNBC that he expects the labor market will remain strong, with increased hiring putting upward pressure on wages. This is especially true for low-income earners.
“We’re already seeing wage growth for low-income workers where the labor market is tighter grow faster than average workers,” he said.
Sectors With the Most Wage Growth
Some sectors should see higher wage growth than others. If trends continue, retail, mining and logging, and leisure and hospitality jobs should see especially large growth.
CNBC analyzed year-over-year pay in these sectors for 2018 to 2019 and found that retail pay increased 5.1%, mining and logging pay increased 5.3%, and leisure and hospitality pay increased by 3.1%.
3. The Minimum Wage Will Rise in 24 States in 2020
Many workers who earn the minimum wage will get a pay bump this year. Twenty-four states and 48 cities and counties across the U.S. are rolling out increased minimum wages in 2020, according to the National Employment Law Project. Of those places, 17 will now have a minimum wage of $15 or more, including Seattle; Petaluma, California; and New York City.
Where the Minimum Wage Will Rise
According to the National Employment Law Project, the states that saw or will see an increase in the minimum wage in 2020 are:
- New Jersey
- New Mexico
- New York
- South Dakota
The cities and counties that saw or will see an increase in the minimum wage in 2020 are:
- Arizona: Flagstaff
- California: Alameda, Belmont, Berkeley, Cupertino, Daly City, El Cerrito, Emeryville, Fremont, Los Altos, Los Angeles, Los Angeles County, Malibu, Milpitas, Menlo Park, Mountain View, Novato, Oakland, Palo Alto, Pasadena, Petaluma, Redwood, Richmond, San Diego, San Francisco, San Jose, San Leandro, San Mateo, Santa Clara, Santa Monica, Santa Rosa, Sonoma, South San Francisco and Sunnyvale
- Colorado: Denver
- Illinois: Chicago and Cook County
- Maine: Portland
- Maryland: Montgomery County
- Minnesota: Minneapolis and Saint Paul
- New Mexico: Albuquerque, Bernalillo County, Las Cruces, Santa Fe and Santa Fe County
- Washington: Seattle
- Washington, D.C.
Why This Matters
The minimum wage increases will affect more than half of the U.S. population, ABC News reported.
“[2020’s] increase is … going to be seen as the highest number of minimum wage increases of any time,” Yannet Lathrop, a researcher at the National Employment Law Project, told the news outlet.
4. There's a New W-4 Form
The IRS released a new W-4 form in 2020 — its first redesign since 1987, The New York Times reported. According to the IRS, “the new design reduces the form’s complexity and increases the transparency and accuracy of the withholding system. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.”
Why This Matters
The simpler form makes it easier to see if you are having too much of your taxes withheld. If you fill out a new Form W-4 and see that you should reduce your withholdings, your paycheck will go up. However, note that if this is the case, your tax refund will be smaller.
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About the Author
Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and People.com. Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert.