Skip to comments.Wages in US show steepest fall in rate since 1991
Posted on 05/11/2005 2:00:03 PM PDT by ninenot
Real wages in the US are falling at their fastest rate in 14 years, according to data surveyed by the Financial Times.
Inflation rose 3.1 per cent in the year to March but salaries climbed just 2.4 per cent, according to the Employment Cost Index. In the final three months of 2004, real wages fell by 0.9 per cent.
The last time salaries fell this steeply was at the start of 1991, when real wages declined by 1.1 per cent.
Stingy pay rises mean many Americans will have to work longer hours to keep up with the cost of living, and they could ultimately undermine consumer spending and economic growth.
Many economists believe that in spite of the unexpectedly large rise in job creation of 274,000 in April, the uneven revival in the labour market since the 2001 recession has made it hard for workers to negotiate real improvements in living standards.
Even after last month's bumper gain in employment, there are 22,000 fewer private sector jobs than when the recession began in March 2001, a 0.02 per cent fall. At the same point in the recovery from the recession of the early 1990s, private sector employment was up 4.7 per cent.
"There is still little evidence that workers are gaining much traction in their negotiations," said Paul Ashworth, US analyst at Capital Economics, the consultancy. "If this does not pick up, it raises the prospect of a sharper slowdown in consumer spending than we have been expecting."
Economists are divided over the best source for measuring pay increases in the US, since the government releases three main measures.
A gauge of average hourly earnings is released with the employment report. This rose by 0.3 per cent in both March and April and 0.1 per cent in February. Even with a slight rise in the hours employees are working, from 33.7 to 33.9, this suggests wages are struggling to keep pace with inflation. The gauge covers non-supervisory workers, about 80 per cent of the workforce.
The Bureau of Economic Analysis figures for personal income showed wages rising at close to 6 per cent in 2004 but slowing down since. This measure also showed wages rising by just 0.3 per cent in each of the past 2 months. This is a broader gauge and includes small businesses and professional partnerships, but it measures total corporate wage bill rather than wages per person.
The Employment Cost Index, seen by some as the most reliable measure, excludes overtime and professional partnerships.
Things are Swell!! Things are Great!! We have Nothing to Hit but the Heights!!
All that this shows is that their is a divergence between one method of calculating inflation and how wage and benefit increases are calculated.
Free-trade, open borders bump!!!!
And toasters are just $5 at Wal-Mart! Everything is perfect!
You hit the nail on the head.
Chill out people. This is a survey from the Financial Times, not a US Government Statistical release. Tax receipts are booming (on Monday it was announced the budget deficit for 2005 will be at least $55 billion less than projected three months ago). That is a far more accurate link to incomes.
Tax receipts can't rise that fast without income growth. Just today CNN/Money released an article talking about the return of hiring for higher paying jobs, the best numbers in their report for four years.
Financial Times is not even an American paper, take this with a grain of salt.
I wonder how the wages are tracking in China and India..
Don't know about India, but they are certainly rising in China. Go to Yahoo - they had a story on it yesterday.
Those tax receipts have NOTHING WHATSOEVER to do with the repatriation of $400 billion in earnings from PRChina.
NOTHING. Not at all.
Pay no attention to the man behind the curtain.
"Financial Times is not even an American paper, take this with a grain of salt."
For a number of people here it is just a chance to bash the current administration. Doesn't matter if it's true or not. FR certainly has it's own version of DUmmies.
The USG's stats show that, indeed, wages PAID rose slightly faster than inflation last month--but only because there were more hours WORKED.
IOW, things were OK if you slept at the factory between your double-shifts.
No what this really shows is that this damned article has been posted 3 times now.
This article leaves out so many factors of real wages it isn't credible to be printed. It leaves out increases in insurance costs, medical and liability, the cost of energy increases etc. Actual wages aren't down, the cost to be in business has gone up. Misleading at best.
Tax receipts are increasing because Bush's tax cuts have stimulated the economy. This economy has nothing to do with Free trade.
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