Americans' Pay Not Keeping Up With Energy And Other Prices Thursday May 19, 7:00 pm ET Kirk Shinkle
The average American is working harder and smarter than ever.
But on payday, that's not making much difference.
U.S. wage growth isn't keeping up with rising prices for everything from gas to groceries to medical care. Strong productivity gains and an improving job market are not helping as they did in the past.
Adjusted for inflation, real weekly wages are down 0.3% vs. a year earlier. That's despite a slight monthly gain in April, Labor Department figures show.
So what gives?
The usual suspects are partly to blame.
Unemployment at 5.2% is low, but still gives firms some slack. And many of the folks who hold the purse strings remain cautious on the general health of the economy.
"There's little pressure on employers to raise wages," said Jared Bernstein, senior economist with the Economic Policy Institute. Instead, revenue is flowing to profits and nonwage compensation -- health care and pensions.
Bosses may also be getting some extra breathing room, thanks to the larger number of workers still sitting out the job hunt. Labor force participation is running at 66%. That's flat with 2004, but below 2001's 67% level.
Higher gasoline and other energy prices are acting as a tax on all Americans. Not surprisingly, consumer sentiment has soured.
The working poor and middle class are getting hit the hardest. Higher gas and food prices buffet hourly wage earners the most.
Skilled white-collar workers are just slightly better off, though they are also more likely to benefit from bonuses or home appreciation.
Still, with productivity rising at a 4.1% average annual pace from 2002-04, wages should follow.
"Higher productivity usually leads to higher wages. That has not been happening," said Peter Morici, an economist at the University of Maryland.
Longer-term economic shifts may be behind the conundrum.
Morici says stronger globalization, an overvalued dollar and unionization trends have all changed the balance.
Globalization means lower wages, as well as lower prices for goods, in some U.S. sectors. In theory, it should also push the U.S. into higher wage activities.
But a few things are keeping that from happening.
Morici posits an even weaker dollar would help export demand for U.S. durable goods, which tend to offer higher paying jobs for middle-class workers.
He argues some U.S. manufacturing wages could get a solid boost if China revalues the yuan and other Asian currencies follow suit -- though that would mean higher import prices.
Factory jobs were the weak spot in April's jobs report, shedding 6,000. By contrast, lower-paying service sector jobs in leisure and hospitality added 58,000.
Morici also hoists some blame on hardheaded unions and management in key U.S. industries.
Some industries -- think airlines and automakers -- aren't facing up to realities of their ailing sectors or foreign competition, a traditional wage-dampener.
"It's a chain. Wages aren't growing because of a lousy labor market. We have a lousy labor market because the consequences of globalization (for the U.S) have been made negative by the overvalued dollar and the inability of some industries to respond," he said.
Good news could be on the way. With oil and gasoline prices pulling back, wages may be able to outpace inflation, at least short term.
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