Following up a bit on my previous entry, the Christian Science Monitor has an article today entitled Workers face paycheck pinch.
For all its strength, the current economic expansion is not boosting the American worker’s paycheck.
Wages have been rising nominally: Average pay rose 8 cents last month to $16.27 an hour, according to a government report Friday. That’s not fast enough to counter inflation.
By one common measure, average pay for an hour’s work has less purchasing power than it had four years ago – when the current growth cycle began.
It’s a pattern of weak wage growth that’s now several years old, but the trend has worsened in recent months. Wages for the most recent quarter were 2.3 percent lower, after inflation, than workers received a year before.
. . .
Traditionally, rising productivity allows employers to raise wages without raising prices. Thus it holds the key to rising living standards in society. But lately, wage growth has lagged behind fast-rising US productivity. Several reasons, beyond the downward pressure of global competition, may be involved:
• The cost of benefits. Some employers have stopped offering health insurance, but those that do are spending more, and thus boosting overall compensation even though hourly wages aren’t rising.
• Price-sensitive consumers. As energy costs rose, many companies didn’t feel able to pass those costs along to customers. So they have to pay their oil bills by cutting costs elsewhere. Pay hikes get smaller.
• Government policies. Some researchers say a failure to crack down on illegal immigration – whether at the border or in the workplace – has depressed wages for the less skilled.
• Weak bargaining power. The decline of union membership in the private workforce has had a significant dampening effect on wages, some economists say.
. . .
Other economists counter that a more flexible, less unionized labor market has helped the US trounce its European peers in job creation. Americans spend less time unemployed, but their incomes have arguably suffered as a result.
. . .
[O]n the issue of real pay for an hour’s work, none of the government surveys show wages rising by even 1 percent a year between 1979 and 2003.
I contend that real economic growth that matters to ordinary Americans, to the extent government action can help, depends on economic stimulus that puts money in the pockets of the ordinary citizen. If they have cash in their pockets, they’ll go out and buy washers and dryers. Tax cuts for the rich is, at best, a wasteful means of stimulus. Sure, they might go out and invest in new American companies, but then again, they might invest in foreign companies, or they might buy a yacht or expensive artwork or some other luxury that doesn’t do much to improve the lot of your average working stiff.
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