Workers face paycheck pinch
After inflation, American workers earned 2.3 percent less than they did a year ago.
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.
While energy costs are the most obvious culprit, other forces may be playing a role, from globalization and illegal immigration to the weakening of labor unions. Politicians, too, could share in the blame.
Experts differ on just how wide and deep the problem runs. But the disturbing implications are clear enough. America's proud heritage as a land where the standard of living rises like late-summer corn seems, to many, to be at risk.
Even the fact that budgets have grown tighter for many debt-laden families is a volatile issue for the nation politically and financially. And economists say that while the pay pinch affects a wide swath of occupations, the impact is hardest on those without college degrees.
"It's two different worlds," skilled and unskilled, says John Silvia, chief economist at Wachovia Corp. in Charlotte, N.C. "There's no way you can consider this one overall labor market."
Well-trained job seekers are in hot demand, he says. But the labor market is weak for those whose education ended in high school. In some cases, "weak" is an understatement.
The automotive industry, and the nation, got a shock a few weeks ago when Delphi Corp., a major auto-parts supplier, demanded that union workers take a gargantuan pay cut so the company can survive.
The airline industry, too, faces a period of intensive restructuring that is difficult for workers of all skill levels.
Pilots at Northwest Airlines last week approved a 24 percent temporary pay cut, to give the beleaguered airline breathing room while a new labor contract is negotiated.
In the grocery industry, the spread of Wal-Mart has had a similar pay-squeezing effect on some unionized supermarkets.
Nor is the challenge confined to the United States. Wage growth has been slowing in Europe and is tepid in Japan, as those regions work through a difficult restructuring of their economic base.
What these industrialized nations share is growing competition for lower wages, from factories in places like Portugal, Poland, and China.
US manufacturers have done remarkably well at responding to global competition by finding ways to make workers more productive.
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.
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