Saturday, July 17, 2004

If you've been reading the Globblog then you already know this. Still, it's nice that the New York Times is picking up the story as well since their readership is a bit larger than mine.
The amount of money workers receive in their paychecks is failing to keep up with inflation. . . .

Even though the economy has been adding hundreds of thousands of jobs almost every month this year, stagnant wages could put a dent in the prospects for economic growth, some economists say. If incomes continue to lag behind the increase in prices, it may hinder the ability of ordinary workers to spend money at a healthy clip, undermining one of the pillars of the expansion so far. . . .

On Friday, the Bureau of Labor Statistics reported that hourly earnings of production workers - nonmanagement workers ranging from nurses and teachers to hamburger flippers and assembly-line workers - fell 1.1 percent in June, after accounting for inflation. The June drop, the steepest decline since the depths of recession in mid-1991, came after a 0.8 percent fall in real hourly earnings in May.

Coming on top of a 12-minute drop in the average workweek, the decline in the hourly rate last month cut deeply into workers� pay. In June, production workers took home $525.84 a week, on average. After accounting for inflation, this is about $8 less than they were pocketing last January. And it is the lowest level of weekly pay since October 2001.

. . . coming after the bonanza of the second half of the 1990�s, the first period of sustained real wage growth since the 1970�s, the current slide in earnings is a big blow for the lower middle class. Moreover, the absence of lower income households could also weigh on overall economic growth � putting a lid on the mass market and skewing consumption toward high-end products.

"There�s a bit of a dichotomy," said Ethan S. Harris, chief economist at Lehman Brothers. "Joe Six-Pack is under a lot of pressure. He got a lousy raise; he�s paying more for gasoline and milk. He�s not doing that great. But proprietors� income is up. Profits are up. Home values are up. Middle income and upper income people are looking pretty good."
Real wages (NSA) for production workers topped out under George W. at $8.43/hr. (in 1982-84 dollars) in December 2002 ($15.25 at the time). They dipped throughout most of 2003 but rose again to their most recent high of $8.41/hr. (1982-84 dollars) in November -- and it's been a skid down the Matterhorn ever since. In June real wages for production workers had sunk to $8.20/hr. (1982-84 dollars), down 2.5% since November. This is a much steeper decline than for the broader workforce, which has seen its real wages decline 1.4% since November.

Clearly production workers -- roughly 80% of the US workforce -- are absorbing all the body blows from this "recovery". Real wages of supervisory workers are up, corporate profits are way up, but the little guy is getting screwed.


At 11:11 AM, Anonymous Anonymous said...

Those are two aspects of the same thing. Money (and capital) not being made available to useful and productive ventures is what is causing "excess" labor and capacity. And the resulting income shortfall on the part of "excess" workers also contributes to resources not being made available.

I'd say your thesis describes a "more causative" phenomenon than Brad's. But wouldn't you agree that increased productivity is also part of the picture, and exacerbates the "excess"?

At 7:13 AM, Blogger Mark said...

good stuff

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