November 18, 2012

Real wages rebound only to 2005 level

McClatchy Newspapers

WASHINGTON - The nation's high unemployment rate captures the headlines with each monthly jobs report, yet many Americans may be surprised to learn that real earnings, when adjusted for inflation, have declined across most industries and sectors since the Great Recession. Since 2002, in fact, it's effectively been a lost decade for workers.

Equally troubling, real wages are now about the same level as they were in December 2005. Put another way, wages have clawed back from the Great Recession only to the level of seven years ago.

"The recession was unprecedented, and the stagnation of wages has really been going on for some time," said Martin Kohli, the chief economist of the New York office of the Bureau of Labor Statistics.

"If you are unemployed or underemployed, that is the most important issue," he said. "But if you're working, and your income has gone down, or you haven't had a wage increase in a number of years, that problem is the bigger issue for you."

The problem makes recovering from the recession harder, he said, because without wage growth, it's harder for Americans to pay down their debts.

In fact, real wages have been on a mostly downward slope for more than 40 years.

Researchers at the Hamilton Project, part of the center-left research center the Brookings Institution, recently calculated that the median working-age man with a job earns about 4 percent less, when adjusted for inflation, than he did in 1970.

The numbers look better for women, but they tell a different story, since women historically numbered fewer in the work force and earned less the further back you go.

There are many explanations for the declining earnings.

One is that the Federal Reserve successfully tamed inflation, so wages aren't racing to keep pace with rising prices. Another is the decline in labor unions, whose members got higher wages and better benefits.

Yet another explanation is that productivity -- a worker's output per hour -- has improved greatly thanks to computers, automation. Productivity's role in falling real wages is a subject of debate, partly because workers used to share in the benefits of rising productivity but have shared less so over the past decade.

 

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