Articles

September, 2018

IF THE ECONOMY IS STRONG, WHY HAVE WAGES STAGNATED?

The Death of the Pay Raise

             As reported in the September 10, 2018 Society for Human Resource Management, (SHRM) article, even though today’s 2018 economy is strong, unemployment is at an all-time low, many businesses are profitable, and the financial markets have increased, wages for many low and middle-income workers have remained stagnant.

For example, a waitress or cashier in 1979 earned about $9.42 per hour when adjusted to today’s dollars.  In 2016, that waitress or cashier earned about $9.33 per hour –98% less than what her counterpart was making almost 40 years ago.

Some of the theories as to why wages have stagnated include:

• Automation and global outsourcing have replaced many U.S. workers, especially low-skilled ones, reducing the demand for these workers and thus the pressure to increase pay;
• A college degree no longer guarantees the financial reward it once did;
• The decline in labor union membership has made it more difficult for unions to negotiate higher pay;
• The minimum wage does not command as much buying power as it once did;
• Following the recession of 2008, companies have chosen to keep labor costs low in anticipation of another economic downturn.

Where there has been wage growth, it has been focused among upper-middle and top-income earners, contributing to an increase in wage inequality.  These earners are defined as those making more than $27 per hour, according to the 2017 analysis of the Bureau of Labor Statistics’ Current Population Survey.  Upper-middle workers saw a 12% growth in wages from 1979 to 2016, when adjusted for today’s dollars.  Top earners enjoyed an increase of more than 27%.

At the lower end, wages decreased by 98% for those making less than $10 an hour.  Meanwhile, the cost of living rose an average of 1.5% per year since 2011, according to the Social Security Administration.  This means that the wages for those at the bottom earnings did not keep pace.

As a result, a study published in May, 2018 by the United Way reported that 43% of U.S. households don’t earn enough to afford basic living expenses such as housing, food, child care, health care and transportation.  The study identified some of these workers as working as the nation’s child care workers, home health aides, office assistants and store clerks.      The study reported that 66% of jobs in the United States pay less than $20 per hour.