World Economy

US Workers Wages Remain Almost Flat

US Workers Wages  Remain Almost FlatUS Workers Wages  Remain Almost Flat

It is one of the contradictions of the US economic boom: the unemployment rate has so-called fallen to the lowest level in six years, but workers’ wages have remained almost flat.

The anomaly is troubling enough that it has sparked questions about whether the economy’s rebound from the 2008-2009 recession is all that strong, AFP said.

“Why is wage growth so slow?” the Federal Reserve’s San Francisco branch asked in a research study Monday, calling the stubbornness of wages amid surging growth “unusual behavior”, economically speaking.

In theory, the sharp fall in the jobless rate from 10 percent in October 2009 to 5.8 percent today should have sparked firm rises in the pay for the average American worker. With the supply of available workers falling, they should be in the position of forcing employers to pay more.

But the reality is that paychecks have barely risen, measured against inflation.

  Wages Flat

“In real terms, wages have been about flat, growing less than labor productivity,” said Fed Chair Janet Yellen last August, and nothing has changed since then. In November the annual growth of wages was just 2.1 percent, compared to the 3.9 percent rise in 2007 before the crisis.

According to the San Francisco Fed study, some 15 percent of Americans saw no wage gain in the year to November 2014, compared to 12 percent in 2007.

Even while celebrating the fall in the jobless rate, the White House itself pointed to the problem in December.


  Longstanding Challenges

“There is more work to be done to further boost wage growth and address longer-standing challenges around both the quality of jobs and the growth of wages,” it said.

Indeed, in constant dollars the average hourly salary of $20.67 is barely higher than the $19.18 of 1964. The problem is worse for those workers on the lower ends of the pay scale. Since 2000, the 10 percent of workers on the bottom of the scale have seen their weekly paychecks shrink 3.7 percent when measured against inflation, according to a recent study by the Pew Research Center.

Those at the top of the scale of wage workers saw gains of 9.7 percent.

“For most US workers, real wages – that is, after inflation is taken into account – have been flat or even falling for decades,” said Pew’s Drew DeSilver.

The one comforting aspect is that inflation remains weak, not eating away more of workers’ household purchasing power.

According to a number of experts, the contradiction of economic growth and stagnant wages exposes certain flaws in the jobs market.

“The labor market is much weaker than it appears to be just by looking at the unemployment rate,” said Kelly Ross, deputy director of the policy department at the AFL-CIO labor federation.


  Waning Union Power

The market is not as tight as the official jobless rate suggests. The official jobless numbers do not include the rise of people stuck in temporary jobs and those who have dropped out of the jobs market in discouragement.

The Economic Policy Institute in Washington estimates those would add another 5.7 million Americans to the official unemployed number of 9.1 million.

The rise in the power of finance and capital in the US economy and the weakness of workers’ unions has also contributed to the problem, according to Ross.

“With the decline of unions, we don’t have the ability to translate higher profits into higher growth in wages,” he said.

A rise in the official federal minimum wage rate, stuck at the current level since 2009, could help push paychecks higher.