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If the Economy Is Back, Why Are Wages Still So Low?


Business  (tags: economy, dishonesty, ethics, cover-up, abuse, americans, politics, usa, money, marketing, lies, law, usa, investments, investors, labor, investing, government, finance, dishonesty, corporate, abuse, americans, business, consumers, corruption, cover-up )

JL
- 439 days ago - motherjones.com
First off, a new paper by a trio of researchers confirms some old news: Adjusted for inflation, wages began stagnating for both men and women 10 years ago.



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JL A. (275)
Wednesday June 19, 2013, 8:21 am


Mother Jones
If the Economy Is Back, Why Are Wages Still So Low?
There used to be a wage floor, even during downturns. But then the Great Recession came along.

By Kevin Drum | Fri Jun. 14, 2013 3:05 AM PDT

Five years after the Great Recession began, the US economy appears to be rebounding a bit. But two recent bits of evidence suggest that the impact of the recession on ordinary workers may have been even worse than we thought—and that the impact of future recessions might be worse too.

First off, a new paper by a trio of researchers [1] confirms some old news: Adjusted for inflation, wages began stagnating for both men and women 10 years ago. Men's wages have actually decreased slightly since 2000, while women's wages, which had been rising steadily for decades, flattened out nearly to zero. But it could have been worse. Economists have long known that there's a floor to wages because employers don't like to reduce nominal wages. If you make $10 per hour, they won't cut your wage to $9 per hour. They'll just hold it at $10 and let inflation eat it away. This phenomenon is called wage stickiness.

But in "Wage Adjustment in the Great Recession," these researchers have found that wage stickiness, which is driven mostly by social convention, not economic law, might be dying out. During the Great Recession, employers were increasingly willing to cut nominal wages. Among hourly workers, the usual number who experience wage cuts is around 15 percent. That had risen to 25 percent by 2011. Among nonhourly workers, the number rose from about 25 percent to nearly 35 percent. Increasingly, it seems, wage stickiness isn't acting as a barrier against wage losses.

So what does this mean in the real world? Economist Jared Bernstein [2] points us to the chart below. It shows growth in nominal wages, growth in benefits, and growth in total compensation (wages plus benefits). The news is grim. Total compensation (the gray line) grew at about 3 to 4 percent per year during most of the aughts. Since the Great Recession hit, that's dropped to 1 to 2 percent. This is less than the inflation rate, which means that even when you account for benefits, real compensation has been declining since 2008.

Bottom line: Wage stickiness is disappearing, and with it a social convention that prevented wages from dropping too harshly even during recessions. As a result, wages are getting cut in bad times and never catching back up in good times. This is the world we live in today.

Source URL: http://www.motherjones.com/kevin-drum/2013/06/permanent-wage-decline-great-recession

Links:
[1] http://conference.nber.org/confer/2013/LMs13m/Elsby_Shin_Solon.pdf
[2] http://jaredbernsteinblog.com/boy-is-there-ever-no-wage-inflation-in-this-economy/
 

Joanne Dixon (38)
Wednesday June 19, 2013, 9:48 am
Kevin Drum, as usual, gets it right - and makes it very clear. So where do we go from here?
 

JL A. (275)
Wednesday June 19, 2013, 9:55 am
Perhaps legislation linking executive/CEO pay to no more than a certain multiplier of company's median wages?
Given them incentives to find ways to pay better?You cannot currently send a star to Joanne because you have done so within the last day.
 

Carol D. (109)
Wednesday June 19, 2013, 10:08 am
because they must be spending the money on other things

Noted
 

JL A. (275)
Wednesday June 19, 2013, 10:25 am
You cannot currently send a star to Carol because you have done so within the last day.
 

Kit B. (276)
Wednesday June 19, 2013, 10:44 am

When big business is allowed to block and stampede unions the result is always the same, poor wages and lousy working conditions.
 

JL A. (275)
Wednesday June 19, 2013, 11:09 am
You cannot currently send a star to Kit because you have done so within the last day.
 

Malgorzata Zmuda (182)
Wednesday June 19, 2013, 12:23 pm
u nas jest jeszcze gorzej
 

Kath P. (10)
Wednesday June 19, 2013, 12:44 pm
The rich get richer if the poor stay poor.
 

Annaliisa A. (0)
Wednesday June 19, 2013, 1:05 pm
That chart is way depressing.
 

Dandelion G. (386)
Wednesday June 19, 2013, 1:34 pm
This is the world we live in today.

Meaning, this by designed economy is going to stay this way, for as long as the Authorities want it too. Global economy means they don't care if you in the USA can buy their product, they'll sell it to someone else doing better in another Country.

Unionize or settle for this, it seems pretty straight forward to me.
 

JL A. (275)
Wednesday June 19, 2013, 1:57 pm
You cannot currently send a star to Dandelion because you have done so within the last day.
 

Birgit W. (144)
Wednesday June 19, 2013, 2:17 pm
Do you really believe what the media is telling us? We cannot believe on word the media, politicians and corporations want us to know.
 

Gene Jacobson (251)
Wednesday June 19, 2013, 2:52 pm
"Total compensation (the gray line) grew at about 3 to 4 percent per year during most of the aughts. Since the Great Recession hit, that's dropped to 1 to 2 percent. This is less than the inflation rate, which means that even when you account for benefits, real compensation has been declining since 2008. "

Not only this, though this is not nothing, but most of the jobs that were lost in the Bush recession were relatively high paying jobs with long tenured employees. Those people have been able to find work at a third of what they were earning, often with either no, or greatly reduced, benefits. They were middle class people in their 40's and up who have a hard time finding new employment, whose job was shipped overseas and what they can find now, if anything are jobs at less than 40 hours at maybe $13.00 an hour. The 1% have done great, their wealth vastly increased, by the exact amount of what the middle class has lost. This cannot last, we will collapse from within if it is not remedied. If class warfare is what it takes, then progressives should stop shrinking every time republicans or talking heads shriek the phrase and proudly say, YES, this is, and your war on the middle and lower class of America is OVER. We are going to enact true tax reform and come to an equitable redistribution of wealth in order to save our country and our lives as we once knew them. If you can't live with that 1%, move to your other house in France or the Caymans. We'll take your job and do it better with justice and equality for all. Class warfare has been underway for 30 years and we have allowed ourselves to be cowed by the 1% screaming about it every time it is suggested they pay their fair share, that their wages need not by 7 figures per year, that the gap between the richest and the poorest MUST be shrunk, or our way of life, the American Dream, is dead. We will not go quietly into that good night, although you may well.
 

JL A. (275)
Wednesday June 19, 2013, 3:10 pm
You cannot currently send a star to Birgit because you have done so within the last day.
 

Lois Jordan (55)
Wednesday June 19, 2013, 4:54 pm
Thanks, JL. However, one thing the article didn't mention was what started this erosion. Trying to remember exactly the year, but I believe it was during Dumbya's 1st term when overtime was "eliminated." A couple of my kids saw their paychecks diminish when Congress enacted that new law. I'm sure someone remembers better than I do. Things have only gone downhill for anyone other than the 1% since then.

Gene's comment was excellent. We absolutely need tax reform and an end to those corporate loopholes. The minimum wage should be about $20 now. Employers no longer hire permanent full-time employees. Their profits are through the roof, and are being pocketed by CEO's and upper management. We are becoming "have-mores" and "have nothings." I am angry at congressional Dems. who aren't fighting for us. Many are just as bought-and-paid for as the GOP. I also found that when I donated to Alan Grayson awhile back, this money went into a Dem. fund that would be dished out as they deemed feasible. I no longer donate. This money is held over the heads of Congress members, too.
 

Adena Z. (42)
Wednesday June 19, 2013, 4:57 pm
I poop on you!!
 

JL A. (275)
Wednesday June 19, 2013, 4:59 pm
You are welcome Lois.You cannot currently send a star to Lois because you have done so within the last day.
 

Micheael Kirkbym (85)
Wednesday June 19, 2013, 5:09 pm
Globalization that led to outsourcing was nothing more than a redistribution of wealth. When the corporatist's Frankenchildren took over it resulted in the west becoming for the most part a service industry. Most of the jobs out there are low paying service type jobs. Why else would Mickey Dees be asking for a minimum BA to be a server in their Mass. outlets? Is this to become the norm? Sit down, shut up and be grateful for what we give you? Meanwhile don't forget to pay your taxes; your life insurance premiums; your overpriced and undervalued university education. Don't bother to take vitamin or mineral supplements. They're no good for you and we'll soon be doing an end run to ensure that only our good buddies in Big Pharma can produce them. Visit your Nazi psychiatrist and take all the drugs he prescribes for you. Pay no attention to those men behind the curtain. I am the all great and powerful Oz and I know what's good for you. Trust me. Heh, heh, heh.
 

JL A. (275)
Wednesday June 19, 2013, 5:19 pm
You cannot currently send a star to Michael because you have done so within the last day.
 

Brian M. (145)
Wednesday June 19, 2013, 5:19 pm
It all boils down to low, low wages for workers equal great, great profits for corporations. We were founded as a slave nation and we are well on our way to being a slave nation once again.
 

Millie O'Connor (179)
Wednesday June 19, 2013, 7:28 pm
I don't see the economy ever getting to a good place for the working class. With the trillions spent on a war that will never end, jobs sent overseas, and corporate gluttony, just to name a few, this country's middle class will never see glory days again, at least not in my lifetime.
 

JL A. (275)
Wednesday June 19, 2013, 7:29 pm
You cannot currently send a star to Millie because you have done so within the last day.
 

Jude Hand (59)
Wednesday June 19, 2013, 8:11 pm
Noted. That's telling...huh.
 

Helen Porter (40)
Wednesday June 19, 2013, 8:32 pm
The economy is back

Really
 

JL A. (275)
Wednesday June 19, 2013, 9:06 pm
You cannot currently send a star to Zee because you have done so within the last day.
 

Billie C. (2)
Wednesday June 19, 2013, 10:36 pm
try finding a full time job now with obamacare. part time less than 30 hours a week is the new normal.
companies aren't going to pay decent wages when they get illegals for half price and they aren't going to pay for insurance so they are cutting hours. not just companies but governments too.
that's our new normal. but it's ok our government will take care of us.
 

TomCat S. (286)
Thursday June 20, 2013, 1:12 am
The economy is back for those whom we have subsidized, not so much for those whose assistance Republicans have blocked.
 

Kerrie G. (135)
Thursday June 20, 2013, 3:14 am
Noted, thanks.
 

jeanne schreurs (203)
Thursday June 20, 2013, 3:51 am
Maybe this is the reason why wages are still so low:
Financial disaster looms for America: $106 trillion in unfunded obligations mounting up over 30 years


Learn more: http://www.naturalnews.com/040868_US_debt_entitlements_financial_disaster.html#ixzz2WkjQzZ00
 

JL A. (275)
Thursday June 20, 2013, 8:25 am
Excellent point TomCat! And indeed employers will raise many straw arguments to be unfair to their workers, making things worse for those people and seek policies enabling even more of a power shift. The employers won't raise wages when they can outsource to slave labor in another country.
You are welcome Kerrie.
 

Deborah W. (6)
Thursday June 20, 2013, 1:36 pm
False advertising ... excellent rhetoric, empty in meaning. Bring anything else to mind?
 

David Menard (43)
Thursday June 20, 2013, 2:37 pm
Its only back for the wall st banksters and billionaires. the poor and the virtually extinct middle class are still F()&^%.
 

Sharon W. (4)
Thursday June 20, 2013, 4:01 pm
I have been asking myself that question. Luckily, it is not so bad over here in Germany.
 

Jo S. (493)
Friday June 21, 2013, 1:36 pm
Notedf & shared.
Yes, that's where I am stuck in " wage stickiness"! On that note it's Friday and I'm going in to get my sticky pay check!
Thanks JL.
 

Kathleen R. (138)
Friday June 21, 2013, 2:44 pm
read & noted
 
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