Just because the BLS artificially expels them from the counted labor market, doesn't mean these unemployeds are 'unattached' or uninterested in working. They are probably on welfare, however, so you're notion that these disruptions are without cost to you, is likely mistaken.
And the impact of inflation, despite glowing claims for its taming by propagandists for the deficits, is becoming unavoidable even in the skewed BLS statistics, as reported by the most recent U.S. News:
For the past three years, salary increases at Shawnee, Kan., ink company Nazdar have hovered around 3.5 percent. This year may be no different. Industry trends for 2006 suggest only a slight uptick in pay, from 3.6 to 3.8 percent. While the 445-employee company has yet to finalize its own merit-increase pool, rising healthcare and energy costs are weighing heavily on its decision. "We realize that employees are taking on more expenses," says Anissa Elsey, vice president of human resources. "But so is the company."
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For all the good news of late on the economy, there has been a noticeable exception and one that might explain why many consumers express less-than-sunny sentiments: Wages continue to lag behind inflation. Year-to-year hourly and weekly earnings for November were up only 3.2 percent, while inflation has hovered around 3.5 percent. Two recent surveys indicate that wages will rise only moderately in the coming months, if at all. And, says a survey by compensation data firm Salary.com, just a third of companies are budgeting more for salaries in 2006.
Lagging indicator. Why aren't workers seeing fatter paychecks? Experts say that wage increases typically lag behind the growth of the economy. "Companies want to make sure that they are going into a period that is as good or better than this year before they start spending money," says Bill Coleman, senior vice president of Salary.com. As a result, many companies are maintaining the fiscal prudence adopted in tougher times.
A key concern for companies is the price of healthcare. Firms face significant increases averaging 9.9 percent in 2006, up from 9.2 percent. "As long as we are going to pay more and more on the benefits side, then wages are not going to go up," says Bill Dunkelberg, an economist with the National Federation of Independent Business. That's especially true for employees, who may end up using any salary gains to pay rising healthcare contributions and out-of-pocket expenses. Consulting firm Hewitt Associates estimates that an employee making $40,000 a year will use 23 percent of an average salary increase of $1,440 for increased 2006 healthcare costs.
Foreign threat. Employees may also feel the pinch from abroad. Many economists point to factors like offshoring that could keep American wages depressed for some time. "It's a basic supply-and-demand story," says Jared Bernstein of the Economic Policy Institute. "Your employer now faces more labor low-cost options than . . . before." That most affects those with a high school education or less; already, the manufacturing sector has struggled to keep wages up at home. Even white-collar workers may not be immune; a 2005 study by the institute found that salaries for college grads had dropped by 1 percent.
The contradictions are plainly felt at Mark IV, a general contractor in Nashville. Business at the nine-employee firm is booming, and the help-wanted sign is out front. But owner Tonya Jones has no intention of raising salaries soon. "Things are still a little rough and rugged," she says. The company lost its healthcare plan almost two years ago, and prices on the open market have proved prohibitive. To compensate, Jones reimburses those covered under individual plans for their healthcare expenses in lieu of a salary increase. Jones implemented a bonus structure five years ago to reward employees who stay at the company for an entire year. "We are tying compensation to performance standards and giving bonuses to the entire company if certain goals are met," she says.
That's a trend catching on among more employers: In a survey by Mercer Human Resource Consulting this summer, 55 percent of companies said they planned to offer cash awards and signing bonuses. "Companies are very reticent about pay increases," says Steven Gross, a consultant with Mercer. "But they are more comfortable with incentives." Now that's something we can all take to the bank.
REVERSAL OF FORTUNE
After outpacing inflation, wages have lost ground compared with consumer prices since 2004.
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CONSUMER PRICE INDEX
AVERAGE HOURLY EARNINGS*
ANNUAL PERCENTAGE CHANGE
2000 3.4 3.9 +0.5 pct.
2001 2.8 3.8 +1 pct.
2002 1.6 2.9 +1.3 pct.
2003 2.3 2.7 +0.4 pct.
2004 2.7 2.1 -0.6 pct.
2005 3.4 2.8 -0.6 pct.
*For workers in nonsupervisory positions; 2005 figures averaged over 11 months.
Source: Bureau of Labor Statistics
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