The Mystery of Low Wage Growth

BusinessWeek Online ^ | Aug 7,2006 | Michael Mandel

[A. Pole]

Perhaps the oddest and most depressing fact about the U.S. economy these days is the lack of real wage growth. The unemployment rate has been below 5% since December, and productivity growth is still looking strong. Yet wages and salaries, adjusted for inflation, are down for virtually every broad occupational category.

Time of the general prosperity in USA was based on mass consumption. Reducing the wages for the average people might lead to the contraction of economy as the demand for the luxury goods and for the servants cannot propel real growth.

Also the cheap labor is an enemy of technological progress as the millenniums of human history has demonstrated.

[Accygirl]

A minuscule amount of the children of illegal immigrants go to college; most illegals take jobs at the lower end of the spectrum (fruit pickers, maids, landscapers...).

[mysterio]

Competition with low-cost workers in China, India, Eastern Europe, and the rest of the developing world may finally be taking its toll on American workers.

Boy, what a shock. Don't tell the free traders. They think exporting all of our jobs to slave labor markets is awesome.

[Darteaus94025]

Thanks for admitting your error. And the presence of illegal aliens does depress wages.

[Accygirl]

Frankly, I don't feel that sorry for Americans stuck in dead end jobs... Considering the amount of job training programs, junior colleges, skilled labor jobs (such as plumbers and electricians), there's no excuse for someone to still be working in a factory. Most factory jobs are going to be either taken over by machines or outsourced overseas in the next twenty years anyway.

The real problem in the U.S. labor market is the fact that no companies are willing to invest in recent college grads. because the Lindsay Lohans of the world make us look all bad. It took me forever to find a decent job, and it barely pays enough for me to live on each month. I recently got an apartment and it shocks me how much it costs to live. And I have a decent job... Lots of kids with college degrees are stuck temping or working in crummy hourly jobs in inside sales (telemarketing) and customer service.

[hedgetrimmer]

the only people left with health and retirement plans will be government workers and CEOs.

Maybe we Americans can take back our government and "level the playing field" between us and the government workers and CEOs, like they did to working Americans with "free trade" and third world workers.The government workers and CEOs will just hate that, won't they.

[hedgetrimmer]

At my employer, last year medical costs rose more than 37%

The more illegal aliens that poor into this country, the worse that number is going to get. The health care shell game has insured workers(and their employers) paying the costs for illegal aliens using our health care system. The more illegals, the fewer benefits you are going to get from your employer, because illegals are making them prohibitively expensive.

[hedgetrimmer]

Why do you exclude food and energy? Thats just sloppy.

Are you saying American workers don't have to pay higher food and energy prices with their 1.1% pay raise?

[hedgetrimmer]

Then you should be able to offer some proof that contradicts my chart

A chart made you up and put up on photobucket showing no data source? Ha ha ha ha ha...

[hedgetrimmer]

They think exporting all of our jobs to slave labor markets is awesome.

A concise summary of "free trade".

[rwfromkansas]

Only in the sectors where they congregate.

The salary of a laywer won't drop because some illegal is out picking grapes.

[lucysmom]

The health care shell game has insured workers(and their employers) paying the costs for illegal aliens using our health care system. The more illegals, the fewer benefits you are going to get from your employer, because illegals are making them prohibitively expensive.

Insurance companies negotiate with health care providers for reduced rates. I'm not sure how much illegal aliens impact the cost of insurance, I think the burden falls more heavily on the taxpayer and the uninsured with some assets.

[rwfromkansas]

And, if you are in a sector where they congregate, well, you should have been smarter about your career path.

[rwfromkansas]

Spot on.

[hedgetrimmer]

Every time you pay $8.00 for an aspirin at a hospital with your insurance, you are funding illegal alien health care.

[lucysmom]

According to the latest numbers from the Bureau of Labor Statistics, average hourly earnings for production and nonsupervisory workers are up by 3.8% over the past year.

According to the Bear Stearns report, "The Underground Labor Force Is Rising To The Surface", illegal immigration is twice the official estimates, and off the books labor is skewing just about all of the data. For instance, if an employer hires workers that are not counted and his productivity goes up, it artificially raises productivity overall. I would imagine that the 3.8% figure might actually be less if earnings are spread over over a larger workforce than is reported, but I don't know how that number is calculated.

[hedgetrimmer]

Thats a good one. We all know that no American is suitable to become a tradesman. Its silly that some Americans think they are good at trades. It should have been schooled out of them in the government school system. No Child Left Behind isn't draconian enough.

[rwfromkansas]

I feel bad for factory workers who are getting screwed and have lived their entire life working in factories.

But, for 20 years, perhaps longer, this nation has been transitioning to an information economy.

That is where the jobs will be, and anybody in college now would be stupid to pursue production work.

[Darteaus94025]

It does if they can't afford to hire a lawyer.

Suppose tomorrow, 90% of the jobs suddenly became minimum wage jobs. For people at that minimum compensation level to hire someone else, they have to be able to afford it. For people at that minimum compensation level to buy a house, they have to be able to afford it. For people at that minimum compensation level to buy a car, they have to be able to afford it.

When a large cohort of people are willing to work at low wages, I believe it has a depressive effect on other compensation levels and products.

[Darteaus94025]

Hey, they congregate in CA, but I guess that kind of proves your point.