Wages Still Under Pressure
By SARA MURRAY
Wages of U.S. employees are generally stagnant and likely to remain so as the pool of unemployed workers helps employers keep wages from rising even as productivity, or output per hour of work, soars.
Average hourly earnings for private-sector production and nonsupervisory workers, who account for about four-fifths of people on private payrolls outside farming, rose three cents in December from November to $18.80 before adjusting for inflation, the Labor Department said Friday.
In the past year, hourly wages have risen 2.2%, not enough to offset the 2.3% increase in the Consumer Price Index from November of 2008 to November 2009.
“There may be pockets of the labor market…where we do see some upward pressure,” such as for highly skilled workers, said Steven Davis of the University of Chicago Booth School of Business. “But I don’t see any reason in the recent reports to expect strong growth in real [inflation-adjusted] wages.”
Other broader measures of wages tell a similar story. Average weekly earnings rose by $1 to $624.16, just 1.9% higher than a year earlier. The government’s broadest compensation measure, the Employment Cost Index, which tracks wages and benefits for private and government workers, was up 1.5% in the 12 months ended in September, the most recent data available. But there are some signs of change.
Associated PressNick Rodriguez looks at job listings for tow-truck drivers earlier this week at a New York state agency. In the past year, hourly wages have risen 2.2%, not enough to offset the 2.3% increase in the Consumer Price Index from November 2008 to November 2009.
“After very weak growth earlier in 2009, wages now appear to be growing modestly,” economist Heidi Shierholz of the left-leaning Economic Policy Institute said Friday.
Separately, the Federal Reserve said Friday that consumer credit, which covers most consumer loans except those for real estate, fell at an 8.5% annual rate in November, reflecting both lack of consumer appetite for borrowing and more tight-fisted lenders. Revolving credit, primarily credit cards, declined at a steep 18.5% annual rate. Non-revolving credit, covering loans for everything from recreational vehicles to education, fell at a 2.9% annual rate.
For those in state and local-government jobs, the worst could be yet to come. “The whole state sector of the economy is probably going to be in worse shape,” said labor economist David Card of the University of California at Berkeley, whose own salary has been cut 10%. “That’s normally been a kind of supporting factor for the middle class: Police jobs, firemen, teachers, all those jobs are getting completely threatened.”
Firefighters in Las Vegas agreed to a wage freeze in June in exchange for maintaining health benefits, said Capt. Dean Fletcher, president of International Association of Firefighters Local 1285. Now the city, its revenues suffering, is asking firefighters to take an 8% pay cut in their next contract. “It’s the younger guys that start out at a smaller salary that are pinching to make ends meet,” he said. “They were probably banking on a cost-of-living raise.”
In Vermont, the union representing 6,500 state government workers, from nurses to snow-plow drivers, recently agreed to a 3% pay cut for two years, effective in July.
Some employers, relieved that the economy isn’t as bad as feared, are restoring wage cuts or abandoning wage freezes.
Just 14% of companies said they are planning across-the-board wage freezes this year, compared with 30% who did so last year, according to a recent survey of 350 midsize and large U.S. companies by Mercer LLC, a consulting firm.
At DENSO International America Inc., which makes car components, seven U.S. locations that trimmed hours or salaries during the recession have restored them. At the North American headquarters in Southfield, Mich., salary cuts of 5% to 10% were restored on Jan. 1.
“The economic situation, at least for the short term, was going to seriously impact our business, and we needed to implement various countermeasures to help prevent further loss,” said Bridgette LaRose Gollinger, a company spokeswoman.
“We still need to be vigilant in managing budgets and expenses as we can’t be certain what will happen in the next year,” she added.
AARP, the lobby for older Americans, recently reimbursed employees for the five furlough days they were required to take last year and reinstated employer-match to 401(k) retirement plans it had suspended. Drew Nannis, a spokesman, said, “We did some belt-tightening and as a result at the end of the year found ourselves in a stronger economic position than I think we had expected.”
Highly skilled, and thus highly valued, workers will be among the first to see wages improve. In an October survey, 65% of companies said that they were worried about holding onto their best, most skilled employees, according to a survey of 201 human-resources executives by consultants Towers Watson.