The Electrical Worker online
October 2018

Rising Prices, Flat Wages:
Most Working People Shut Out of Booming Economy

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The average American worker's paycheck has a few more dollars in it than it did a year ago, but it doesn't stretch as far.

Despite a tight job market and Republican promises about tax cuts trickling down, wages aren't keeping up with inflation, according to numbers released by the U.S. Department of Labor.

Drivers who filled their gas tanks for $40 last summer spend $50 now. The cost of living — for rent, food, clothing, transportation, health care and more — was 2.9 percent higher this year than last. But wages are up just 2.7 percent.

That means, adjusted for what each dollar actually buys, real wages are down slightly for non-management workers over the last year.

"Jobs may be plentiful and corporate profits strong, but the U.S. economy is still failing workers," the Boston Globe reported, an analysis echoed by economists and news coverage nationwide this summer, even from The Wall Street Journal.

Unfortunately for workers, it's not a new pattern. A Pew Research study in August showed the real average wage has about the same purchasing power it did 40 years ago.

USA Today summed up the reality for most workers: "If you get a $1,200 annual raise on the same day that your rent goes up by $100 a month, you don't need an accountant to tell you that you didn't actually make any financial progress. And while that's an excessively simplified example, it's nonetheless a pretty fair representation of what has been happening to most American workers over the past four decades."

Even so, with an unemployment rate below 4 percent nationally, bewildered economists say it should be a seller's market for workers. Their theories involve globalization, technology and, importantly, the ceaseless attacks on unions and the right of workers to bargain collectively for better pay and benefits.

But virtually every news report comes back to an economist saying, in effect, "We really don't know."

Corporations are violating the laws of supply and demand with impunity, giving them little or no incentive to make good on the sales pitch for the 2017 tax cuts.

"Remember when Trump said the corporate tax cuts would translate to $4,000 in wage increases per worker?" Heidi Shierholz, former chief economist at the Department of Labor, tweeted in July. "How about zero, does zero work for you?"

Less than zero, in fact. Her post about Bureau of Labor Statistics data for the second quarter of 2018 showed "usual weekly earnings" — earnings before taxes and other deductions and including overtime — rising 2 percent, or 0.7 percent below the rate of inflation.

Many workers "are far from making up lost ground" from the Great Recession, and more roadblocks are in the way, as the New York Times described:

"Hourly earnings have moved forward at a crawl, with higher prices giving workers less buying power than they had last summer. Last-minute scheduling, no-poaching and noncompete clauses, and the use of independent contractors are popular tactics that put workers at a disadvantage. Threats to move operations overseas, where labor is cheaper, continue to loom. And in the background, the nation's central bankers stand poised to raise interest rates and deliberately rein in growth if wages climb too rapidly."

While workers toil away for less and less, companies are using their tax-cut windfalls to buy back hundreds of billions in stock and further enrich executives and shareholders — namely the top 10 percent of Americans who own 80 percent of all stock.

"There's a bit of a myth that through indirect holdings, like holdings of stock in a pension fund, the stock market has become democratized, and everyone's all in. Not so," economist Jared Bernstein wrote in a Washington Post column.

The New York Times story cited a Brookings Institution analysis showing that in 2000, the last time the jobless rate fell below 4 percent, "corporations pulled in 8.3 percent of the nation's total income in the form of profits (while) wages and salaries across the entire work force accounted for roughly 66 percent."

Now, corporate profits account for 13.2 percent of national income, and workers' share has dropped to 62 percent.

"Worker productivity has been soaring for 40 years, sending corporate profits into the stratosphere," International President Lonnie R. Stephenson said. "How is it possible that workers aren't breaking even, let alone getting ahead?

"Economists may be puzzled, but America's unions aren't: it's corporate greed run amok, fed by laws and policies that make the rich richer while workers, and consumers, pay the price. Electing pro-worker candidates in November is the first step toward balancing the scales."