Higher Prices, Stagnant Wages Produce Pay Cut for US Workers
By Nicholas Riccardi
The Los Angeles Times
Monday 11 April 2005
For the first time in 14 years, the American work force has in effect gotten an across-the-board pay cut.
The growth in wages in 2004 and the first two months of this year trailed the growth in prices, compounding the squeeze from higher housing, energy and other costs.
The result is that people such as Victor Romero are finding themselves falling behind.
The 49-year-old film-set laborer had to ditch his $1,100-a-month Los Angeles apartment because his rent kept rising while his pay of $24.50 an hour stayed flat.
"There's no such thing as raises anymore," Romero said. This is the first time that salaries have increased more slowly than inflation since the 1990-91 recession. While salary growth has been relatively sluggish since the 2001 downturn, inflation had stayed relatively subdued until last year, when the consumer price index rose 2.7 percent. But average hourly wages rose only 2.5 percent.
The effective 0.2-percentage-point erosion in workers' living standards occurred while the economy expanded at a healthy 4 percent, better than the 3 percent historical average.
At the same time, corporate profits hit record highs as companies got more productivity out of workers while keeping pay raises down.