Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member Latest Breaking News General Discussion The DU Lounge All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search

progressoid

(49,988 posts)
Sun Jun 16, 2013, 01:32 PM Jun 2013

If the Economy Is Back, Why Are Wages Still So Low?

—By Kevin Drum
...

First off, a new paper by a trio of researchers confirms some old news: Adjusted for inflation, wages began stagnating for both men and women 10 years ago. Men's wages have actually decreased slightly since 2000, while women's wages, which had been rising steadily for decades, flattened out nearly to zero. But it could have been worse. Economists have long known that there's a floor to wages because employers don't like to reduce nominal wages. If you make $10 per hour, they won't cut your wage to $9 per hour. They'll just hold it at $10 and let inflation eat it away. This phenomenon is called wage stickiness.

But in "Wage Adjustment in the Great Recession," these researchers have found that wage stickiness, which is driven mostly by social convention, not economic law, might be dying out. During the Great Recession, employers were increasingly willing to cut nominal wages. Among hourly workers, the usual number who experience wage cuts is around 15 percent. That had risen to 25 percent by 2011. Among nonhourly workers, the number rose from about 25 percent to nearly 35 percent. Increasingly, it seems, wage stickiness isn't acting as a barrier against wage losses.

So what does this mean in the real world? Economist Jared Bernstein points us to the chart below. It shows growth in nominal wages, growth in benefits, and growth in total compensation (wages plus benefits). The news is grim. Total compensation (the gray line) grew at about 3 to 4 percent per year during most of the aughts. Since the Great Recession hit, that's dropped to 1 to 2 percent. This is less than the inflation rate, which means that even when you account for benefits, real compensation has been declining since 2008.

Bottom line: Wage stickiness is disappearing, and with it a social convention that prevented wages from dropping too harshly even during recessions. As a result, wages are getting cut in bad times and never catching back up in good times. This is the world we live in today.




http://www.motherjones.com/kevin-drum/2013/06/permanent-wage-decline-great-recession?google_editors_picks=true

28 replies = new reply since forum marked as read
Highlight: NoneDon't highlight anything 5 newestHighlight 5 most recent replies
If the Economy Is Back, Why Are Wages Still So Low? (Original Post) progressoid Jun 2013 OP
The comfort of the rich requires an abundant supply of the poor. Voltaire Tierra_y_Libertad Jun 2013 #1
Exactly. It's a feature, not a bug Populist_Prole Jun 2013 #2
The Escher Economy alterfurz Jun 2013 #6
SOP WovenGems Jun 2013 #3
And pay people in service jobs a living wage. progressoid Jun 2013 #5
Total number of employed is not yet back to the 2006 level. FarCenter Jun 2013 #4
My daughter worked as an unpaid intern at a free clinic for six months, three months of which she Mnemosyne Jun 2013 #7
If we don't get together (read: unionize) soon, they will suck us all dry. reformist2 Jun 2013 #9
They are stealing our futures, and our children and grandchildren's futures. nt Mnemosyne Jun 2013 #10
Yes, that is the only answer. Loge23 Jun 2013 #13
On the other hand a badly run union can break a company Loge23. cstanleytech Jun 2013 #18
Define a "badly run union"....... socialist_n_TN Jun 2013 #26
One that forces through bad deals that dont take into account whats best in the long term for both cstanleytech Jun 2013 #28
Free trade is accelerating, and there's no domestic bubble this time to mask it. reformist2 Jun 2013 #8
Yup. ctsnowman Jun 2013 #22
Because it was not a recovery. woo me with science Jun 2013 #11
It started with the stolen election in 2000. ananda Jun 2013 #14
No. bvar22 Jun 2013 #16
good programmes/articles on the Trans Pacific Partnership Snowfield Jun 2013 #17
Tx and welcome to DU! n/t Triana Jun 2013 #21
Nailed it. ctsnowman Jun 2013 #23
It started well before that Sherman A1 Jun 2013 #25
Ironic . . . TomClash Jun 2013 #12
You should have reversed your headline. former9thward Jun 2013 #15
The economy isnt "back".. there is a long way to go. DCBob Jun 2013 #19
But that under 6% employment is NOT in the plan...... socialist_n_TN Jun 2013 #27
That's what "Free" trade agreements and union-busting is meant to do. Triana Jun 2013 #20
X 1000 ctsnowman Jun 2013 #24
 

FarCenter

(19,429 posts)
4. Total number of employed is not yet back to the 2006 level.
Sun Jun 16, 2013, 01:40 PM
Jun 2013

Also America Has Way Too Much Manufacturing Capacity

In another sign of recent weakness in the manufacturing sector, capacity utilization in the US has stalled, as demand remains soft. US industries are producing significantly below their capacity and "5.5 percentage points below long-run average" according to the Fed. We are certainly far under the 82-85% level at which economists believe that the traditional measures of inflation are expected to rise.


http://www.businessinsider.com/america-has-too-much-manufacturing-capacity-2013-6

Mnemosyne

(21,363 posts)
7. My daughter worked as an unpaid intern at a free clinic for six months, three months of which she
Sun Jun 16, 2013, 01:52 PM
Jun 2013

was the only one running the entire clinic, except for volunteer doctors and nurse three times a month.

The board finally hired her to run the entire clinic for $10 per to raise two children. She accepted because she was desperate for paid work in her field. She worked for that wage for 14 1/2 months. Then her electric bill was ridiculous and she tried to find help to get it paid, the board fired her for embarrassing them. They told her how much she had embarrassed them about two weeks before they decided she messed up her sick day on the time sheet and used that as an excuse to fire her.

They had just agreed to give her two paid sick days and a week paid vacation about a month before, which she couldn't ever take because there was no one else to take over the clinic.

These are wealthy people on the bod, and they consider anyone poor as stupid and deserving of it, even when they are the ones keeping someone in poverty.

I've gone broke helping her and the kids survive. We both have to sell our homes now to survive. Thankful to have a home to sell, but damn, does it ever get any easier?

On edit - and she took out student loans, which the school convinced her she would be able to repay because she would be making at least $30,000 to start.

Loge23

(3,922 posts)
13. Yes, that is the only answer.
Sun Jun 16, 2013, 02:13 PM
Jun 2013

I just don't see that happening anymore, sadly.
Even sadder, is that so many working class Americans have brought the lie about unions - even with the reality of the alternative staring them in the face.
The great paradox is this is why the economy sucks! If you starve the middle-to-lower class out, you kill broad-based spending.

cstanleytech

(26,291 posts)
18. On the other hand a badly run union can break a company Loge23.
Sun Jun 16, 2013, 03:13 PM
Jun 2013

A good one though can be an asset both for the company and the workers.

cstanleytech

(26,291 posts)
28. One that forces through bad deals that dont take into account whats best in the long term for both
Sun Jun 16, 2013, 08:17 PM
Jun 2013

the workers and the company as a whole.
I just wish more CEOs did what was best for the workers and the company as a whole as well but it seems most of them are out for themselves from what I have seen.

reformist2

(9,841 posts)
8. Free trade is accelerating, and there's no domestic bubble this time to mask it.
Sun Jun 16, 2013, 01:57 PM
Jun 2013

If it weren't for the internet bubble of '96-'00 and the housing bubble of '03-'07, I think we would have seen this downward trend in wages much sooner. But now that those bubble-related, too-good-to-be-true jobs are gone, we are seeing the stark reality of what globalism means to American wages.

bvar22

(39,909 posts)
16. No.
Sun Jun 16, 2013, 02:36 PM
Jun 2013

It started under Reagan with the huge Tax Cuts to the Rich and Busting of Unions,

accelerated under Clinton with "Free Trade", De-Regulation of Banks and Telecoms,

and has continued to accelerate under Bush2 and Obama.

The final Death Blow will be the The Trans-Pacific Partnership (NAFTA on Steroids)
currently being negotiated in secret by the Obama administration.

 

Snowfield

(46 posts)
17. good programmes/articles on the Trans Pacific Partnership
Sun Jun 16, 2013, 03:11 PM
Jun 2013
http://archives.kpfa.org/data/20130612-Wed1300.mp3 (right click, save as)

"The Trans Pacific Partnership Forum" with Georgia Kelly, Arthur Stamoulis, Margaret Flowers and Kevin Zeese from the Public Banking Institute's Public Banking 2013: Funding the New Economy conference. Georgia Kelly talks about Fast Track; Arthur Stamoulis about what the TPP is; Margaret Flowers on healthcare; and Kevin Zeese on how to fight back.

----------------------------------

Senator Warren Presses White House to Release Pacific Trade Text

http://www.businessweek.com/news/2013-06-13/senator-warren-presses-white-house-to-release-pacific-trade-text

The TPP Could Destroy the American Middle Class

http://economyincrisis.org/content/the-grave-danger-ahead-the-tpp-could-destroy-the-american-middle-class

The Dangers of the Trans-Pacific Partnership

http://www.brownpoliticalreview.org/2013/03/the-dangers-of-the-trans-pacific-partnership/

--------------------------------------





ctsnowman

(1,903 posts)
23. Nailed it.
Sun Jun 16, 2013, 03:46 PM
Jun 2013

Maybe if we can just get a multimillionaire or better yet a billionaire to run the NLRB things will get better.

DCBob

(24,689 posts)
19. The economy isnt "back".. there is a long way to go.
Sun Jun 16, 2013, 03:14 PM
Jun 2013

Once we get back under 6% unemployment, I suspect wages will start going back up again.

socialist_n_TN

(11,481 posts)
27. But that under 6% employment is NOT in the plan......
Sun Jun 16, 2013, 07:42 PM
Jun 2013

They want to keep the reserve army of labor hungry for ANY job and that means unemployment will stay above that 6% mark. It'll acutally probably stay closer to 7% from now on. Or at least as long as end stage capitalism exists.

 

Triana

(22,666 posts)
20. That's what "Free" trade agreements and union-busting is meant to do.
Sun Jun 16, 2013, 03:31 PM
Jun 2013

Drive wages into the dirt. Suffice to say the multinational corprats have succeeded in re-creating slavery and driving more and more middle-class workers to becoming the working poor with no hope of ever being anything else.

Latest Discussions»General Discussion»If the Economy Is Back, W...