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Thursday, September 3, 2009
AFL-CIO NOW BLOG: Slow Wage Growth Puts Damper on Labor Day
by James Parks, Sep 2, 2009
This Labor Day, many American workers will be watching their pennies as much as they watch the annual parades. This year, working people across the board are being hit with an unprecedented array of economic problems, ranging from a lack of jobs to reduced wages for those who have jobs.
The impact of the recession goes far beyond those people who are unemployed or underemployed. A combination of slow wage growth, mandatory unpaid leave and a drop in benefits is going to make it harder for the economy to recover, says a leading economist.
During a conference call with reporters today, Lawrence Mishel, president of the Economic Policy Institute (EPI), said the recession is hitting working people hard across the board, including white-collar workers, blue-collar workers, women, men, union members, nonunion workers and both college and high-school educated workers.
Later this week, EPI will release a briefing paper, “The Recession’s Hidden Costs: Workers Lucky Enough to Keep Their Jobs Still Feel the Pain in Their Paycheck,” which chronicles the widespread pain being spread by the recession.
Mishel points out that private-sector wages grew only by 1.3 percent between December 2008 and June 2009. Meanwhile, production and nonsupervisory workers—representing about 80 percent of employees—have seen their annual wage growth slow drastically to 1.4 percent after a relatively steady growth of 4 percent from 2007 to 2008.
This sluggish wage growth could have a serious dampening effect on the economy, Mishel says.
Wage growth is the fuel for what’s going to happen to household consumption growth, which is essential to a robust recovery.
Right now, wages are growing slower than the rate of inflation, and we’re going to see real wages falling remarkably in the months ahead.
Adding to the misery is the trend by employers to require workers to take furloughs—time off without pay. If you take a week off without pay, Mishel points out, it costs you 2 percent of your income, or takes away 2 percent of your ability to pay bills, buy food and support your family. In fact, furloughs have become so common that average weekly work hours are at the lowest level in the 35 years that records have been kept, he says.
These trends naturally are raising anxiety in the workforce. Mishel cited a recent Gallup Poll, which shows 31 percent of respondents say they are afraid of being laid off, up from 19 percent in 2003 at the height of the last recession. Some 27 percent say they are concerned that their work hours will be cut back, and 32 percent say they are worried that their wages will be reduced.
Women workers especially are being hurt, Mishel says. While the bulk of unemployment was among men, the wages of college-educated women dropped more than any other group.
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