• Welcome to the System Change Not Climate Change Community Forum. The Forum's goal is to promote exchange of information, discussion, and debate among ecosocialists and other activists who share our belief that capitalism is driving climate change and that a radical international grassroots movement can stop it.

Inflation is outpacing U.S. wage growth

#1
Los Angeles Times, August 11, 2018

Los Angeles Times
Inflation is outpacing U.S. wage growth

BY HEATHER LONG

U.S. workers’ paychecks are worth less than they were a year ago, the Labor Department reported Friday, as modest wage gains have not kept pace with inflation.

Prices rose 2.9% from July 2017 to July 2018, the Labor Department said, while average hourly pay increased 2.7% in the same period.
The lack of real wage gains comes despite a strong economy, with sustained growth and an unemployment rate of 3.9% — one of the lowest levels in decades.

The Labor Department tracks average hourly pay adjusted for inflation, which is known as the “real wage.” According to the federal government, the real average hourly wage was $10.78 in July 2017 and $10.76 in July 2018. Real wages have been on a sharp decline since the start of the year.

“Despite the strong labor market, wage growth has lagged economists’ expectations,” Pew Research said in a report this week. “In fact, despite some ups and downs over the past several decades, today’s real average wage has about the same purchasing power it did 40 years ago.”

Since 2000, only the top quarter of wage earners have seen any true increase in their pay once you account for inflation, Pew reported. For the middle class, it’s been years of stagnation, and the latest trends aren’t encouraging.

Gas prices, housing and transportation costs have all jumped in the last year, taking a bigger bite out of paychecks. The price of gas has risen 50 cents a gallon in the last year, according to the AAA tracker of the average national price of gas. Used-car prices and rent are also up substantially from a year ago.
When inflation rises faster than wages, workers fall behind. They have to cut costs from their budgets, take on debt or put in more hours to try to live the same lifestyle they had enjoyed a year ago.

The Labor Department reported that Americans are putting in more time on the job this summer versus last summer, which is helping to keep family earnings about the same for now.

“We are nearly a decade into the recovery and we’re still arguing about whether or not we’re seeing meaningful gains in wages. That should be a given at this point in the cycle,” said Lindsey Piegza, chief economist at Stifel.

President Trump campaigned on getting Americans back to work and getting them a raise as he recognized the frustration of many working people, but it’s proving a challenging task, much as it was for former Presidents Obama and George W. Bush.

Trump passed a large tax cut for businesses and consumers that is giving many families more money in their pockets this year and doesn’t show up in the wage data, but families are having to use a good chunk of the tax cut to cover rising energy and housing costs. The president has tweeted several times to try to get Saudi Arabia to produce more oil.

Long writes for the Washington Post.
 
Top