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The past decade of wage growth has been one for the record books — but not one to celebrate.
The increase in total private-sector wages, adjusted for inflation, from the start of 2001 has fallen far short of any 10-year period since World War II, according to Commerce Department data. In fact, if the data are to be believed, economywide wage gains have even lagged those in the decade of the Great Depression (adjusted for deflation).
Two years into the recovery, and 10 years after the nation fell into a post-dot-com bubble recession, this legacy of near-stagnant wages has helped ground the economy despite unprecedented fiscal and monetary stimulus — and even an impressive bull market.
Over the past decade, real private-sector wage growth has scraped bottom at 4%, just below the 5% increase from 1929 to 1939, government data show.
To put that in perspective, since the Great Depression, 10-year gains in real private wages had always exceeded 25% with one exception: the period ended in 1982-83, when the jobless rate spiked above 10% and wage gains briefly decelerated to 16%.
There are several culprits, of which by far the biggest has been the net loss of 2.7 million private nonfarm jobs since March 2001. (Government payrolls rose by 1.2 million over that span.)
That excess supply of labor has given employers the upper hand in holding back wage gains.
Then there is a dramatic, decade-long job shift that has occurred. The often higher-paying goods-producing sector, including construction and manufacturing, has shed 26% of its workers. Meanwhile, typically lower-paying service industries have kept growing their payrolls: social assistance (41%), nursing homes (21%), leisure and hospitality (10%).
"To the extent you have more hotels and fewer manufacturing jobs," the changing composition of the work force has been a negative for wage growth, said John Silvia, chief economist at Wells Fargo Securities.
Behind this job shift is the globalization of production, which has fed "the substitution of capital for labor" amid a push for productivity and competitiveness.
"Brain, not brawn, is required" for today's high-skilled factory jobs in the U.S., Silvia said.
A third trend is the increase in nonwage compensation — fueled by the growth of tax-free health care spending — which has eroded real wage gains.
A fourth factor, rising food and fuel prices, has taken a bite out of real wage growth in the past year.
The long dry spell for real wage gains tests the natural resilience of America's consumer economy.
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Posted By: lukelea(5) on 6/3/2011 | 1:24 AM ET
Might have mentioned the continuous introduction of new labor-saving technologies as an additional factor. Also, obviously, high immigration.
Posted By: BCanuck(5) on 6/3/2011 | 12:07 AM ET
How come 10 years of war time deficit spending didn't stimulate the economy? What about the domestic ethanol subsidy program? Why didn't that didn't boost wages? What about Part D Medicare (free drugs for old people)? Why didn't that boost incomes? Low interest rates that should do it, right? Tons of new money sloshing around, everyone will get rich, right? I just don't understand why all these brilliant polices don't work. Must be China or maybe the illegal immigrants,
Posted By: PerryM(25) on 6/2/2011 | 10:10 PM ET
Supply and demand run free markets. Sadly America has NO free markets anymore - well maybe eBay. You name an industry and you'll find Porky Pig government regulating and destroying supply and demand. Until Porky is shot for bacon our economy won't work anymore....
Posted By: clawhammer jake(30) on 6/2/2011 | 8:00 PM ET
Somehow you left out referring to the war the rich and their Republican agents have inflicted on the middle class.
Posted By: karl_from_Chicago(60) on 6/2/2011 | 6:44 PM ET
Stagnant wages are not a new phenomenon. If you look at real median wages for full-time white male workers, they have been essentially stagnant since 1973. (http://www.census.gov/hhes/www/income/data/historical/people/index.html, table 36, White). This is masked in the median household data because women's workforce parti***tion increased from 45% to 60%. Also because discrimination against women and minorities has been reduced. But Joe Six Pack has been struggling for almost 40 years.
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