American salaries below inflation

[Gabriel013]

Is this the way the average working American sees it or are you doing alright salary wise?
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Taken from Yahoo finance:

The average American is working harder and smarter than ever.
But on payday, that's not making much difference.

U.S. wage growth isn't keeping up with rising prices for everything from gas to groceries to medical care. Strong productivity gains and an improving job market are not helping as they did in the past.

Adjusted for inflation, real weekly wages are down 0.3% vs. a year earlier. That's despite a slight monthly gain in April, Labor Department figures show.

So what gives?

The usual suspects are partly to blame.

Unemployment at 5.2% is low, but still gives firms some slack. And many of the folks who hold the purse strings remain cautious on the general health of the economy.

"There's little pressure on employers to raise wages," said Jared Bernstein, senior economist with the Economic Policy Institute. Instead, revenue is flowing to profits and nonwage compensation -- health care and pensions.

Bosses may also be getting some extra breathing room, thanks to the larger number of workers still sitting out the job hunt. Labor force participation is running at 66%. That's flat with 2004, but below 2001's 67% level.

Higher gasoline and other energy prices are acting as a tax on all Americans. Not surprisingly, consumer sentiment has soured.

The working poor and middle class are getting hit the hardest. Higher gas and food prices buffet hourly wage earners the most.

Skilled white-collar workers are just slightly better off, though they are also more likely to benefit from bonuses or home appreciation.

Still, with productivity rising at a 4.1% average annual pace from 2002-04, wages should follow.

"Higher productivity usually leads to higher wages. That has not been happening," said Peter Morici, an economist at the University of Maryland.

Longer-term economic shifts may be behind the conundrum.

Morici says stronger globalization, an overvalued dollar and unionization trends have all changed the balance.

Globalization means lower wages, as well as lower prices for goods, in some U.S. sectors. In theory, it should also push the U.S. into higher wage activities.

But a few things are keeping that from happening.

Morici posits an even weaker dollar would help export demand for U.S. durable goods, which tend to offer higher paying jobs for middle-class workers.

He argues some U.S. manufacturing wages could get a solid boost if China revalues the yuan and other Asian currencies follow suit -- though that would mean higher import prices.

Factory jobs were the weak spot in April's jobs report, shedding 6,000. By contrast, lower-paying service sector jobs in leisure and hospitality added 58,000.

Morici also hoists some blame on hardheaded unions and management in key U.S. industries.

Some industries -- think airlines and automakers -- aren't facing up to realities of their ailing sectors or foreign competition, a traditional wage-dampener.

"It's a chain. Wages aren't growing because of a lousy labor market. We have a lousy labor market because the consequences of globalization (for the U.S) have been made negative by the overvalued dollar and the inability of some industries to respond," he said.

Good news could be on the way. With oil and gasoline prices pulling back, wages may be able to outpace inflation, at least short term.

[Dmitry M. (Lazer)]

Well the working man does not really depend on how smart or how hard he is. You could be extremely stupid, and have a business that gets you millions. The problem with America is that our society of people are becoming lazier.

Everyone is going for the same career, and people are becoming like Supply and Demand for the employer. For example the Computer Industry is probably the fastest growing industry on the market, but there are so many people getting IT Degrees, Graphics Designing, or Programming Degrees, that the demand for employees are a lot less then the amount coming out of college. Another mistake people are making is that they go to college for business degrees. Yes it may help, but to run a business you do not need a degree, i've noticed most business owners only have a highschool degree or dropped out of college.

People don't want to go into fields like Medical Doctor, Judicial Doctors (Lawyers), and other fields dealing with a Doctorine and having to go to college for 6-12 years. Everyone wants to get out of college after 4 years.

Also a lot of the problems are put into college students by there own professors or by the guidence counselor's. The people that are supposed encourage you, keep on telling you not to take Chemistry, Physics, Organic Chemistry, Philosophy, and many other challenging classes. They say you will not be able to handle them. They are hard. And they believe you can only handle them once you're a senior. And this causes a lot more college students to take easier majors, rather then harder ones.

For Example i'm going for a Pharm-D (Pharmacology). Basically i'm gettings a Doctor's Degree in Pharmacy. And i need to take 4 Chemistry (2 Regular & 2 Organic), 2 Physics, 2 Bio's, and 2 Calculus courses along with other electives and some required courses. And this all needs to be done in 2 years (4 Semestars), so no matter what i do each semestar i will have to take a Chemistry course with another science either Bio or Physics, and then Calculus, plus some elective. And because i'm a freshman the Guidence Counselor was telling me, no i'm not gonna sign you off to take these classes, you're gonna fail them. He said in these exact words, "taking 2 sciences and a math is suicide." I got so pissed off, eventually after arguement he signed me off for the classes i wanted. Basically once i'm done taking those classes then and only then i get into pharmacy, keeping in mind i have to maintain no lower then a 3.25 GPA, and i'm trying to hold a 3.5 or higher GPA to get in.

This is my opinion of this subject, i'm glad you brought it up.

[svosen]

Well, I don't claim to be an economist, so I'll just stick to answering the question you asked, Gabe:

I don't feel like my wage is keeping up with increases in the costs of living.

For instance, last year I got a 4.8% raise which did not quite cover the cost increase of my health insurance package (ie - a net LOSS in wages).

And, as you well know, other costs have continued to raise as well, including gasoline (which isn't too big of a deal for my family, really), and energy (natural gas and electricity, which IS a big deal).
~~~~

I just found out today that I have received an 11.5% raise. That sounds impressive, but here's the reality of it. My surpervisor did a cost analysis of my productivity and my billable rates a few months back. The 11.5% raise I got has just brought me to $0.04/hour less than what my boss calculated I SHOULD HAVE BEEN MAKING LAST YEAR!!

But I'm not going to grouse about it; it's better than not getting it at all.

[Gabriel013]

It's similar here. Costs are constantly rising but the standard annual increase stands at about 3% and we didn't even get that last year. We're supposed to be getting 1.5% from June but that is no where near the increased costs of livings so like yourself Svosen, It'll actually be like a net reduction in salary .

Good post Dmitry, thanks for the insight

[Matthew S.]

Originally posted by Dmitry M. (Lazer)
Another mistake people are making is that they go to college for business degrees. Yes it may help, but to run a business you do not need a degree.

Many people go to college for business degrees because they want to work in business, not because they want to own a business. When entering the job field, it's far superior to have a bachelor's degree in business than attempting to enter an organization with a high school education. This includes a better starting salary and ability to move up through promotion.

People don't want to go into fields like Medical Doctor, Judicial Doctors (Lawyers), and other fields dealing with a Doctorine and having to go to college for 6-12 years. Everyone wants to get out of college after 4 years.

First off, it's Doctorate, not "Doctorine" which isn't a word, or even Doctrine for that matter. Second, there are more medical and law students today than there has ever been in history. Just because the majority of college students aren't interested in graduate school doesn't mean they are lazy. Another reason has to do with the expense of going to school that long, or simply the intensity of getting a PhD or even getting into the program. There are strict requirements to get into a PhD program, including superior grades in your undergraduate studies and scores on your Graduate Record Examination (GRE); not to mention a dissertation or thesis that must be written and passing of boards.

Also a lot of the problems are put into college students by there own professors or by the guidence counselor's. The people that are supposed encourage you, keep on telling you not to take Chemistry, Physics, Organic Chemistry, Philosophy, and many other challenging classes. They say you will not be ale to handle them. They are hard. And they believe you can only handle them once you're a senior. And this causes a lot more college students to take easier majors, rather then harder ones.

Guidance counselors are meant to guide you, not necessarily encourage you. It's often unnecessary to take an extreme load of classes your Freshman or Sophomore year, especially if you're attempting to adjust to the new environment of college. Also, if you're attempting to get into a program later in your college career that relies on GPA, it's definitely smarter to spread difficult classes out. If every guidance counselor told their students to pile extremely difficult classes into their first few semesters, you'd see more dropouts and switching into easier majors. Your guidance counselor was attempting to show you that by spreading your more difficult classes across semesters, you'll receive higher grades that will help your chances of getting into the Pharmacy program.

You'll have to keep us informed how your upcoming semester goes...

[Majesty]

Originally posted by Dmitry M. (Lazer)


For Example i'm going for a Pharm-D (Pharmacology). Basically i'm gettings a Doctor's Degree in Pharmacy. And i need to take 4 Chemistry (2 Regular & 2 Organic), 2 Physics, 2 Bio's, and 2 Calculus courses along with other electives and some required courses. And this all needs to be done in 2 years (4 Semestars), so no matter what i do each semestar i will have to take a Chemistry course with another science either Bio or Physics, and then Calculus, plus some elective. And because i'm a freshman the Guidence Counselor was telling me, no i'm not gonna sign you off to take these classes, you're gonna fail them. He said in these exact words, "taking 2 sciences and a math is suicide." I got so pissed off, eventually after arguement he signed me off for the classes i wanted. Basically once i'm done taking those classes then and only then i get into pharmacy, keeping in mind i have to maintain no lower then a 3.25 GPA, and i'm trying to hold a 3.5 or higher GPA to get in.

This is my opinion of this subject, i'm glad you brought it up.

wow, u got lots of work to do. Its hard to maintain a 3.2 GPA for major like pharmacy. I got a A- on chemistry. The key is to find the right professor, and do all the problems in teh textbook. What i do is read the text books first and foremost. Notice that they'll put examples in the text showing you how to do a problem (they'll prolly put 3 examples for each section of the chapters). Make sure to look at the easy and the hard examples and try to understand it. Then when you do the hw, the questions are very very similar to the examples in teh book. This stuff applys for any class. That's how i get good grades and understand the materials.

Remember in college, u are not allowed to take two science classes. Dude ur counselor might be right, cuz its not easy. The professors are hard asses in college, especially in teh fields of science. Its not good to start off with hard classes as a freshman, because i know how it feels. u wanna adjust ur college environment in the beginning, then take hard courses when ur at junior level. What u need to take is english, cal 1 (or pre-cal), take any liberal arts like phsychology or sociology, and one science. Tada, u got a fresh start as a freshman (btw, u are going to be a freshman righ?)

Im majoring in electrical and im taking cal 3, physics 1 for engineer, engineering analysis for EE, and computer science intro this fall. Well, that's gonna get me lots of work to do. I got two OK professors. and i dont know about the other ones... . Im gonna start working my ass off cuz i know EE classes is not easy.
There are three courses that's going to teach me about how processor (cpu) works and how to make a processors for computers. Can u believe it? three courses, and students usually do bad in those classes. Afterwards, i can choose to start learning about electronics, control system, or any other field of my choice.
Guess whats going to be my senior design for EE? I could either make a basic computer processor or a robot for my senior design.

-good luck.

[Majesty]

Dont worry, the key is to like ur subject. Calculas is not hard if u just do the hw. Chemistry isn't easy, but if u do hw and study every day, u'll end up getting good grades. Hey i have a 3.3 gpa (which is ok, considering i did slack off b4 finals), but in freshman, i had 3.5 gpa. Dont let the counselor scare u. Sometimes i hate it when they tell you "courses are hard", "u will fail", etc. They told me the same thing when i applied as a freshman. It turned out the opposite of what he said. I didn't fail courses, and i did good in my semesters. I got B- in my other engineering class considering that i didn't put so much effort into the work. The fun part is when u study hard and u get really good grades, u feel good about ur self. gota find ways to motivate ur self. i know this is off topic, just thought i share my opinions with ya guys.

[Ryan H.]

The article makes a very fundamental, very STUPID mistake of assuming that higher productivity will always lead to higher wages. This has been historically true, but the difference in the modern world is that productivity is increasing because of computerization and other forms of technology.

As Mortimer Zuckerman from US News points out:

"Look at steel production. It has increased over the past two decades, from 75 million tons in 1982 to 102 million tons last year, with a considerably higher degree of product complexity. Yet the number of steelworkers has dropped in that same period by almost 75 percent."


This is actually a huge problem in America, Brazil, and several countries in Europe. You can read the entire article by Zuckerman here:

http://www.usnews.com/usnews/opinion...0209/9edit.htm

This is why you shouldn't get your news from Yahoo! Finance :P

[Gabriel013]

Nice article Ryan.

I can't quite get his view on the matter though regarding higher productivity from the same staff levels?

Is he inferring this is a bad thig?

From a company perspective, if you can get a $35k employee to produce the same as a $40k employee then you only employ the ones at the lower figure. Not great for workers but good for the businesses themselves.

[Ryan H.]

He's inferring it's a bad thing simply because it is a big contributing factor to unemployment and problems with wage stimulation.

The thesis in his argument is that you can't blame Bush for lack of job creation (which is true) and that this is primarily the reason. Jobs are created in the private sector, not by government, and the only way a president can directly create jobs is by expanding government.

That's why Kerry's promise to create ten million jobs was such a ****ing joke.