Chatting With Chapey
Small pay increases and a decrease in the number of hours worked in June has caused workers pay to decline in relation to the inflation adjusted wages according to Joseph Rebello and James R. Hagerty in the July 19, 2002 edition of the Wall Street Journal.
Analysts report that although the brightening economy has caused a modest increase in the number of workers hired, employers are not offering substantially higher wages. The majority of jobs that are being created are at the lower end of the pay scale. Another factor affecting this is that there are still a large number of people looking for work. In order to increase their pay, most workers will have to work more hours.
Michael Derby’s articles in the June 22, 2004 Wall Street Journal entitled “Sorry, you’re only getting a 3.5% raise again” really summarizes the current situation. Employers are offering the same percentage of pay increase as they did last year. This typical pay raise includes all levels of workers. Most employers are concentrating on cost containment.
Over the past several years many companies have down sized significantly. It appears that the new available jobs may not be at the same level as the ones that were eliminated. In addition, the profit increases are in some measure due to an increase in productivity caused by the elimination of the jobs. This increase in productivity distorts profit margins because the economic gains of the corporation cannot be sustained.
An interesting article by Greg Ip in the June 23, 2004 Wall Street Journal points out that between 1970 and 2002 the number of hours worked annually increased 20% in the U.S. This increase is the most among 19 countries polled by the Organization for Economic Cooperation and Development (OCED). Ip notes that the number of working hours in Japan for the same period has decreased 17% and 24% in France. The primary reason that incomes in the U. S. are higher than other countries is because the U. S. workers per capita work more than those in other countries.
The OCED report notes that 71% of the working age group in the U. S. had employment as compared with 65% in other countries.
Even with the relatively small increase in the work force employers are not offering the same benefits as the laid off workers were getting. In addition employers have decreased the benefits to its current work force. Workers have been forced to pay for these benefits themselves. According to Kathy Chu in a Wall Street Journal article on June 30, 2004 entitled “Good Times Return, Not Benefits” we can expect to see employers invest in perks that have more to do with the employees personal lives such as child care and elder care. Employers are edging away from providing health care because of the escalating costs. This trend puts a bigger burden on the employee. This comes at a time when we are looking at increases in food and fuel costs also.
The economy is giving mixed signals. It will be interesting to watch Alan Greenspan’s next move on August 10th.