US Wage growth: Perception and Reality

[pchang]

More complete labor data show that in the first quarter of this year, hourly wages went up 13.6% and unit labor costs went up 9%. During the second quarter of this year, hourly wages went up 6.6% and unit labor costs went up 4.9%. These numbers are well in excess of inflation.

During this same period, what I saw and heard were mostly complaints that economic growth in the US was benefitting big business and the average worker was being left behind.

Is this perception really held by the majority of people in the US? If so, where did it come from?

[Japher]

IMO, it comes from the fact that those numbers are national averages, which is all fine and dandy if you live somewhere that inflation (read; cost of living) is at or below the national average.

Problem is that big businesses base wage off of national average, and most of those numbers only come from big buisnes. So if you are getting paid the national average in places like New York, Atlanta, Chicago, Seattle, etc... you aren't making a living wage.

Not that I am for a living wage. I'm just saying that it is in these places that complaints get most recognition. Thus, while perception and reality may not be seeing eye to eye, they are both the same in areas with the loudest voice.

[pchang]

This doesn't quite make sense

Well, the numbers I cite are national averages of % increases. Your analysis seems based upon national averages of absolute costs.

[Japher]

REAL costs!

[Colon™]

Re: US Wage growth: Perception and Reality

Originally posted by pchang
More complete labor data show that in the first quarter of this year, hourly wages went up 13.6% and unit labor costs went up 9%. During the second quarter of this year, hourly wages went up 6.6% and unit labor costs went up 4.9%. These numbers are well in excess of inflation.

During this same period, what I saw and heard were mostly complaints that economic growth in the US was benefitting big business and the average worker was being left behind.

Is this perception really held by the majority of people in the US? If so, where did it come from?

http://www.bls.gov/news.release/prod2.nr0.htm

Hourly compensation, not hourly wages. Compensations consist of wages, taxes and benefits payments. This statistic is what the employer pays, not (necessarily) what the employee receives. The data release also only covers business, not the whole economy. And unit labour costs are in itself an indicator of inflation (as it substracts hourly productivity growth from hourly compensations growth), substracting inflation from it is pointless.

[Japher]

So, if cost of health care benefits goes up then the cost of compensation goes up? So really it has nothing to do with wages, just costs.

[Dinner]

Isn't the difference that pchang's numbers are averages while the median is dropping in all but four states?

[SlowwHand]

What's reflected is the rich getting richer, and more evidence of the disappearance of the middle class.

While home foreclosures remain at a staggering level, the flip-side is that it creates a windfall for those secure enough to take advantage.

[Whoha]

Originally posted by Oerdin
Isn't the difference that pchang's numbers are averages while the median is dropping in all but four states?

don't forget the district of columbia.

[Colon™]

Originally posted by Japher
So, if cost of health care benefits goes up then the cost of compensation goes up? So really it has nothing to do with wages, just costs.

Well, it has to do with wages in so far they're part of the costs, but otherwise yes.

For wages growth better check tables A & B here: http://www.bls.gov/news.release/eci.nr0.htm (only aggregate, not hourly numbers)

And for what's happening on the income side, check this: http://bea.gov/bea/newsrel/pinewsrelease.htm

[pchang]

The income numbers average out to a yearly increase of 6% which is greater than inflation (4.15%).

The latest 3 month compensation increase for all workers was 0.9% for a yearly rate of 3.6%.

Which number is more meaningful, income or wages? For me, it would be income because I don't really care where my money comes from.

[Japher]

Since you're in the upper crust, you are off setting that average to the upside so you would only care about income.

[pchang]

Does it really matter where your money comes from? What is the real difference between wages, investment returns, rent, etc. to one's ability to spend?

Are you saying that lower income people have no other source of income than wages (like savings account interest, tax credits, WIC, etc.)?

[SlowwHand]

uh, yeah. Pretty much how I interpret it.

[Dinner]

Originally posted by pchang
Does it really matter where your money comes from? What is the real difference between wages, investment returns, rent, etc. to one's ability to spend?

Are you saying that lower income people have no other source of income than wages (like savings account interest, tax credits, WIC, etc.)?

Generally wages do make up virtually all income for lower income people.