Hourly Pay in U.S. Not Keeping Pace With Price Rises

[Anonymous]

Hourly Pay in U.S. Not Keeping Pace With Price Rises

By EDUARDO PORTER, The New York Times

(July 18) -- The amount of money workers receive in their paychecks is failing to keep up with inflation. Though wages should recover if businesses continue to hire, three years of job losses have left a large worker surplus.

If incomes continue to lag behind the increase in prices, it may hinder the ability of ordinary workers to spend.  
   
"There's too much slack in the labor market to generate any pressure on wage growth,'' said Jared Bernstein, an economist at the Economic Policy Institute, a liberal research institution based in Washington. "We are going to need a much lower unemployment rate.'' He noted that at 5.6 percent, the national unemployment rate is still back at the same level as at the end of the recession in November 2001.

Even though the economy has been adding hundreds of thousands of jobs almost every month this year, stagnant wages could put a dent in the prospects for economic growth, some economists say. If incomes continue to lag behind the increase in prices, it may hinder the ability of ordinary workers to spend money at a healthy clip, undermining one of the pillars of the expansion so far.

Declining wages are likely to play a prominent role in the current presidential campaign. Growing employment has lifted President Bush's job approval ratings on the economy of late. According to the latest New York Times/CBS News poll, in mid-July, 42 percent of those polled approved of the president's handling of the economy, up from 38 percent in mid-March.

Yet Senator John Kerry, the likely Democratic presidential nominee, is pointing to lackluster wages as a telling weakness in the administration's economic track record. ``Americans feel squeezed between prices that are rising and incomes that are not,'' Mark Mellman, a pollster for the campaign, said in a memorandum last month.
   
On Friday, the Bureau of Labor Statistics reported that hourly earnings of production workers - nonmanagement workers ranging from nurses and teachers to hamburger flippers and assembly-line workers - fell 1.1 percent in June, after accounting for inflation. The June drop, the steepest decline since the depths of recession in mid-1991, came after a 0.8 percent fall in real hourly earnings in May.

Coming on top of a 12-minute drop in the average workweek, the decline in the hourly rate last month cut deeply into workers' pay. In June, production workers took home $525.84 a week, on average. After accounting for inflation, this is about $8 less than they were pocketing last January, and is the lowest level of weekly pay since October 2001.

On its own, the decline in workers' wages is unlikely to derail the recovery. Though they account for some 80 percent of the work force, they contribute much less to spending. Mark M. Zandi, chief economist at Economy.com, a research firm, noted that households in the bottom half of income distribution account for only one-third of consumer spending.

Nonetheless, coming after the bonanza of the second half of the 1990's, the first period of sustained real wage growth since the 1970's, the current slide in earnings is a big blow for the lower middle class. Moreover, the absence of lower income households could also weigh on overall economic growth - putting a lid on the mass market and skewing consumption toward high-end products.

   
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"There's a bit of a dichotomy," said Ethan S. Harris, chief economist at Lehman Brothers. "Joe Six-Pack is under a lot of pressure. He got a lousy raise; he's paying more for gasoline and milk. He's not doing that great. But proprietors' income is up. Profits are up. Home values are up. Middle-income and upper-income people are looking pretty good."

Tales of tight budgets at the bottom are springing up across the country. "I haven't had a salary increase in two years, but the cost of living is going up," said Eric Lambert, 42, a father of three who earns $13 an hour as a security guard at 660 Madison Ave. in Manhattan.

Silvia Vides, 43, who earns $11 an hour in a union job as a housekeeper at the Universal City Sheraton hotel in Los Angeles, said, "Sometimes I don't know how I pay the bills and food and rent." She has cut back on all nonessential expenditures and she is four months behind on payments on $4,000 in credit-card debt.

Their woes are a product of supply and demand for labor. From 1996 through 2000 when employers were hiring hand over fist, real hourly wages of ordinary workers rose by 7.5 percent. Those for leisure and hospitality workers rose 9.6 percent, and retail workers' climbed 8.9 percent. The raises continued even as the economy slipped into recession in 2001 and businesses began to shed workers.

From 2001 to 2003, 2.4 million jobs were eliminated, as businesses sharply reduced their work forces, refusing to hire back even as demand started picking up. Over a million of these jobs have been regained this year.

Yet with the lowest number of people employed as a share of the population since 1994, there is still a plentiful supply of unused laborers looking for jobs.

As the rise in energy prices in the earlier months of this year led to rising inflation, pushing prices in June up 3.2 percent from the same month of last year, the lackluster job market has left workers in a weak position to demand more money.

"Since last November, we've had a pickup in hiring and a pickup in hours worked in virtually all of our businesses," said David Pittaway, a senior managing director at Castle Harlan, an equity investment company that owns everything from Burger King franchises to a shipping company.

But there is clearly still a lot of slack. When Castle Harlan advertised in the newspapers to fill 70 to 80 positions at a Morton's restaurant it opened in early July in White Plains, 600 to 700 people showed up.

Ms. Vides in California ticks off the items of a rising cost of living. She pays $850 a month for a one-bedroom apartment in Panorama City, $25 more a month than last year. The cost of a bus pass rose $10, to $45 a month. The electricity bill is much higher and food costs more. "I've got to do miracles with my salary," she said.

So Ms. Vides said she was outraged that the hotels negotiating a new contract with her union were offering annual raises of 40 cents to 45 cents an hour each year for the next five years. The raise in 2004 would be about 4 percent, just enough to keep up with the 4 percent rise in prices in Los Angeles over the last year. "This is miserly," said Ms. Vides, who said the union wants $1.25 this year and $1.50 next.

Colleen Kareti, president of the Los Angeles hotel employers' council, which represents the hotels, argued that negotiations had not yet gotten down to bargaining over wages. But she pointed out that times are hard for the hotel business, too. "It's been pretty bad for the last three years. We're nowhere near the levels of business where we were in 1998 through 2000," Ms. Kareti said.

Some economists warn that if wages remain depressed for a long time they may end up weighing on the economy. "The recovery will likely continue on despite the travails of lower-income households, but it cannot flourish," Mr. Zandi said.

So far, spending has been fueled mostly by debt, as consumers took advantage of bedrock-low interest rates to whip out their credit cards and refinance their mortgages. But as interest rates rise to keep inflation in check, continued growth in consumer spending will depend more on jobs and wages.

Spending is still holding up, led by strong corporate profits as well as higher salaries and bonuses at the upper end of the income distribution. But the lagging earnings at the bottom end are making for a somewhat lopsided expansion.

The upper echelons of consumer spending, at places like Saks Fifth Avenue, Neiman Marcus and Nordstrom department stores, are reporting gangbuster business. "I'm surprised by how well we've sold high-priced fashion at this stage," said Pete Nordstrom, president of Nordstrom's full-line stores.

But at the other end, sales at stores open at least a year at big-box discounters like Target and Wal-Mart have disappointed, while sales of used cars are declining year over year, government figures show. "We're not seeing the traffic, not even the same volumes of sales calls," said Richard Cooper, a sales manager at Jones Ford in Charleston, S.C.

Wages at the bottom should eventually recover, as businesses continue hiring to meet growing demand. The question is how fast. "As unemployment slides down, more of the benefits of growth should flow to the working class," Mr. Bernstein said. "But not until we reach truly full employment are they likely to see their earnings rise at a level closer to that of productivity."


Published: July 18, 2004

Copyright © 2004 The New York Times Company.

[Anonymous]

http://www.universallivingwage.org/

The Universal Living Wage Campaign is a committee of House the Homeless, Inc. It is a nonprofit, charitable organization. HTH is comprised of homeless and formerly homeless citizens and those dedicated to ending homelessness in our life time. Our goal is to root out the core causes of homelessness, isolate them, and take a pragmatic approach to ensure long-term systemic change. We believe that ending homelessness will not just benefit the individuals and families most affected, but it will also benefit business and society in general. We believe that there are three areas on which we need to focus in order to accomplish this task. They are Affordable Housing, Living Wages, and Health Care. We believe that if we can solve these instabilities at this the lowest level, we can stabilize and benefit all affected parties.


The Federal minimum wage is $5.15 per hour, which was increased in 1998 up from $4.75 per hour. According to a recent Conference of Mayors Report, more than the minimum wage is required to afford a one or two bedroom apartment at 30% of earned income.
However, in the 1970s the Federal minimum wage was an average of $2.07 per hour and times were such that the Federal minimum wage was just that...the minimum amount required to afford housing. It allowed a person to pay for a room with a lock and key, get a good night's sleep and be refreshed enough to go to work the next day and to work his/her way up the economic ladder, if he so desired (the American Dream). Today, that is not possible as the Federal minimum wage will not allow a worker to get a toehold so he or she can maintain independence and work his or her way out of poverty.
 
As evidenced by the Fair Market Rents set each year by HUD, it can clearly be seen that the cost of housing in this country (1) makes up the lion's share of a person's expenses each month and (2) ranges widely in cost not just state to state but from city to city.
The Congressional approach of "One Size Fits All" is unfair not only to workers but also to industry. How can a worker be expected to find housing in Austin, Texas where the cost of an efficiency apartment requires $10.60 per hour while the Federal minimum wage is $5.15 or even $6.65 per hour? Conversely, how can a small business expect to survive in Beaumont, Texas if the employer is forced to pay $10.60 per hour. Why should the employer pay that if the worker only needs $6.48 per hour to be ready for work the next day? How do we reconcile the need to balance these two economic concerns?
The response is that obviously one size doe not fit all and because the greatest need is to house our minimum wage workers we look to housing (the greatest portion of that monthly budget) as the focus of the wage. By paying a wage that relates directly to the cost of housing in each local area we see the need to customize the Federal minimum wage. The Universal Living Wage allows us to do just that. The ULW formula allows us to index the wage to the local cost of housing. This allows us to de-federalize the minimum wage while maintaining established uniform guidelines which allow us to return control to local governments. This provides a new work force of ready and willing workers. According to a 1999 federal study 42% of all unhoused workers were working at some point during the week. Clearly the work ethic is in place and now the mechanism to utilize those workers will also be there.
 
Each year the Federal Government reexamines the cost of local housing as set forth in the Fair Market Rents. This means that if the cost of housing rises due to inflation or falls due to depression the cost of housing will automatically be adjusted either up or down. If the cost of housing increases, then the ability to meet those needs will be addressed. Conversely, if the cost of housing goes down, then the economic need and wage will likewise decrease accordingly.

http://www.universallivingwage.org/
In this section we have determined the Universal Living Wage for over fifty cities from around the country. By applying the Universal Living Wage formula, we have identified their fair market rents and determined the least wage necessary to afford both an efficiency apartment or a one bedroom apartment by plugging the FMRs into the Universal Living Wage Formula.
 
What is important to note is the wide range of wages required to meet basic housing cost from city to city. In some cities, such as Chicago, Illinois the cost of housing has now inflated so that a minimum wage of $15.33/hr. is required for a one bedroom apartment. On the other hand, by using the same formula and incorporating the same standard (that no one should spend more than 30% of their income on housing), we see that the amount needed to get the same one bedroom apartment in Clay, West Virginia only requires a minimum wage of $6.42/hr..
Clearly one size does not fit all. For example, any attempt to meet the minimum wage needs in Santa Cruz, California by paying a wage rate of $5.15 per hour is impossible. (This is why even fully employed minimum wage workers are not affording housing across this nation.) At the same time, to apply the current federal "cookie cutter" response of "one size fits all" and force the required minimum wage in Santa Cruz, California of $24.88/hr. on the small businesses of Asheville, North Carolina would be tantamount to forcing them all into bankruptcy! This means that we must customize the wage accordingly.
The national hue and cry has been to return power to local government. This formula allows us to do just that and to respect the economic individuality of not just every state but nearly every municipality and country region throughout the United States.
Finally, the formula establishes a "continuum of flexibility" from which each individual community can designate whether it wishes to pay a wage that gets its minimum wage workers off the streets and into housing (efficiency apartment). Or, if it chooses, each community can make a decision to pay a wage that will ensure that a single woman with a child can afford a one bedroom apartment. Each community can either start at the efficiency level or at the one bedroom level using the same national formula which embraces the same national guidelines but is related to the local cost of housing. Clearly, one size does not fit all.
 
And, this formula allows us to recognize states' rights and their economic diversity all across America. It allows us to meet the needs of each community and those of our minimum wage workers who are the basic cornerstone of our economic viability.

[Deborah]

From:www.altpr.org

Still Not Getting by in Bush's America
By Joel Wendland

According to recent statistics provided by the U.S. Census Bureau, the gap between the rich and poor since 1967 has grown by 75 percent. While the
average total household income for families in the bottom 20 percent has grown by $2,500 since 1967, the top 20 percent have seen their incomes soar by about $62,000. According to the same report, the share of national income held by the bottom 20 percent fell to only 3.5 percent. In other words, approximately 26 million households combined to earn only 3.5 percent of the total income earned by people in the US. While income has sunk for the poor, the middle strata have seen their wages stagnate over the same period.
Meanwhile healthcare costs, housing, education, gas and oil, and food have soared.
This growing disparity is of special concern as the jobs picture has looked bleak in the last three years. In the first two years of the Bush
presidency, 2.6 million jobs were lost, nearly doubling the unemployment rate. While the Bush administration points to recent jobs creation to build a case for its reelection bid, over 1.5 million jobs remain unaccounted for. The jobs that have been created, says economist Art Perlo, may not even cover the number of people who entered the work force for the first time in
the same period. This is certainly the case in recent months with only 112,000 jobs in June and 32,000 new jobs in July. At least 140,000 new jobs
need to be added "each month just to absorb new workers," Perlo says.

Further, according to economists, 60 percent of the jobs that have been created pay less than the national average in wages, the vast majority are
in the low-paying service sector, few provide benefits such as health care coverage, and as many as 1/5 are temp jobs. Currently, the national average of weekly wages is at its lowest point since the official end of the Bush
recession in late 2001.

Many observers attribute this economic picture to job losses generated by outsourcing of work offshore. This is partially true, argues economist Doug Henwood of Left Business Observer in an interview with Political Affairs, but outsourcing, while a major problem for working people, accounts for only a relative handful of job losses in the last three years. The number of jobs that have been outsourced is in "the low six figures" in this period, but a normal economy in recovery should have created about 8 million jobs, says Henwood. The Bush economy has failed to do so.

In the wake of the long term trend of economic polarization, recent unemployment, and what the Bureau of Labor Statistics describes as underutilization (underemployment or having more than one job to earn a living wage), the Bush administration has followed a narrow, ideologically driven economic stimulus policy of tax cuts on top of tax cuts. In addition to the obvious problem of eliminating hundreds of billions of dollars from the treasury in the face of needed resources for the Iraq and Afghanistan
misadventures and the transformation of large budget surpluses into enormous deficits, Bush tax policies have compounded economic problems for workers, suggests the findings of a recent Congressional Budget Office (CBO) report.

The budget crisis has first allowed the Bush administration to adopt its ideological imperative to cut government services. Among those have been important programs like veterans benefits, funding for public education,
environmental protection and cleanup, child poverty programs, agricultural subsidy programs, medical research funding, and so on. In addition to this, Bush has eliminated hundreds of millions of dollars from worker training and relocation assistance funding for unemployed and displaced workers.

If that isn't enough, the direct result of the tax policies has been to intensify the polarization of wealth and poverty. According to the CBO, the top one percent of income earners, who average about $1.2 million each year,
received 1/3 of the benefits from the tax cuts Bush pushed through Congress since 2001. Households in this income bracket received an average of $78,000 annually from the tax cut. The top 20 percent, averaging over $200,000, took
in 2/3 of the total windfall from the tax cuts. The bottom 20 percent of wage earners averaged only about $250 in returns in the last three years. The tax benefit to the top 1 percent ­ the very richest of Americans ­alone equals what it would cost for two wars in Iraq or what experts believe it would cost for two years to provide every American with health care coverage.

While Republicans claim that these statistics prove that the tax cuts benefited everyone, it is clear that Bush's tax policies have shifted the
burden of financing federal spending to the working class. It is we who will have to pay for these tax policies: we will pay gisproportionately to make up for the growing deficit with higher interest rates, higher tax rates, and more cuts in social services we all rely on.

Joel Wendland is managing editor of Political Affairs, blogs at ClassWarNotes, and can be reached at jwendland@politicalaffairs.net.

[Deborah]

Minnesotans Raise a Ruckus
Protesters pushed their way into the lobby of the Bush/Cheney campaign headquarters and confronted startled staffers in St. Paul on Tuesday during a surprise rally to protest the administration's change in overtime rules that they say could deprive 250,000 Minnesota workers of overtime pay.

Of the more than 300 workers bused in by Minnesota labor unions for the outdoor rally, about a dozen protesters pressed forward into the campaign headquarters' lobby. The protesters were trying to deliver plastic bins filled with postcards but found their way into the headquarters itself blocked by an eight-foot-long Bush/Cheney placard that had been upended against an interior door.

The postcards bore the signatures of 10,000 Minnesotans protesting the change in overtime rules that went into effect in late August, said Diane O'Brien, spokeswoman for the Minnesota AFL-CIO, which represents 400,000 Minnesotans. "We want to send a message to the president," O'Brien said.

The rules regarding overtime have been mired in controversy since last year, when the Bush administration moved to change rules that would allow more than 1 million lower-income wage-earners to become eligible for overtime but that could also deny overtime to more than 6 million workers nationwide.

The new rules make it easier to classify workers as administrative, professional or executive employees -- three categories typically exempt from overtime. White-collar employees who make more than $100,000 a year now are automatically exempt from overtime.

More at:
http://www.startribune.com/stories/587/5017983.html