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‘Real’ Wage Growth ‘Is Actually Falling’ & Simply Having A ‘Steady’ Paycheck ‘Now Means You Should Count Yourself Lucky’

Published Monday, June 10, 2019
by Patrick W. Watson/Contributor-Forbes
‘Real’ Wage Growth ‘Is Actually Falling’ & Simply Having A ‘Steady’ Paycheck ‘Now Means You Should Count Yourself Lucky’

(WASHINGTON, D.C.) - The U.S. economy is at “full employment,” says the official 3.8% Unemployment Rate compiled by the Bureau of Labor Statistics (BLS), but he problem is that fully employed people haven’t seen enough wage growth.  It’s a puzzle.  Wages used to rise faster when unemployment was this lowThat’s why there was much celebration when the February Jobs Report showed a 2.8% annual increase in average hourly earnings for “Production and Nonsupervisory Employees” - i.e., regular Workers. 

Aside from employment data, the BLS also compiles the Consumer Price Index (CPI), our primary inflation gauge.  In the same period in which average hourly earnings rose 2.8%, the CPI rose 2.7%.  That’s how much the cost of living went up, on average.

Your personal inflation depends on how you spent your money, but unless you had no housing or transportation expenses in the last year, your cost of living probably rose at least 2.7%, and -possibly much more

So, a 2.8% wage gain is essentially no gain at all. 

Inflation-adjusted wages are flat since last year and it is certainly not the fastest wage growth since 2009, or even close.

Wage growth started a nice rally in mid-2017 and apparently, it is set to go higher still - but again, that doesn’t consider inflation.

What we see is that real wage growth peaked in 2015.

Since then, it’s been trending down, except for a brief pop in 2017 and it’s been about zero in recent months.

Economists and Journalists know about inflation.  They often report Gross Domestic Product (GDP) growth in real terms, for instance, but not wage growth.

For that, they assume inflation doesn’t matter, but it matters a lot.

Workers whose earnings don’t keep up with inflation find themselves falling behind.

Eventually, they notice the problem and look for someone to blame - hence, our current social and political discord.

Real wages are flat and trending the wrong way, yet politicians from Republican President Donald Trump on down - and experts who should know better - tell Workers to celebrate their good fortune.

What’s really happened is a redefinition of “good fortune.” 

Simply having a steady paycheck now means you should count yourself lucky.

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