I have written a great deal about the lack of pay growth for the last 5 years. According to the Bureau of Labor Statistics, the average earnings increase from 2000-2004 was 3.86%, 3.22%, 3.12%, 1.71% and 2.39% respectively. However wages have to be compared to inflation to determine the real rate of wage growth. For the same years, annual inflation was 3.4%, 2.8%, 1.6%, 2.3% and 2.7% respectively. When inflation is subtracted from wages, overall wage growth becomes .46%, .42%, 1.52%, -.59% and-.31% respectively for 2000-2004.
That trend is continuing, with workers barely making more than the rate of inflation. “Results of a survey released Tuesday by Mercer Human Resource Consulting show the size of the average raise this year is little changed from 2004, when pay hikes averaged 3.5 percent. But the increases are generally helping workers stay ahead of inflation, which has risen at annual rate of 3.1 percent so far this year.”
The average person is now making .4% more than the rate of inflation. Wow. Color me a happy man. At the same time that workers are making .4% more than inflation, medical insurance premiums are increasing at an annual rate of 8.2%, prescription drug spending is increasing faster than inflation, and college tuition is going through the roof.
At the same time, corporations are doing well. A reporter on Bloomberg news reported yesterday that of the S&P 500 companies that have reported earnings, 80% have met or exceeded expectations. And corporation’s percentage of national income is at its highest level since the 1960s. So, someone is making good money out there.
However, employers are more likely to use 1-time bonuses. “Mercer said 86 percent of its survey respondents reported they used some kind of short-term incentive in 2005.” We all like bonuses. The problem is they are sporadic in the current economy. While more people are using them, there is no guarantee they will continue to use them. Hence, it is difficult for the recipients to make any economic plans based on them.
http://www.chron.com/cs/CDA/ssistory.mpl/business/3273618
