President Obama's signature on a bill Congress passed last week extending Bush-era tax cuts ensures that rates will stay the same for all wage earners during the next two years. The bill also contains a provision that lowers workers' contributions to the Social Security tax for one year, providing those who earn $40,000 a year, for example, $800 in additional take-home pay.

Those extra funds will no doubt be welcome to many low- and middle-income wage earners who've seen their pay stagnate during the last decade or so, as costs for everything from energy to health care to housing soared. But here, too, recession-weary workers may finally get some encouraging news.

Annual wages, at least among private-sector workers, will improve in the coming months, albeit modestly, according to data compiled by BNA, publisher of Daily Labor Report and other specialty periodicals. Its index of workers' earnings, known as the Wage Trend Indicator, moved higher in the third quarter for only the second time, following a decline of more than two years.

"Slow Improvement" Ahead

The pace of year-over-year wage and salary growth among private-sector employees in the coming months is expected to remain below 2%. By comparison, in the 12 months ending September, wages grew 1.6%, according to data from the U.S. Department of Labor, up from a record low of 1.4% during the comparable period in 2009.

"With the slow recovery, labor markets remain very mixed," says economist Kathryn Kobe, a BNA consultant. "We are expecting slow improvement in the job market next year, but it's still going to take some time for that to work into more solid wage increases," she says.

BNA noted that three of the seven components used to measure moves in workers' wages showed positive movement. They included average hourly earnings of workers in production or nonsupervisory roles; industrial production; and the share of employers planning to hire production and service workers in coming months.

Of the remaining four index components, two -- the anticipated rate of inflation and the number of employers reporting difficulty in filling professional and technical positions -- were flat. Components logging negative contributions to the index were the nation's unemployment rate and the percentage workers who lost jobs measured against the total labor force.

As Good As It's Likely to Get


The slight uptick in the expected percentage increase in wages next year compared to those in 2009 works out to an additional $240, using the example of an annual salary of $40,000 a year. That's modest indeed. But with inflation remaining tame, the gain in wages combined with reduced Social Security taxes may at least help low- and middle-income earners offset expenses, such as property taxes, that nearly always increase.

Until the economy fully rebounds and labor shortages begin to appear, however, incremental gains in wages are likely the best workers can expect.

* * * * * * * * *

Follow-up: Six months ago, this column took a look at the U.S. military's onerous "don't ask, don't tell" policy that applies to gay and lesbian service members. The piece noted, among other things, that the policy was simply unfair, imposing a set of standards of conduct upon one small, definable group that isn't required of the rest of the military.

As has been widely reported, the Senate took the courageous -- and long overdue -- step Saturday of repealing the corrosive policy, which resulted in the discharge of more than 13,000 troops since its implementation in 1994. President Obama has promised to sign it.

Still, repeal isn't yet a done deal. Despite the bill's passage, it's still unsafe for gay and lesbian military members to come out, until the repeal is certified by the Department of Defense, expected no later than March, notes the Servicemembers Legal Defense Network, an advocacy organization created in the wake of "don't ask, don't tell."

The bottom line: "For now, gay, lesbian, and bisexual service members must remain cautiously closeted," says Aubrey Sarvis, SLDN's executive director and an Army veteran. The organization has called on Defense Secretary Robert Gates to suspend all investigations under "don't ask, don't tell" during the interim period.

Further, SLDN has asked that Obama issue an executive order protecting service members from discrimination based on their actual or perceived sexual orientation. Several precedents exist for taking such action, including that of President Harry Truman, who issued an executive order barring racial discrimination in the armed services in 1948.

More recently, President Bill Clinton issued an executive order in 1998 barring discrimination in federal employment based on sexual orientation. As SLDN notes, the Clinton-era guidelines have "been successful and set a durable precedent."

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jolsencpa

Here is something that nobody is talking about.

Single people will make out better than married people with the new tax bill and couples making less than $40,000 will actually make less than they did in 2010 and singles will make more.

Here are two examples.

- With the reduction of the Social Security 6.2% rate to 4.2%, offset by the elimination of the Making Work Pay credit, those couples making more than $40,000 in wages (singles $20,000) will see an increase in their tax home pay, but singles will make even more.

Example – A married couple who make $50,000 will get $1,000 more in their pay (2% reduction in Social Security) but offset by a reduction of $800 in the Making Work Pay credit or a net of $200 more. A single person making the same amount will get $1,000 more offset by a reduction of $400 in Making Work Pay or a net of $600 more.

- For those making under $40,000 the following will apply:

Example – A married couple making $30,000 will get $600 from the Social Security deduction but $800 less in the Making Work Pay elimination or a net loss of $200 for the year. A single person making the same $30,000 will get $600 more in SS reduction, less $400 in the Making Work Pay elimination or a net gain of $200 for the year.

So singles get a better deal than married couples, and couples under $40,000 take a hit.

Typical of how the government makes no sense on many tax issues and nobody talked about this.

Jim Olsen CPA

December 20 2010 at 6:56 PM Report abuse rate up rate down Reply