For many Americans, the prospect of living paycheck-to-paycheck is a grim reality. A Bankrate survey in June noted that a mere 23 percent of respondents had enough in their emergency savings to cover six months of expenses. And 26 percent claimed to have no emergency savings whatsoever.
For this unprepared majority, a growing paycheck is incredibly important. But while workers have seen nominal improvements in their hourly pay, their actual wages have gone in reverse since the recession ended.
Based on data from the Bureau of Labor Statistics, average hourly earnings for production and nonsupervisory private employees have risen from $18.57 in June 2009, the point at which the Great Recession ended, to $20.61 as of July 2014. Nominally, that's 10 percent more in workers' wallets.
Yet factor in the effects of inflation and the higher costs for goods and services since June 2009, and the BLS figures tell a very different tale. In fact, since June 2009 real average hourly wages (those adjusted for inflation) have dipped from $10.32 to $10.29 in June, a drop of 0.3 percent.
This of course raises the question: Why aren't American workers' wages rising?
The answer to this question lies in three factors; one of which may seem obvious, but the other two may come as a shock.
1. Your Specialized Job Is Being Sent Overseas
Perhaps no factor has played a larger role in stymieing American wage growth than job outsourcing to markets where wages are significantly lower. According to a 2012 study by the Economic Policy Institute, a nonprofit research organization, America lost 2.74 million jobs to China alone between 2001 and 2011, with California taking the brunt of the hit, with 474,700 net jobs displaced.
As the institute notes, 76.9 percent of these jobs lost (2.1 million) were in manufacturing. And of those, more than 1 million were computer and electronic product category jobs. These are highly specialized jobs that offer workers considerably better wage prospects than nonspecialized jobs, and their loss, as institute surmises, has negatively affected wages for about 100 million American workers.
2. Your Raise Wasn't in Cash
The second reason American wages aren't rising is because, while employers are putting more money into personnel costs, that spending isn't showing up in paychecks.
A 20112 USA Today study, utilizing data from the federal Bureau of Economic Analysis, showed benefits as a percentage of worker compensation rose by 10.8 percent between 2007 and 2011 for full-time workers, even after adjusting for inflation. Benefits are primarily defined as health insurance, retirement benefits and employer contributions to Social Security and Medicare.
This trend is expected to continue. The National Business Group on Health last week estimated that health-benefit costs for large employers will rise by an average of 6.5 percent in 2015 after a 5 percent increase in 2014. This is expected to result in more large businesses only offering higher-deductible health insurance options to employees and narrowing their provider networks to pass some of these rising costs back to workers.
Even Walmart Stores (WMT), by far the largest low-wage employer in America, was forced to lower its full-year profit forecast in its latest quarter after what its executive vice president and chief financial officer, Charles Holley, described as "headwinds from higher health-care costs in the U.S. than previously estimated."
3. Your College Education May Be a Hindrance
The importance of a college education can't be disputed. In February, research by the Pew Research Center showed that millennials ages 25 to 32 with at least a bachelor's degree earned a median of $17,500 more on an annual basis than millennials with only a high school education.
But the educational trend has also had two interesting twists, both of which have been bad news for wage growth.
First, students are staying in college longer than ever. Just 59 percent of college students in private institutions and 32 percent in public ones graduate within four years, a Forbes report on America's top college found. These extra years of schooling can lead to hefty student loan accumulation, which, in turn, may compel some graduates into taking low-paying jobs just to meet their student loan payments.
Second, an aggressive push by for-profit universities to enroll students has removed a lot of the degree specialization we once saw. With more people turning to college as the answer, competition among people with broad majors is increasing, pushing wages down in the fields where such liberal arts degrees are most useful. For grads without a specialized degree in a high-demand field, it's simply getting tougher to find a career that offers the potential for real wage growth.
Motley Fool contributor Sean Williams has no material interest in any companies mentioned. You can follow him on Twitter @TMFUltraLong. The Motley Fool has no position in any stocks mentioned.
3 Reasons American Wages Aren't Rising
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