3 Reasons American Wages Aren't Rising
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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.


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Seacat400

High tech jobs..........low tech workers who in some cases refuse to retrain.

Useless degrees.........social sciences,art, etc..vs math ,engineering, accounting, etc.

September 04 2014 at 12:08 PM Report abuse rate up rate down Reply
bwyou812

The 3 reasons wages aren't going up are : Congress , congress and congress!!! They have to
support big buisness that keeps them in office and wage increases are in their pockets!!!!!
It's a fact that back in 1968, minimum wage was 1.60 and compared to todays cost of living
now it would have to be 12.00 per hour at the minimum wage level. So many are working below
the poverty line at 7-8 dollars an hour. Yet it won't be long when congress gives themselves
another raise overnight. The average pay for a congressman is 174,00.00 per year for about
115 days per year. That's 1,500-1600 per day !!!!!!!!!!

September 04 2014 at 10:01 AM Report abuse rate up rate down Reply
1 reply to bwyou812's comment
truu.liberal

It's a fact that every single American seeking to sell their labor is perfectly free to set any minimum wage of their choosing at which they are willing to make such a sale.

The fact is that less than 3% of all wage earners earn the minimum wage or less, and over half of those are tipped workers whose total compensation in most cases exceeds the minimum wage (in some cases, by a significant amount).

And of this small number, over half are under 25 years of age. This is an age group that already experiences unemployment rates nearly 3X the national average.

Despite all this, a single full time minimum wage employee earns 24% MORE than the poverty line.

Other than that, you just about nailed it, Skippy.

September 04 2014 at 11:57 AM Report abuse rate up rate down Reply
Vita

Well the way I see it is nothing but greed. More companies outsourcing not paying fair share of taxes. Polticians, lobbiest and lawyers creating loopholes for taxe breaks for companies. Now they can go to another country to avoid paying taxes. Governers creating new job but giving tax breaks to these companies starting new business while not offering a decent wage or benefits along with having employees work part time so no benefits will be offered. Insurance companies keep raise deduction for premiuims for healthcare every year.Who are they kidding they still do not count the people who have ran out of unemployment but yet jobs are on the rise BS. All the economics they put out there say we have improved another BS lie. What I would like to know is who comes up with this load of garbage.

September 04 2014 at 7:31 AM Report abuse +1 rate up rate down Reply
Robert Smith

You Suck Obummer!!!!!!!!!!!

September 04 2014 at 3:29 AM Report abuse -2 rate up rate down Reply
Robert Smith

You Suck Obummer!!!!!!!!!!!

September 04 2014 at 3:29 AM Report abuse -1 rate up rate down Reply
Robert Smith

You Suck Obummer!!!!!!!!!!!

September 04 2014 at 3:23 AM Report abuse -1 rate up rate down Reply
Robert Smith

You Suck Obummer!!!!!!!!!!!

September 04 2014 at 3:23 AM Report abuse rate up rate down Reply
Iselin007

The math wizards are either on drugs or their playing this out while they wait for the next crash. You can't squeeze blood from a rock.

September 04 2014 at 12:44 AM Report abuse +2 rate up rate down Reply
Iselin007

Revenues from the declining middle class can not support the public sector and the private sector's retail can not increase it's already saturated share of the market with out growth in wages and income of the consumers.

The share of income has been been shifting to investers and corporate thus depleting the share that would of other wise gone to the workforce. What will investers do next stiff the imported goods makers when they can't shave the wealth from a broke US population?

September 04 2014 at 12:38 AM Report abuse +1 rate up rate down Reply
1 reply to Iselin007's comment
truu.liberal

Labor and capital are not in competition. Rather, they have a symbiotic relationship. One cannot prosper without the other. Capital boosts productivity and productivity boosts living standards.

The reason American workers are among the best paid in the world is because they are among the most productive in the world. And the reason they are among the most productive in the world is because the US leads the world in investment and innovation.

September 04 2014 at 9:19 AM Report abuse +1 rate up rate down Reply
Trisha

And yet Sophia Vergara was paid $37 million to go to work in 2013. And you people actually believe there is a reasonable explanation in a financial sense as to why the regular Joe who MAKES people like her "Stars" cant be paid so much as a living wage. Its shameful. Things will change for the better as soon as more of you stop believing in this BS illusion the 1% has fed you.

September 04 2014 at 12:31 AM Report abuse +2 rate up rate down Reply
1 reply to Trisha's comment
mac2sr

Why can't regular joe make a livable wage? Plenty of regular people do. Now, if Joe or anyone else.becomes irregular, they might consider taking a laxative to help ease their condition.

September 04 2014 at 12:57 PM Report abuse rate up rate down Reply
1 reply to mac2sr's comment
truu.liberal

If these "regular Joe's" couldn't earn a "living wage" wouldn't that imply that there were no "regular Joe's"? After all, absent the "living wage", they'd all be dead, right?

September 04 2014 at 3:02 PM Report abuse rate up rate down