Where's Your Raise?

[jeffrey]

Profits are up and inflation is under control, but America's workers aren't getting richer. File your complaints with the benefits department.

At first glance, it seems that life is getting better for America's workers. The unemployment rate has dropped by half a percentage point in the past year, and 1.4 million more people have been hired than fired. GDP growth has been robust, averaging more than 4 percent. But from the perspective of the average worker, the macroeconomic stats don't tell the whole story. Employees aren't seeing improvement where it matters most: in their wallets. Workers feel richer when wages climb faster than the prices of the things they buy. During the last boom, this difference -- called real wage growth -- averaged about 0.7 percent per year. But during the past five years, real wage growth has stalled, remaining basically unchanged since the recession ended in November 2001.

It's not that bosses are being stingy. From the perspective of employers, the overall cost of compensation -- the figure that matters most to them -- has been ballooning. Workers may not be seeing more take-home pay, but the cost of their benefits has been rising. Skyrocketing health insurance premiums and unanticipated pension shortfalls have driven up private-sector benefit costs by 17 percent since the economy stopped shrinking.

To see how dramatically things have changed, look at compensation data from the past 10 years. Split the decade in half, and at the beginning of each five-year period, index the growth of wages, benefits, and inflation to see how they compare over time. In the first five years, from 1994 to 1999, wage growth consistently outpaced both benefit costs and inflationary price increases. But in the more recent period, from 1999 to 2004, take-home pay stagnated as the cost of benefits rose much faster than either wages or inflation... [read more at business2.com]