April 29, 2006

They just don't get it

We keep hearing the pundits and the Republicans touting good economic growth and puzzling about why the poll numbers don't reflect that knowledge. I suggest that Americans wouldn't be howling so much about rising gas prices if their wages had not been declining relative to inflation for the past two years.

...real wages fell by 0.5% over the last 12 months after falling 0.7% the previous 12 months. Because of the momentum of real wage growth from the tight labor market of the late 1990s, real wages actually continued to grow during the recession that began in March and ended in November 2001. Since then, however, they have fallen slightly (Figure C).

The decline in inflation-adjusted pay has been the largest for lower and middle-income employees. For example, workers at the 20th percentile of the income scale suffered a 0.8% decline in real pay. Only the highest wage employees enjoyed pay gains that outpaced inflation—those in the 95th percentile of wages had gains last year of 0.8% (Figure D).

If you've been getting raises every year, even at the minimal level, you at least feel like momentum is in your favor. If you've not gotten one at all or if a year was missed, you're likely to feel like you're falling behind. The two charts at the link show that you're not wrong. Couple that with rising interest rates for your credit cards, the new car loan you want to get, or particularly the adjustable rate mortgage you took out three or four years ago, and you're feeling like the cards are stacked against you. Add rising gas prices to that, and you're liable to be an unhappy camper.

Posted by Linkmeister at April 29, 2006 12:51 PM | TrackBack