Tags: low | wage | work | productivity

Analysis: Wages Drop Most for Low-Wage Workers

Thursday, 11 Jul 2013 07:52 AM

By Michael Kling

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While real wages dropped almost across the board from 2009 to 2012, wages dropped the most for the lowest paid workers, according to a National Employment Law Project (NELP) analysis.

After adjusting for inflation, hourly wages dropped 2.8 percent from 2009 to 2012, the analysis showed. Real wages dropped at least 5 percent in five of the 10 largest low-wage occupations, including restaurant cooks, food preparation workers, home health aides, personal care aides and maids and housekeepers.

The overall wage drop was striking since productivity increased 4.5 percent, the group said. Workers are producing more, but getting paid less.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

"Corporations are reaping the financial benefits of an increasingly productive work force, but the recent decline in wages shows that these gains are not being shared with the people actually doing the work," said NELP Executive Director Christine Owens.

The analysis found that pay for the bottom fifth of workers in terms of wages dropped 3 percent. The second fifth dropped 4.1 percent, and the middle group fell 3.1 percent.

Those in the top two groups saw their median wages decline by less than 2 percent on average, and nearly a third of those occupations actually saw real wage growth.

For the 30 years prior to the recession, real wage gains and income growth accrued primarily to those at the very top, while lower-wage earners experienced stagnant or declining wages, according to NELP.

"While persistent high unemployment likely explains some of the recent decline in real wages, recent losses are part of an alarming trend toward greater inequality and a shrinking share of economic pie going to those at the bottom," Owens noted.

An eroding minimum wage, falling union memberships and government policies that encourage firms to move jobs overseas have contributed to the increasing inequality, NELP asserted.

President Obama has proposed raising the minimum wage from $7.25 to $9 an hour.

Although critics say increasing the minimum wage would cause job losses, a study by the Chicago Federal Reserve Bank concluded that it would stimulate economic growth by boosting income and spending — at least in the short term.

"We are skeptical that minimum wage hikes boost GDP in the long run," wrote Chicago Fed economists Daniel Aaronson and Eric French.

"Nevertheless, we do find evidence that putting money into the hands of consumers, especially low-wage consumers, leads to predictable increases in spending in the short run."

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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