Wage growth decline adds drag to economic recovery

(National Employment Law Project) Whatever is shown by the numbers of Friday's much-awaited April jobs report, the analysts will be digging into them like a Roman seer pawing through rabbit entrails for evidence of the direction of the labor market and the greater economy. One thing that typically gets missed in all the amateur and professional analyses of labor-force participation rates, the rise and fall of manufacturing jobs and the impact of seasonal adjustments to jobs is the quality of those jobs and how much they pay.

Though not the first to do so, the National Employment Law Project points out that the plunge in the rate of wage gains in the past five years is holding back the recovery. Workers simply cannot buy as much as is needed to increase demand so that more workers can be hired to meet that demand:

...in fact, as of March 2012, hourly wage change was nearly 44 percent below the rate of change as of March 2007, prior to the Great Recession. Not only is wage growth slowing, but the real value of hourly wages'once adjusted for inflation'is also declining when compared to the prior year. From March 2011 through March 2012, real average hourly earnings fell 0.6 percent for all private sector workers and declined by even a great degree'1.0 percent'for nonsupervisory and production workers.

Changes in the number of hours worked per week by both groups did not make up for the loss in wages: an uptick in the hours worked among all private sector employees left their real total weekly wages (a product of the hourly wage and hours worked per week) unchanged, while an increase in hours for production and nonsupervisory workers still resulted in 0.5 percent decline in real total weekly wages.

The Bureau of Labor Statistics has noted that for all of 2012, aggregate wages went up 1.7 percent. But inflation for the year was 3 percent. In other words, workers overall lost ground.

Worse yet is that low-wage occupations are the ones dominating the recovery. And worse still is that fully 30 percent of job openings from now until 2020 will pay around the $20,000 level. Those are poverty wages for a household of four. The litany of wage problems goes on and on. New entrants are being paid less than before. Unemployed people who finally find a job are often paid less even if they get hired in the same field. Those who had to switch fields to find employment took even harder hits. And people who have been out of work the longest typically find it hard to do anything but switch fields because their skills have atrophied and they aren't as attractive to employers as workers with more up-to-date skills.

People at the very bottom end of the job market are paid a minimum wage (or less)  that has far less buying power than it did at the peak in 1968, $7.25 an hour. To reach parity with the '60s, that minimum would now have to be $10.55 an hour. And if it had kept up with productivity gains, it would be $22 an hour.

As Laura Clawson explained recently, the low wage floor, when combined with the drop in unionization and shredding of employment protections have made the U.S. the "global leader in low-wage work: the US labor force is made up of a larger share of low-wage workers than any other comparable economy."

All this has been a major contributor to income inequality. It did not happen overnight or solely as a consequence of the Great Recession. That downturn only worsened a trend that has been on-going since the mid-1970s for all but a few years of the Clinton administration. The median, inflation-adjusted wage has only increased 5.7 percent in the past 30 years.

Raising the minimum wage or finding other means to provide income support to low-wage earners along the lines of how many European nations have done it, is a crucial first step in rectifying this situation. But it will take a good deal more than such tinkering to truly improve matters for U.S. workers. Progressive tax reform and cooperative forms of ownership are key to making that happen. In the current political climate, short of a movement focused on comprehensive economic reform, making those changes is simply off the table.

Making it a priority will mean reducing the number of elected Republicans determined to go the other direction in such matters. But it will also require electing leftist Democrats and changing the minds of a lot of already elected Democrats whose best efforts of late have been addressed at rearguard actions to protect gains we once thought were permanent. Getting better Democrats into place and making better Democrats of those already elected will be no easy task. But it's one essential to the future well-being of American workers. And it will take prodigious efforts, with both movement and electoral activists cooperating instead of pretending that they don't need each other to make the changes we so desperately need.