Higher Expectations Take Two

I nearly spit up my coffee reading the local scribe this morning.  According to the Star Tribune,

WASHINGTON — U.S. employers added a robust 263,000 jobs in April…

The unemployment rate fell to a five-decade low of 3.6% from 3.8%, though that drop partly reflected an increase in the number of Americans who stopped looking for work. Average hourly pay rose 3.2% from 12 months earlier, a healthy increase though unchanged from the previous month.

A healthy increase?????

Ok, so let me get this straight.  If we deliver the best year ever and pile up all the treasure for the few, we get less then a cost of living raise?  Data shows that pay raises in the neighborhood of 3% is barely above annual inflation. People will need more than a 3% raise to rebuild the wealth lost as a result of the 2008 recession.

Letters on dice spelling wages?

Big Raises for the 1%

Ok, that seems to suck, but maybe we shouldn’t complain, it’s better than no raise at all.  Maybe it’s just harder to achieve prosperity anymore.  Maybe nobody is making money, but at least we still have jobs.  Hmmmm.   Let’s check in on the one percent to make sure they are ok and at least saw a cost of living raise like us.

According to the Economic Policy Institute;  https://www.epi.org/publication/ceo-compensation-surged-in-2017/

…in 2017 the average CEO of the 350 largest firms in the U.S. received $18.9 million in compensation, a 17.6 percent increase over 2016. The typical worker’s compensation remained flat, rising a mere 0.3 percent. The 2017 CEO-to-worker compensation ratio of 312-to-1 was far greater than the 20-to-1 ratio in 1965 and more than five times greater than the 58-to-1 ratio in 1989 (although it was lower than the peak ratio of 344-to-1, reached in 2000)

Purchasing Power of the Dollar

Whew, the one percent is doing ok, thank goodness.  Maybe it’s more complicated then we think.  Maybe the cost of things has gone down so we have more purchasing power.  Let’s take a look.

According to the Pew Research Center,

After adjusting for inflation, however, today’s average hourly wage has just about the same purchasing power it did in 1978, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then. In fact, in real terms average hourly earnings peaked more than 45 years ago: The $4.03-an-hour rate recorded in January 1973 had the same purchasing power that $23.68 would today.

Business partners holding a wad of cash while smoking cigars and drinking cocktails. Isolated.Dang it, wrong again!  But hold on folks.  We seemed to have forgotten about that big tax break for the rich.  That guaranteed they would go into a feeding frenzy and a little bit of gravy would dribble off their chins to our gaping mouths.  MMM, MMM Gravy!  As in bonuses to workers from the tax breaks!  Surely this is the missing piece of the puzzle to our lost prosperity.  Let’s take a look.

According to the Economic Policy Group;  https://www.epi.org/blog/bonuses-are-up-one-cent-in-2018-since-the-gop-tax-cuts-passed/

The increase from the fourth quarter of 2017 to the first quarter of 2018 was from 2.7 to 2.8 percent of compensation. The sharp fall in December 2018 stands out. If one averages the data for the full years of 2017 and 2018, the nonproduction share of total compensation was essentially flat, rising from 2.60 to 2.63 percent. An examination of overall wage and compensation growth does not provide much in the way of bragging rights for tax cutters, especially given the expectation of rising wages and compensation amidst low unemployment.

Wage Stagnation- The New Normal

Dang it, wrong again!  Folks, this has been our reality for the last 30 years, the longest wages stagnation in U.S. history along with the biggest windfall for the few.  This is the new normal.  In banner years like this last one, you will have plenty of stagnated wage jobs to pick from and your pay will almost keep up with inflation so you can tread water.  Of course, we can’t deliver banner years every year so we will cycle between falling way behind in bad times, falling behind in decent times, and treading water in the best of times.

Man with head in sand. Ok, sorry for the interruption, you can all go back to screaming at poor immigrants and talking about how China and the rest took your jobs!  As the One Percent would say; there is nothing to see here folks, just get back to work.

Cheers,

Andy

Read the first post on  Higher Expectations.

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