Workers still feeling the pain in paychecks

Lagging wages delay recovery

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Presidential candidates like to say it’s all about jobs, but for the nearly 92 percent of the American workforce with jobs, it’s about the wages.

U.S. corporations are brimming with cash and reporting record levels of profits, but many workers haven’t received solid raises in years. Some have had to take on the workloads of laid-off colleagues, but have not received additional pay. The jobs that are open often provide smaller paychecks than the ones Americans lost during the 2007-09 recession.

Compensation for workers has been inching up at less than 2 percent a year — about half the pre-recession rate — despite three years of recovery, government reports show, and average hourly wage gains have hit a record low of 1.4 percent.

This dearth of solid income growth is having a broad impact on the economy in obvious and subtle ways.

It is a key reason for the subpar recovery because it denies American consumers — the biggest engine of economic growth — the wherewithal to increase spending in any sustained way.

Consumers have had to depend on a series of federal tax cuts to eke out even the modest gains in spending since the recession ended in June 2009. Americans also are more vulnerable to even a small uptick in inflation, which can easily overwhelm their growth in wages.

On a psychological level, flat wages dampen consumer spirits — making many people feel like the recession never ended — and feed anger about any outsized gains in prices for essentials — such as a spike in gasoline prices — that erodes any increase in spending power.

Suzanne N., a California technology worker who asked for privacy reasons not to reveal her last name, knows the story well. She took a job with a startup firm seven years ago and began to get good raises. But during the recession, the company encountered difficulties and announced a 10 percent pay cut.

Although the pay cut was made up two years later when business improved and she got a small raise at that time as well, she has heard nothing about raises since. With expenses rising — particularly for gas — Suzanne recently inquired about a raise and was told she would have to wait.

“Many friends say, ‘Be happy you have a job.’ Some individuals have not had raises in over four years,” she said, noting that one friend recently had to take a two-week unpaid furlough. Still, “my motivation to do a job well is slacking” without any hopes of getting a raise, she said.

Suzanne’s employer has compensated her for the long period without raises by giving her considerable job flexibility. She works from home four days a week, which allows her to spend more time with her family and helps save fuel on her 168-mile round-trip commute.

She also was given 1,000 shares of company stock, which currently do not have much value, she said, but she expects they will someday.

“All in all, I could not imagine working someplace else,” she said. “But there is that one little piece of me that keeps saying if you’re such a good employee — and I’m told this often — then why doesn’t my paycheck show it?”

Pay, profits diverge

Pay cuts, freezes and interruptions in pay, common during the recession, remain fixtures in the job market despite the reviving profitability of U.S. companies.

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