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Our Wallets Get Emptier

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Posted on Sep 7, 2009

By Marie Cocco

It isn’t all in our heads. Americans did not balk at buying back-to-school clothes, or forgo a Labor Day weekend trip, or refuse to invest in a new television for football season just because they are, to use the overworked shorthand, “feeling cautious.”

They are feeling the real effect of shrinking paychecks.

Wage growth—perhaps the most important number in the torrent of economic numbers that seems to assault us daily—all but ceased in the past six months. Pay for private-sector workers grew at the rate of only 1.3 percent, according to government data analyzed by the Economic Policy Institute. That’s slower than the rate of growth late last year, when credit markets froze and it seemed as though we were about to plunge into another Great Depression.

With inflation running at more than 2 percent, no sophisticated computer is needed to do the math. Workers are, in effect, taking a net loss. “People are losing ground to inflation, big-time,” says Lawrence Mishel, president of the institute and an author of its new study, “The Recession’s Hidden Costs.”

That is, among the lucky who have managed to hold on to their jobs. They still have them, in part, because employers have cut costs by cutting pay, hours and benefits. That is what a “furlough” is—involuntary unpaid leave time. Though no official government data tracks this new trend, the EPI study estimates, based on the number of hours worked, that every week of a furlough amounts to a 2 percent cut in annual pay.

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Then there is pay to be expected in retirement, or what used to be called a pension. Now, if you have a pension (and only about half the private-sector work force does) it is most likely to be in the form of a 401(k) savings account, which, as water-cooler jokers know, was knocked down to a 201(k) due to stock market losses. Or make that a 101(k) because hundreds of employers—upward of 300, according to the Pension Rights Center—have stopped or temporarily suspended employer contributions into the savings accounts.

This is only an unofficial count, based on corporate press releases and media stories. Private benefits companies that have tried to measure this trend have generally concluded that about 20 percent of employers have suspended their matching contributions, or intend to reduce them.

In mid-August, the Gallup Poll found that the fear of losing a job was at its highest level since the firm first started asking the question in 1997. About a third of those surveyed worried about a layoff, a similar proportion said they believed their pay would be cut, and 46 percent were concerned about benefit cuts.

This isn’t paranoia. For the last three decades, the economy has been on an almost uninterrupted course of lower wages and lost benefits for most workers. The current recession may well have hit bottom this summer, as government and private economists believe. But for American workers, there is no bottom.

Basic labor protections are ignored with impunity. Minimum wage laws are violated, overtime routinely goes unpaid, and workers are forced to toil off-the-clock, according to a survey of 4,387 low-wage workers in New York, Los Angeles and Chicago by the National Employment Law Project. The findings are consistent with a recent Government Accountability Office report that showed federal officials were failing to enforce basic wage and hour laws. “We have a lawless labor market, in my view,” Mishel says.

The wage crisis isn’t just the product of the current downturn. Stagnation in average Americans’ pay has been a fixture for the past decade, with real median household income—that is, income after inflation is factored in—essentially unchanged since 1999, according to the Census Bureau.

Long before this recession, workers were dodging downsizing, outsourcing, pension freezes and other benefit cuts. Years ago, the announcement that a company was moving operations offshore for cheaper labor was met with outrage. Today it is applauded on Wall Street and barely lamented in Washington. The tactics of the past are the new normal.

That is what’s worrying about the new techniques companies are using to trim costs in this slowdown. Emergency practices perfected now—suspension of the employer share of 401(k) contributions, for instance—could easily become tomorrow’s standard.

Then what? Without pay that keeps up with inflation, without pensions, without the certainty of health insurance coverage, there’s a diminishing chance that those in the much-vaunted American middle class will stay there.

Marie Cocco’s e-mail address is mariecocco(at)washpost.com.

© 2009, Washington Post Writers Group


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By John Andersen, September 15, 2009 at 5:03 am Link to this comment
(Unregistered commenter)

Let me echo the sentiment about loss of health care worker jobs.

One of the reasons dentistry, for instance, has succeeded so well as an industry since the 1960s (now mostly vanity dentistry) is because of employer supplied dental coverage. 

People without dental insurance don’t go to the dentist as much.

With coverage being cut by many companies trying to reduce expenses, and dentistry increasingly dependent on customers paying out of pocket, expect the dental industry to contract if not collapse altogether.

The same will be true of many other industries like dentistry that are mostly about image rather than substance.

I’m not sure, in the grand scope of things, if such developments are actually bad.

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By Blackspeare, September 9, 2009 at 9:20 am Link to this comment

INFLATION?????——-what inflation.  You have no idea what real inflation is!  The USA has never had a true period of runaway inflation.  We had an inflationary period during Nixon’s and Carter’s terms, but that was somewhat contained with price and wage controls under Nixon’s administration.  Remember “sticker shock”——well you ain’t seen nothin’ yet!!!

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By Jim Yell, September 9, 2009 at 7:18 am Link to this comment
(Unregistered commenter)

Usuary is a crime that should be recognized as the result of withdrawing the regulation and enforcement of regulations on the lending and financial corporations. They consider anything not leading directly to jail, a permitted activity. It is time to disabuse them of this, while the working poor have any income at all.

Instead of putting these people in jail for ruining our economy, little regulation has been leveled and they have been rewarded by a massive flood of taxpayer money, or more to the point borrowed money against future tax revenue.

These people should be in jail and the money they stole by corrupting our elected officials should be sent to the national treasury so that it can pay the costs of the disaster of their making, instead of getting multi million dollar bonuses for having destroyed the economy. To hell with the lot of them.

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By DBM, September 9, 2009 at 3:37 am Link to this comment

That average American non-union worker needs $691/week to pay off his credit card debt and his mortgage.  I can’t figure out if this is more like share-cropper economics or the Feudal system.

It’s a great time to be filthy rich in America.  A pity about the rest…

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By Shift, September 8, 2009 at 10:01 pm Link to this comment

One out of five Americans are unemployed or seriously underemployed.  Those are depression numbers.

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By johnnyfarout, September 8, 2009 at 7:54 pm Link to this comment

This is that same Marie Cocco that wrote that awful retarded reactionary Afghablamastan article about how afghablamastan was a needed war to keep us all safe from Al Queeda. She is a retard, to add hominun to hominum attack! So all of a sudden she’s half awake?! The working class is getting fucked in america today…? Like duh. So I suppose the message is that we best roll over and die because we can’t do anything. I’ll tell you. It’s going to get very dangerious in America soon. Like tonight maybe. The day these dimwits don’t pass the one bone that the working masses will let out an audible sigh across America over… Universal Health Care. Even if the Medicare age was lowered to 45 a collective sigh of orgasmic relief would be heard by the Soyuz space craft and the L5 Space Station too: 1,000,000 years from Earth isn’t very far nowadays.

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By frank1569, September 8, 2009 at 3:52 pm Link to this comment
(Unregistered commenter)

The average non-union worker in the US earns $691/week. The average non-union worker in China earns $64/week.

“Why doesn’t labor have any power?” “Where are all the jobs?” “Why don’t we make stuff anymore?”

The average non-union wage in Mexico is $20/week; Philippines - $15/week. Health benefits = get sick, get fired. Vacation? Maternity? Pension? Safety controls?

US labor is basically f@#ked. Period.

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By G.Anderson, September 8, 2009 at 1:49 pm Link to this comment

We don’t really need workers anymore, what we want is debtors. Then we can keep on making billions selling their debts, and keep them slaving away knowing that they will never get out of debt.

Student Loans, Credit Card Debt, and Mortgages, mean you will always be in bondage, because you can never pay off these loans only service them forever.

You can’t have freedom when your leaders, believe in slavery.

Like the famous song:

St. Peter don’t you call me cause I can’t go, I owe my soul to the company store.

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By rico, suave, September 8, 2009 at 11:13 am Link to this comment

Mr Lemonde:

Is that a criticism or an endorsement of free markets?

You are, of course, absolutely correct in your observation. And the key word is “free”.

As opposed to a command market, where government power interests decide what businesses and industries can and can’t do, and people are told what they can and can’t consume, from cigarettes to SUVs to health care.

Give me the “free” kind any day.

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By Rodger Lemonde, September 8, 2009 at 9:53 am Link to this comment
(Unregistered commenter)

Free market means business and industry are free to do
whatever they wish. People are free to feed business
and industry.

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By rico, suave, September 8, 2009 at 8:45 am Link to this comment

I’ve got an idea! Why doesn’t the government let people keep more of their pay by giving them a tax cut? On a related note, why do libs support the payroll tax, the most regressive tax we have?

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By bane-richter, September 8, 2009 at 7:07 am Link to this comment

Marie, all the jobs at Raytheon and Lockheed and ITT pay ok in the DC area. They pay big amounts to advertise in your sleaze- media company too. War mongering is only going to reward so many people, and it’s not where the US should be throwing trillions.
Why won’t you mention these Subsidized Corporations who return very little to the worsening situtation you’ve just described?  In the past, throwing people off of the welfare rolls has been “wildly successful”. Why can’t we cut Boeing and Northrup off as well?
Why have you supported the carnage, war profiteering, and no bid orgasms in the illegal 8 year Afghan real estate grab?  Scared of the boogie-man or falling profits?

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By NZDoug, September 8, 2009 at 12:43 am Link to this comment

WOW, Im glad Im not a Kennedy….

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By david m, September 7, 2009 at 10:46 pm Link to this comment
(Unregistered commenter)

I used to be fearful of losing my job, then I lost it. And along with the job went my retirement, health insurance, and vacation time… all victims of the only developed nation that ties everything to a person’s employment.

This is how things are in Dayton, Ohio:
The local library branches are going to close every other Thursday to save money. Every day there are more empty businesses and houses on the streets (it’s one of the USA’s top cities for abandoned buildings). We just lost the last of the fortune 500 companies that were headquartered here.

One of my wife’s friends has worked 20 years at a dental clinic that provides care for the poor. They just cut their staff working hours in half. Well, she was in a panic because her husband just lost his job at the GM truck plant that just went under in the spring. She sent out her resume but found out that no dentist’s offices are hiring because so many people now have no insurance coverage that the dental business is down. My prediction: say goodbye to all those healthcare worker jobs that Americans have been shifting into. No coverage means no need for workers.

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