American Workers Just Treading Water At All-Time Low, Gains In Wages And Benefits Barely Stay Ahead Of Inflation

Wages and benefits paid American workers rose just 2.9 percent last year, the smallest increase on record and fresh fuel for the unhappiness of a middle class convinced it is falling behind.

The biggest factor was restraint in health care and other benefits, though they rose more quickly at year’s end.

The Labor Department said Tuesday the increase in its Employment Cost Index was down from 3 percent in 1994 and the smallest since the government began recording annual changes in 1982.

The gain barely kept worker compensation ahead of inflation. The Consumer Price Index rose 2.5 percent last year.

Businesses concerned about maintaining profits are keeping employee costs under close control, and “basically, labor is not in a position to argue,” said Robert G. Dederick, economic consultant for the Northern Trust Co. in Chicago.

Overall job growth has been slow, and many companies have been downsizing, giving workers little leverage to seek increased wages and benefits.

“This tells the American worker that he’s not sharing in the nation’s productivity growth,” said John Zalusky, an economist with the AFL-CIO. “He’s barely keeping up with cost of living.”

The reason, he says, is that “this nation has chosen a low road to international competition. It’s chosen to compete by low wages, laying workers off, not investing in education, not investing in the work force, not investing in technology.”

Labor Secretary Robert Reich echoed those sentiments:

“Something is going on here that can no longer be ignored. The stock market and executive compensation are soaring (while) blue-collar workers have continued to lose ground” when inflation is taken into account.

In economic terms, the Employment Cost Index is considered one of the best gauges of inflation since compensation represents about two-thirds of the cost of a product.

Pay and benefits for blue-collar workers in private industry rose 2.5 percent during 1995, just matching the increase in consumer prices. On the other hand, compensation for workers in white-collar occupations rose 3.1 percent.

People employed in service occupations did the worst, however. Their pay and benefits rose only 2 percent last year.

Compensation for union workers rose 3 percent in 1995 compared with 2.8 percent for non-union workers.

The cost of benefits, such as health care and pensions, grew 2.8 percent, the smallest gain since the record-keeping began in 1982. Benefit costs had risen 3.4 percent in 1994.

Although worker compensation did beat the inflation rate last year, real earnings have been stagnant. For example, while employment costs rose 0.9 percent in the fourth quarter, that increase was concentrated in benefits.