U.S. Confirms: Skimpy Raises Were the Rule

WASHINGTON —  The government confirmed Tuesday what most workers already knew: In terms of their pay, Americans are just treading water.

The Labor Department reported that wages and benefits in private industry increased 2.9% over the last year. It was the smallest advance since the department began calculating its employment cost index in 1981 and reflects both the low level of inflation and the inability of workers to wrest pay raises from employers in an increasingly competitive economy.

Despite the news about their pay, there was an indication that Americans remain relatively upbeat about the economy.

The Conference Board, a New York-based business research group, reported that its index of consumer confidence rose in July to 99.9, up from a revised June reading of 94.6. The uptick largely reflects increased optimism about job prospects, the board said.

The Labor Department’s compensation measure, adjusted for inflation, showed a slight 0.2% decline over the past 12 months in spite of robust gains in worker productivity and record levels of corporate profits.

As with other recent data on wages, there was a good news-bad news quality to the report.

From one perspective, it should remove any lingering fears of inflation and give the Federal Reserve Board and private lenders the opportunity to lower interest rates in the months ahead.

At the same time, the news of continuing slow growth in worker pay comes when the incomes of many Americans--particularly those without a college education--have been falling on an inflation-adjusted basis for nearly 20 years.

Much of that decline reflects lagging productivity growth during the late 1970s and early ‘80s. But with productivity on the upswing again, many economists have begun to fear that the traditional link between productivity and pay seems to have been severed.

“Productivity improvements are going into corporate profits, not workers pockets,” said Labor Secretary Robert B. Reich. “But workers are also consumers, and at some point American workers won’t have enough money in their pockets to buy all the goods and services they are producing.”

Although Tuesday’s report shows no gains in overall compensation once adjusted for inflation, there were variations by sector and occupation. Salaries of white-collar workers--professionals, technicians, sales workers and managers--rose 3% in the last year, while pay for blue-collar workers gained 2.6%.

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Existing Home Sales

Seasonally adjusted annual rate, in millions of units:

June 1995: 3.78

Source: National Assn. of Realtors

Consumer Confidence

Index, from a monthly survey of 5,000 households. 1985=100

July 1995: 99.9

Source: Conference Board