Aug 01, 2011 at 5:40 pm
…wages, like much else, are stuck in neutral.
Recent data show that total compensation is actually accelerating a bit, which I took to be good news (revealing that I’m not one of those people who rush for the fire extinguisher anytime wages pick up a bit).
But alas, it’s not paychecks—ie, wages. It’s non-wage benefits. That ain’t nothin’ but it’s less helpful to both family budgets and the macro economy.
Compensation—wages+benefits—clearly decelerated with the onset of Great Recession, hit bottom in terms of growth in late 2010, and have picked up the pace a bit most recently. I’ll get to whether they’re beating inflation in a minute, but for now, if one were to look solely at comp, one might envision a tightening labor market generating a trend like that.
But if you break out wage growth from benefits, the story changes. Wages are flat in nominal terms, and with faster inflation of late, that means declining real paychecks, on average.
The acceleration in comp is a function of benefits. Interestingly, it’s not health care (data not shown), as that component has also not grown much of late (a quick look suggested retirement benefits are up a bit).
At any rate, when you adjust compensation growth for inflation, you get the unfortunate trend in the next figure, as recent price growth has outpaced the acceleration in overall comp. That of course means real wages/paychecks are falling even faster.
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