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Wages haven’t kept pace with recovery, study finds

The stock market is improving. Corporate profits are up dramatically. But workers’ wages don’t seem to be rising, a study finds.

By Jay Fitzgerald
Globe Correspondent / April 8, 2012
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After going eight months without working, Karen St. Germain has learned one thing about the job market in today’s tough economy.

“Employers are looking for a lot more for a lot less from employees,’’ said St. Germain, who has applied to work at a number of Massachusetts firms after losing her job as an operations manager at a local jewelry maker. “Employers are looking at bringing in people at lower pay, and they want you to do a lot more things that aren’t included in a job description.’’

With sometimes hundreds of people applying for a single opening, it’s hard for people like St. Germain to find a job - not to mention one that pays as well as their old positions did before the Great Recession.

A new study by the Northeastern University Center for Labor Market Studies statistically confirms what St. Germain and others are seeing and hearing every day within the labor market: Workers’ salaries and wages are generally stagnant amid high unemployment - even while the economy slowly generates new jobs, stock markets rebound, average worker productivity increases, and corporate profits soar.

Indeed, the Northeastern study says that nearly 90 percent of the economy’s real income growth during the current recovery has gone into corporate profits, after companies slashed payrolls, kept wages down, and squeezed additional productivity out of existing employees.

“This is the most lopsided recovery I’ve ever seen,’’ said Andrew Sum, an economist and director of the Northeastern center that is releasing the study this week. “The average American worker has gotten virtually nothing in their paychecks from this recovery, even though jobs are slowly starting to come back and profits are up.’’

The nation’s unemployment rate has fallen to 8.2 percent since hitting its high of 10 percent in 2009, though total employment is still down about 5.2 million jobs from its prerecession peak, according to the Bureau of Labor Statistics.

Corporate profits have increased by 93 percent before taxes from the fourth quarter of 2008 through the fourth quarter of 2011, rising to a record $1.9 trillion, according to Northeastern data. The Dow Jones industrial average has risen by 35 percent in the same time period, pushing above the 12,000 mark for the first time since 2008. And labor productivity, ultimately measured by the growth of the economy amid current labor market conditions, has increased by about 8 percent over the same three-year period.

But mean weekly wages have risen only 0.4 percent over the past three years, to $796, or by $3, and weekly wages have actually fallen by 0.1 percent over the past year, or by $1 a week, according to Northeastern data.

To Northeastern’s Sum, it all adds up to the slowest postrecession wage and salary recovery since the Great Depression - and the largest postrecession accumulation of corporate profits over the same period. It all ties back to jobs - or lack of them - and the subsequent pressures that are keeping labor market wages from rising, Sum said.

“The bargaining power of workers has simply deteriorated,’’ said Gary Burtless, an economist at the Brookings Institute, a liberal-leaning think tank in Washington, D.C. “The supply-and-demand equation is off. Workers have no leverage to ask for higher salaries.’’

Some sectors like technology are seeing employment and wage gains, according to recent data from PayScale Inc., which tracks national employee compensation trends. But in many others, economists say, companies aren’t hiring more workers because consumer demand and the economy are still too fragile to justify long-term hiring commitments. Other firms are worried about major government policy changes - such as to the tax code or to the health care sector - that could disrupt their labor costs and bottom lines.

Employers say that companies are doing everything they can to expand - and that executives are just as frustrated as employees about the state of the economy.

“Everyone is just trying to survive and scrambling to find business,’’ said Diane Giblin, co-owner of Draper Metal Fabrication Inc. and Draper Elevator Cab Co., two Holbrook companies that make elevator products.

Though the two Draper firms managed to avoid laying off any of their combined 11 workers during the recession, Giblin, who is on the leadership council of the state chapter of the National Federation of Independent Business, said she is “not even thinking of hiring in this uncertain economy.’’

Hollingsworth & Vose Co., a Walpole maker of advanced materials for the technology sector, employs about 300 people in Massachusetts and more than 1,000 workers worldwide. The company reduced its payroll slightly through attrition during the recession - and now is beginning to hire again, albeit slowly.

“Talking to our customers and others in business, a lot of people are saying they’re running companies lean, really efficient, and they’re reluctant to make big investments or hires because of all the unknowns out there,’’ said Val Hollingsworth, the company’s chief executive.

Slow job and wage growth make for a painfully slow recovery as many workers, both blue collar and white collar, struggle to get by, whether they’re employed or unemployed.

John Burke, an operating engineer with the International Union of Operating Engineers Local 4 in Medway, said he’s one of the lucky ones within the construction industry who managed to find work during the recession. In Massachusetts alone, nearly 40,000 construction jobs were eliminated during the recent downturn - and only 1,400 of those jobs have been regained since the recovery began in 2009, according to state data.

But Burke, a Walpole resident, has seen a 30 percent cut in his income because he is logging fewer work hours as a crane and heavy equipment operator. “I’ve managed to get by, watching every penny,’’ said Burke. “I have so many friends who are far worse off. They’ve lost their jobs, lost their homes, dipped into their [savings]. Even for those working, it’s tense out there. There’s no margin of error.’’

At a recent employment support group meeting at the Trinitarian Congregational Church in Norton, white-collar workers who recently lost their jobs talked about how difficult it’s been to find work within their fields - and how hard it is to find job listings that come close to paying what they used to make.

James “Jay’’ Creeden of Norton lost his job as a supply-chain specialist in 2009 - and has been looking for full-time work ever since. “There’s been more jobs posted on online job boards in the past six months or so,’’ said Creeden. “But each job [opening] is flooded with applications, and they don’t pay as much. I’ve had many interviews and gotten down to the last two or four finalists for jobs, but nothing has closed yet.’’

Anne Crawford, a career-transition consultant from Franklin who helps run the Trinitarian employment group, said part of her role is trying to prevent job seekers from getting too discouraged.

“The word ‘frustration’ is putting it mildly,’’ she said of the mood of those looking for work or higher paying jobs. “When they apply for a position and finally get an interview and hear what might be available at what salary, it’s heartbreaking for them.’’

Jay Fitzgerald can be reached at jayfitzmedia@gmail.com.

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