I don’t know why the economics cognoscenti pay much less attention to the Labor Department’s inflation-adjusted wage figures than to those that don’t take into account price changes. Maybe it’s because the latter are released along with the monthly jobs reports that always make big headlines, while the former come out weeks later? Whatever the reason, it’s a mistake. Even though inflation’s been very low, what workers make in real terms is the biggest earnings-related determinant of their spending, and America’s economy has been consumer-heavy for decades.
The latest (March) real wage figures just came out today, and among other things, they show how important it is to distinguish between pay for all workers, and pay for the vast majority of workers who aren’t managers or supervisors.
Here’s what I mean: If you just looked at the new wage data for all workers, the March numbers look encouraging – at least by dreary recent standards. Real wages in the private sector rose a penny month-to-month, after falling by the same amount in February. More important, year-on-year wages after inflation were up by 2.23 percent – more than February’s 2.13 percent, and much more than the 0.58 percent increase from March, 2013 to March, 2014, and the 0.49 percent improvement the year before.
As a result, real private sector wages are 2.13 percent higher than they were when the recovery started, in June, 2009. That’s pretty unimpressive, but at least it’s progress.
Blue-collar workers, however, haven’t fared nearly as well. Month on month, their real wages fell by a penny in March – on top of a two cent-drop in February. Year-on-year, they’re up just 1.13 percent – less than in February (1.24 percent) and January (1.59 percent). At least the latest March year-on-year gains have been better than those of 2013-14 (1.03 percent), and 2012-13 (0.46 percent). But the 1.13 percent rise in inflation-adjusted wages for production and non-supervisory workers is only a little more than half of that registered for all workers. And pay for just the “bosses,” as a result, has grown faster still.
Real wage trends in manufacturing look similar. They fell a penny month-to-month in March after flat-lining in February. Year-on-year increases were a bit less in March as well – 1.66 percent versus 1.78 percent in February. The big difference is the yearly acceleration in after-inflation pay over the pace in 2013-14 (0.12 percent) and 2012-13 (when they fell by 0.36 percent).
But whereas real wages for all private sector non-supervisory workers have improved slightly during the recovery, they’re down by 1.27 percent for their manufacturing counterparts.
This divergence between blue- and white-collar real wage trends sheds some new light on income inequality in America. And as for those claims of a U.S. manufacturing renaissance by President Obama and other cheerleaders? They’re not even funny any more.