Low-income workers in US worse off even as economy recovers

NEW YORK • Despite steady gains in hiring, a falling jobless rate and other signs of an improving economy, take-home pay for many US workers has effectively fallen since the economic recovery began in 2009, according to a study.

The falls were greatest for the lowest-paid workers in sectors where hiring has been strong - home healthcare, food preparation and retailing - even though their wages were below-average to begin with.

"Stagnant wages are a problem for everyone at this point, but the imbalance in the economy has become more pronounced since the recession," said Ms Irene Tung, a senior policy researcher at the National Employment Law Project (Nelp) and co-author of the study.

Ms Jasmin Almodovar, a home healthcare aide in Cleveland, knows all about that. She has worked for the same healthcare agency since 2003 and, for the first four years, she got an annual wage increase of 25 US cents an hour.

But since 2007, her hourly pay has been stuck at US$9.50 (S$13.50) an hour. "I've asked for raises several times, and each time I get the runaround," said Ms Almodovar, a licensed nurse's assistant.

Bills for natural gas, electricity, food and other necessities have gone up since her last raise, she noted, leaving little money for her and her 12-year-old son.

In many ways, her predicament encapsulates the contradictions evident each month when the government reports the latest data on hiring and unemployment.

And the report by Nelp, a left-leaning research and advocacy group, underscores why so many Americans are still angry about the economy and with what they see as the inability of Democratic and Republican leaders in Washington to do anything to improve living standards for many ordinary workers.

Latest Labour Department data shows 173,000 jobs were added to the economy, with the unemployment rate dropping to its lowest in more than seven years. The report was especially significant because it will be the last one before Federal Reserve policymakers meet this month to decide whether to go ahead with or delay their long-telegraphed move to raise short-term interest rates from near zero.

The fall in the unemployment rate from a post-recession high of 10 per cent is certainly good news, Ms Tung said, but Nelp's analysis showed that once inflation was taken into account, median wages across all occupations fell by 4 per cent between 2009 and last year.

Wage declines in the lowest-paid occupations were much worse, dropping 8.9 per cent for restaurant cooks and 6.2 per cent for home health aides.

"When you see all those jobs being added per month, you think, 'Come on, how can this be bad?'" said chief international economist Torsten Slok at Deutsche Bank Securities in New York. "But there has been a lot of pain and suffering, and people have been losing their skills or have not been able to re-skill."

One explanation may lie in the findings of a study by the Economic Policy Institute, also a liberal research group. Its report last week showed that even as labour productivity has improved steadily since 2000, the benefits have nearly all gone to companies, shareholders and top executives, rather than rank-and-file employees.

The roots of wage stagnation are deep, said Mr Slok. Some of it is linked to what he calls the "glacial changes" wrought by macroeconomic forces like automation, demographics and globalisation. Other factors are specific to the US economy, including the real estate boom and bust, consumer debt levels and relatively low demand compared with the still-large numbers of people who are looking for work or would return to work if they had a better chance of finding a worthwhile job.


A version of this article appeared in the print edition of The Straits Times on September 07, 2015, with the headline 'Low-income workers in US worse off even as economy recovers'. Print Edition | Subscribe