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Your “Real” Raise

This article was written by in Career and Work, Salaries. 2 comments.

If you’ve been wondering why your average raises over the last few years haven’t helped you get ahead, it’s because, as the New York Times reports, real wages (after factoring in inflation) have actually declined 2% since 2003. Apparently, the last time this has been the situation was during Wolrd War II.

The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

So why are people working harder but getting paid less after inflation? It’s not because total compensation including salary and benefits beat inflation. In fact, it didn’t.

Over the last year, the value of employee benefits has risen only 3.4 percent, while inflation has exceeded 4 percent, according to the Labor Department… Average family income, adjusted for inflation, has continued to advance at a good clip… But these gains are a result mainly of increases at the top of the income spectrum that pull up the overall numbers. Even for workers at the 90th percentile of earners — making about $80,000 a year — inflation has outpaced their pay increases over the last three years, according to the Labor Department.

The above is interesting. The result is you’ll hear politicians talking about average income increasing, but that’s due to increases seen by high-income earners ulling the average higher. The average family will not see these average income increases.

Published or updated August 29, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 1 comment… read it below or add one }

avatar traineeinvestor

This issue was raised in Bernanke’s Fed testimony last month when the Fed was criticised for using “real” numbers for most sectors of the economy but “nominal” numbers for employee compensation.

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