See the boss celebrate her latest pay hike; it was pretty generous.
See the cleaning woman do the same; she got a decent raise, too.
Americans’ paychecks are growing faster–finally.
In fact, Americans’ wages and benefits rose last year at the biggest pace since 1993, according to government figures released Tuesday. The growth should be encouraging for many workers who have endured raises that had barely kept pace with inflation or even fell behind rising prices.
Some analysts worry that accelerating wages might pinch corporate profits and slow the economy’s overall growth, while others fear that they will lead to higher prices, reigniting inflation.
Most economists, however, seemed untroubled by the pay data, saying inflation has yet to appear on the horizon.
The latest compensation figures, which mirror other measures that have shown growing salary gains in the past year, come from the U.S. Labor Department’s employment cost index. It showed that overall compensation, which covers wages and benefits, grew by 3.3 percent last year, up from 2.9 percent in 1996 and 2.7 percent
in 1995. It was the highest since 3.5 percent in 1993.
More significantly, the growth was most marked in the last quarter, when compensation costs increased by 1 percent. That was the highest quarterly boost since 1990’s second quarter, said Labor Department officials in Washington.
And in real terms–adjusting for inflation–last year’s pay increase was even bigger, rising at twice the rate of the consumer price index, which moved up a scant 1.7 percent in 1997.
Overall last year, wages and salaries rose 3.8 percent, while benefit costs increased 2.1 percent.
Economists said it should be no surprise that wages have begun to climb: Unemployment has been skimming along at generation-low levels, and a scarcity of qualified applicants is forcing companies to intensify their search for some workers– and pay more to keep the ones they have.
“This is confirmation that the labor market is tight, indeed,” said Michael Penzer, a senior economist with the Bank of America in San Francisco.
With the collapse of Asian currencies against the dollar, it might seem that Americans are pricing themselves out of the global economy. As they’ve done before, corporations could shift more work overseas, where workers are paid much less than Americans.
But many of the biggest compensation gains took place in the service sector, and many of these duties cannot easily be transferred abroad.
In fact, Asia’s financial collapse may help workers. Imports from Asia will be cheaper, reducing overall inflation and giving consumers more bang for their buck. Also, Penzer noted, the U.S. work force is becoming more productive, which means employers can afford to pay more.
Among the nation’s regions, the South led with a 3.8 percent increase in wages and benefits, followed by the Midwest, with a 3.6 percent growth last year. Since 1989, the Midwest’s workers have led the nation in wage and benefits increases, the government figures showed.
The news about pay, however, was not reflected in the latest reading of consumer confidence from the Conference Board.
The business research group’s consumer confidence index fell from a record high 136.2 in December to 127.3 in January. Asia was a factor, the Conference Board said, as people grew more uneasy over the slump.
Reflecting the way the booming economy has rewarded some more than others, some of the highest wage and benefits increases last year went to better-educated, white-collar workers, while blue-collar workers tended to receive increases at the bottom of the curve.
Factory workers’ compensation costs grew by about 2.4 percent last year, according to the Labor Department. Meanwhile, workers in the finance, insurance and real estate industries benefited from an average 6.7 percent hike, the largest increase seen by any group, government officials noted.
Not all of the compensation increases, however, went to mortgage lenders or stockbrokers– service workers had a 4 percent hike last year in their wages and benefits. But Labor Department officials cautioned that such increases are distorted because many of these workers have low base pay.
Along with the salary spurt in the last quarter, benefits also climbed markedly, growing by 0.9 percent, the highest such increase since 1994’s third quarter. Experts attributed this increase to the renewed growth in health-care costs, particularly from managed health plans.
Jared Bernstein, an economist with the liberal Economic Policy Institute in Washington, said the latest figures are another measure that wage growth has taken off for most workers only in the last year.
“The pie is growing so we can cut some larger slices,” he said.
