Stagnant Wages: Article Summary

Topics: Employment, Unemployment, Macroeconomics Pages: 2 (502 words) Published: October 19, 2013
Professional Business Journal Article Summary

Name of Professional Business Journal:Wall Street Journal
Name of Author:Neil Shah
Date of Article:August 26, 2013
Article Title:Stagnant Wages Crimping Economic Growth

Article Summary:
This article discusses the participation U.S. businesses have had on American workers’ wages remaining stagnant during the four years since the economic downturn and the impact it has had on consumer spending. Their pay is not staying up with the inflation rate. In fact, on average, hourly pay has declined .9% for non-management employees since June of 2009. Three factors were detailed as to how the stagnant wages have led to a decline in consumer spending. The first is due to unemployment remaining high at 11.5 million, prices staying steady and demand for labor low leaving employers with no need to hire and no incentive to increase wages for current employees. Secondly, companies are deciding which employees to keep and in order to not reduce those employees’ pay they are making choices to terminate employees when they could have kept all employees at reduced wages. Lastly, U.S. workers are still competing internationally with workers due to new globalized technology leaving employers feeling like they have no bargaining power. In addition workers aren’t switching jobs due to a lack of confidence, 1.6 changing jobs versus an average of 2.1% at pre-recession levels.

Consumers remain the biggest force of the U.S. economy but without an increase in wages it will be difficult to see an increase in economic growth. Real wages growth is expected to be 1% by the end of 2014. This is not promising for workers or the economy. Adding to this, economists indicate the average American living longer will lower median wages. The baby boomers in retirement will downsize lifestyle due to lower personal income thus putting fewer dollars into the economy. Some sectors such as manufacturing and restaurant workers have...
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