Marketplace Report: Worker Pay Not Keeping Pace

The U.S. Department of Commerce reported that employee compensation growth over the past two years has been even weaker than previously assumed, and the pay for many workers isn't keeping up with rising prices. Steve Tripoli of Marketplace talks with Noah Adams about the rising inflation rate and slowing economic growth.

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NOAH ADAMS, host:

And back now with DAY TO DAY. If you think it's harder to stretch your paycheck over all your bills these days, you may be on to something. Pay raises have been anemic lately. This year's looking no different, and get this. Even our past raises are turning out to be worse than we once thought.

Steve Tripoli from MARKETPLACE joins us now. Steve, most people who get their incomes from salaries - most people get their income from salaries, rather, not investments. That's probably not the best way to go through life, right?

STEVE TRIPOLI: It's not a very bright prospect right now in the present in the future, or as you said, even in the past. The latest projection for this year is for salaries to increase by 3.7 percent, but that's lower than the projected inflation rate, so the average worker loses buying power. Next year's pay raises are expected to be about the same.

ADAMS: And now we learn from the Commerce Department today that wage growth over the past three years, that time, wasn't quite what it seemed.

TRIPOLI: Right. They took new facts and found out that total compensation for the past three years, that's wages and benefits, grew just three point - 2.3 percent annually. They used to say it was 2.9 percent a year, and that's not an insignificant difference.

ADAMS: Now what's going on? Why aren't wages keeping up?

TRIPOLI: Well the changing global economy certainly plays a role. I spoke with Steve Gross. He's a compensation expert at Mercer Consulting. He says employers are really struggling with how much to raise salaries. They're worried that they can't recover that cost as competition intensifies around the world.

So we're seeing a lot of what he calls variable compensation these days, things like one-time bonuses and incentives that don't get locked into your salary base. Steve Gross says the changing economy's going to keep affecting different workers' salaries differently.

Mr. STEVE GROSS (Mercer Compensation): I think it's going to be an hourglass. The higher-level work, the real, say, thinking activities, those are the things that Americans do best. The worker in the middle is where I see the biggest struggles. So without the continued thrust of education, I see that working-middle class, lower-middle class, middle-middle class having to either reinvent themselves or be left behind in the new economy.

ADAMS: Well, Steve, what's the middle to do here?

TRIPOLI: Well, you know, the economy has slowed down and the middle is cutting back. The Commerce Department says consumers have turned cautious. And here's another indicator. We used to just hear that at Christmastime - this at Christmastime, but retailers are apparently worrying about the back-to-school shopping season. So they're rolling out the freebies and all sorts of aggressive prices.

Anyway, Noah, we're going to take a little break from the gloomier news today on MARKETPLACE. We'll learn why Britain's famous Top of the Pops TV show isn't on top anymore.

ADAMS: Steve Tripoli of Public Radio's daily business show MARKETPLACE. It is produced by American Public Media.

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