Paychecks Can't Keep Up With Rising Prices Anyone who has filled a gas tank or shopped for ground beef recently knows that prices are headed higher. Retail prices may be moving up, but workers' wages are remaining flat. The mismatch between rising prices and stagnant wages is putting a squeeze on workers this year.
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Paychecks Can't Keep Up With Rising Prices

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Paychecks Can't Keep Up With Rising Prices

Paychecks Can't Keep Up With Rising Prices

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The price of an education isn't the only thing going up. Anyone who's been to a supermarket or a gas station lately can attest to that. But while it costs more to educate your kids, buy milk for them and keep the gas tank full to take them to school, it's likely your salary has not kept pace. The latest U.S. Labor Department statistics show that average hourly wages have been flat for four of the last five months.

Here to discuss the lack of wage growth is NPR's senior business editor Marilyn Geewax.

Good to see you again, Marilyn.


HANSEN: Marilyn, we haven't seen much inflation in the last few years. Are we seeing it now?

GEEWAX: So far this year, yes. We've seen a lot of inflation. Over the last three months, consumer prices have been rising at a rate of 5.6 percent. That's an annual rate but it's a lot.

There's a pretty heated debate among economists over whether or not the pace is just a temporary blip or if this is a long-term trend. Last week, Federal Reserve Chairman Ben Bernanke, he said that he thinks this recent surge in prices is, quote, "transitory," and that it'll go away soon.

But in Europe, the central bankers took exactly the opposite position. On Thursday, they raised interest rates in an attempt to slow economic growth in Europe. They want to cool consumer demand enough to hold down the price pressure.

HANSEN: So wages have not kept up with those price hikes?

GEEWAX: It's really remarkable how slow the wage growth has been. Historically, wages and prices move more or less together; workers get cost of living adjustments to keep up with prices. But that just hasn't been happening lately. The Labor Department said that in March, average weekly earnings amounted to $784.44. And, Liane, that was not one single penny more than the previous month. So it makes it pretty tough for people to keep up with their bills.

Let's say that you're the average person and you're trying to fill up your gas tank - that's 12 gallons of gas, that's pretty average. That costs you this year $40 a month more than it was costing last year ago. And this is happening with a lot of things: beef, milk, vegetables, butter, fruit - they're all a lot higher in recent months.

HANSEN: Is everything getting more expensive?

GEEWAX: There really are some things that are cheaper. Home prices are still falling. And, you know, technology just gets cheaper all the time. So smartphone prices are down. But you don't really buy a house or even a phone all that often, but you do buy gasoline and milk all the time. So workers out there are feeling the squeeze of stuck wages and the higher prices.

HANSEN: So what's the problem? I mean can't companies afford to give raises?

GEEWAX: Well, actually corporate profits have been terrific. In the fourth quarter of last year, corporate profits - or at least those that are measured by the S&P 500 Index - they were up 31 percent. And this week, we'll be getting a lot of reports on first quarter earnings and pretty much everybody is expecting them to be healthy too.

So we're seeing corporations enjoying big profits. They have greater productivity. They've got higher stock prices. But we still have an awful lot of uncertainty out there and employers are wary, they don't want to hire. And that reluctance to increase the payroll has created this enormous pool of unemployed, but willing workers.

We have more than 13 million people who are seeking jobs. Most employers don't have to offer higher wages to retain their existing workers or to attract new ones from this giant pool of unemployed people.

And then there's globalization. Right now, there aren't nearly enough jobs being created in the United States. But in places like China and India, they are. They're creating jobs, they're creating consumers, and those people are pushing up the demand for food and fuel and other commodities.

So that's really the core of the problem. We've got slack job grown here in the United States but we're shopping for the same food and fuel and iron that people in other countries want too. So that gives Americans a pretty painful mismatch. We have low wage growth but high commodity prices.

HANSEN: Doesn't sound very encouraging for the average consumer.

GEEWAX: Well, it's not because there aren't any easy fixes for this mismatch. What would help would be a surge in job creation in the United States. That would put upward pressure on our wages. And we also need a big boost in the output of food and energy to relieve these global shortages and get rid of this mismatch.

HANSEN: NPR senior business editor Marilyn Geewax. Thanks, Marilyn

GEEWAX: You're welcome, Liane.

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