Wages Fail to Keep Up With Inflation: And the employers think this is just wonderful.

[Better Believe It]

Wages Fail to Keep Up With Inflation
By SUDEEP REDDY
April 2, 2011

Compared with a year earlier, average hourly earnings were up just 1.7% in March. Inflation is running above 2%, largely due to higher energy and food prices, which means workers' average inflation-adjusted wages have declined.

The weakness in wages comes amid surging corporate profits and continued productivity gains. With unemployment still high—8.8% in March—employers are finding so much labor available that they are able to keep a tight lid on wages.

"There's a capitulation on the part of workers," said David Resler, chief economist at Nomura Securities. "They're increasingly willing to accept a lower wage than they might have thought they had to when the recession started. The fact that average hourly earnings are now weak or falling is an indication to me that the market is starting to clear."

"Companies are in the dominant bargaining position," said Paul Ashworth, chief U.S. economist at Capital Economics, a consultancy. "They don't have the added problem of paying more for their wages as well."

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