Growth Rate in Employees Wage - Essay Example

Wage Trend Report: Is American Dream Still Alive or Dead? The question of whether American dream is still alive or dead depends on a number of issues. This paper will look at this issue with focus on wage trend in the past 25 years. To start with, Kenneth (2012) quoted that, “the real wages remain below their peak for 39th straight year.” In his study, the weekly earnings of $341.82 were reported in 1972 and were at the peak. The lowest point was in 1992 where weekly wage earning slumped to $266.46. In fact, this wage value was below the peak by 22 percent. The report further showed that in the year 2012, the weekly wage earning recorded a remarkable growth to $294.78. This narrowed the gap from the peak by 14 percent (Kenneth, 2012). Table 1 below summarized the trend. Table 1: Based on Thomas’ report, 39 years had elapsed and yet the real wage was still below the reported peak wage of 1972. In the real sense, by 2011, it was still 14 percent below the peak wage (Thomas, 2012). Despite the dwindling wage levels for workers in the country, the Federal Reserve Bank claimed that the country’s productivity was at a steady increase during this period. Wage Trends The study by Lawrence, Jared and Heidi (2009) showed that wage trends fueled the inequalities in income growth in the United States. In the real sense, wage comprise of three quarter of the family’s total income. However, for the broad middle class group, salaries and wages consist of more than three quarters of the families’ income. It was estimated that between 1973 and the year 2011, real hourly wage attributed to a median worker only reported a 10.7 percent increase. This was mostly witnessed in the late1990s. On the contrary, real wage again registered a stagnated growth between 2002 and 2003. This is why the last decade is referred to as lost decades in terms of wage growth. Another prediction based on the study is that in cases unemployment problem persists, there is high likelihood that the country will have another lost decade in the near future. Wage trend in the last 25 years This section will provide the trends in the employees wage for the last two and half decades. Wage trend is known to have played a critical role in the families and households income trends, particularly, with the growing wage inequality being reported in the United States (Lawrence, Jared and Heidi, 2012). Basically, wage stagnation led affected income growth in the year 2000. It also contributed to high unemployment rates and recession of 2007 and 2011. The reason for the stagnation includes weak recovery phases between 2002 and 2007 and loss of income during the 2007/2008 financial crisis. In order to understand wage trend in the country for the last few decades, analysis was done on hourly, weekly and monthly trends. The trends in the three categories are driven by a number of factors, for instance, annual wages are influenced by hourly wage, as well as, working hours per week. Similarly, trends in the weekly wage are affected by number of working hours per week and the pay per hour. The following table is an illustration of the distinguishing features of hourly, weekly and annual wage trends between 1967 and 2010. Table 2 Source: (Murphy and Welch, 1989) Table 3: Annual Growth Rate Year Productivity/ Hour (2005= 100 Real Wage Levels Hours Worked Annual Wage Weekly Wages Hourly Wages Annual Hours Weeks/Year Hours/Week 1967-1973 2.40% 2.50% 2.60% 2.90% -0.40% 0.00% 0.10% 1973-1979 1.30% 0.80% 0.50% 0.40% 0.50% 0.20% 0.10% 1979-1989 1.70% 1.30% 1.00% 0.90% 0.50% 0.30% 0.10% 1989-1995 1.30% 0.50% 0.30% 0.10% 0.40% 0.20% 0.20% 1995-2000 2.30% 2.40% 1.90% 1.80% 0.50% 0.40% 0.10% 2000-2007 2.00% 0.00% 0.10% -0.10% 0.10% 0.10% -0.10% 2007-2010 2.00% -0.30% 0.30% 0.90% -1.20% -0.60% -0.60% Source: (Murphy and Welch, 1989) Based on the information presented in table 2, it clearly portrayed the significance of distinguishing wage trends based on hourly, monthly and annually. For example, 2007-2010 was characterized by economic downturn, in which, the reported average annual wage slumped to 0.3 percent. The drop was as a result of the decline in the total hours worked per year. In addition, the table indicated that annual hours worked dropped by approximately 1.2 percent annually. This was opposite to the hourly wage trends which reported an annual growth of 0.9 percent (Lawrence, Jared and Heidi, 2012). Therefore, it can be concluded that weekly and annual wages are controlled by the number of weeks worked per year or the number of working hours per week. As opposed to the recession period, other business cycles were characterized by a steady annual wage growth resulting from increased number of working hours per year. Basically, the business cycles of the year 1970s, 1980s, the 1990s and the year 2000 reported an increased growth rate in the number of hours worked per year. On the other hand, table 3 above showed that hourly wage growth experienced a sharp acceleration between 1995 and 2000 at an approximately 18 percent. This was high compared to the growth rate in the business cycle 1989 and 1995 at 0.1 percent. On the contrary, the hourly wage growth between 1979 and 1989 was slightly higher at 0.4 percent. Late 1990s and 2000-2007 business cycle registered a strong productivity however; the hourly wage growth was stagnated at an approximately -0.1 percent. Finally, the study further showed that a strong growth rate in wage was mainly witnessed between 2007 and 2010. This was the time the country reported a decline in price of energy and a subsequently, inflation decreased to a negative value in the year 2009. Workers with higher wage level also reported a slower growth in the last business cycle compared to the 1995-2000 performance. Summary of Wage Trend Late 1990s and 2000s In order to efficiently understand wage trend in most recent business cycle, 1990s and 2000s were important considerations. Looking at the business cycle 2000 and 2007, a remarkable wage growth mainly occurred in the initial two years of the cycle. The early 2000s was characterized by lack of job creation which led to high unemployment rates. Consequently, the wage growth in the country registered a slumped. There was 4.6 percent unemployment rate; the bottom 70 percent workers had a modest wage growth of 3.0 percent and a median wage growth of 2.6 percent (Lawrence, Jared and Heidi, 2009). These values were a third of what was reported in the 1995 and 2000 business cycle. Examining disparities based on gender, poverty wage level was more rampant among women than men. In 2007, the proportion of women in poverty wage was 31.4 percent compared to men’s share of 21.8 percent. Alternatively, minority growth with low wage includes blacks at 34 percent and Hispanic at 41.8 percent in 2007. Generally, between late 1990s and 2000s, the United States reported a steady reduction in the poverty wage job, however, in 2000-2007 business cycles; no progress was made to reduce the number of low earners in the country. Group Affected By the Wage Trend The wage trend affected families and household groups because individual family members wage has a direct influence on the amount of family income. According to the study, the trend in family income in the country reported a strong annual wage growth rates in late 1990s followed by a slump in family income between 2000 and 2007(Lawrence, Jared and Heidi, 2009). The main reason behind improvement in the average family income include remarkable wage growth rate reported in the late 1990s towards the year 2000s. Factors That Affected Wage Growth There are a number of factors that may have affected wage growth rate in America. To start with, the increase in health care costs affected wage growth in the country. The healthcare expenses attributed to employers was accomplished in the expense of the employees wage growth. In addition, employers’ pension plan coverage was in a steady upward trend as shown in the study thus stagnating employees wage growth. Finally, in my view, the financial crisis of 2007 and 2008, problems of inflation and deflation also affected performance in both private and public sectors thus, employers found it difficult to significantly increase wage rates for their employees because of lack of money (Lawrence, Jared and Heidi, 2009). Law that can alter the trend in wage growth Despite the sluggish in wage growth rate trends, changes can be employed to reverse the system. In the first place, the government can establish legislation by offering tax subsidies to the companies so that disposable income is increased. They can also create a friendly business environment that would uplift business performance and profitability of the corporations. They should as well, support labor unions in their quest for better salaries and wages to employees. By having all these measures in place, a steady trend will be registered in the country Critique on the paper It had been argued that growth rate in employees wage over the past three decades was varied based on race, educational levels and positions held in the company. For instance, high wage earners reported steady growth rate in wage, this might not stand in some cases, especially, in a series of poor performance. In another cases, there are some instance where Black and Hispanic minority groups reported high wage growth than their white counterparts. In another case, education may not stand because in some organizations, bachelors degree holders can report a higher rise in wages as opposed master’s degree holders. The only aspect that may hold is the economic situation in the country that may relatively affect the financial performance of the organization. A poorly performing company may not have the resources to adjust wages accordingly. Based on the above discussion, I summarize by saying that the American dream on wage equality is still alive. Work Cited Lawrence, R., Michel, Jared, Bernstein, and Heidi, Sheirholz. The State of Working America: 2008-2009. Cornell University Press, 2009. Web.27. April 2013. < http://books.google.co.ke/books?id=_iFPW3TXlN4C&dq=The+of+working+America+2008/2009&source=gbs_navlinks_s Lawrence, R., Mishel, Jared, Bernstein, and Heidi, Sheirholz. The State of Working America: Wages. Ed 12. Cornell University Press, 2012. Web. 27. April 2013. Murphy, Welch. Analysis of Unpublished Total Economy Productivity Data from the Bureau of Labor Statistics Labor Productivity and Cost program. Current Population Survey Annual Social and Economic Supplement Microdata, 1989. Kenneth, Thomas. Basic: Real Wages Remain Below Their Peak for 39th Straight Year, 2012. Web. 26. April 2013. < http://middleclasspoliticaleconomist.blogspot.com/2012/03/basics-real-wages-remain-below-their.html> Read More