One of the biggest economic problems of the last 30 years is the overall wage decrease
for the majority of American workers, and also more workers globally. Many would say that they have increased – and in a limited sense, they have – but here's the problem: Wages have increased in currency amounts, but not relative to buying power.
The costs of goods and services have increased above the rate of inflation (health care, tuition, and so forth), whereas the average workers' wage has not (CEO's have!) and it isn't a mystery why people are running for payday loans. There are a lot of wage problems, and that seems to be an economic issue that needs fixing more than anything. .
[excerpt... Inflation Exceeding Consumers’ Payday Cash by Laura McLean
Economists expect inflation to remain low throughout 2010 because that gives the Federal Reserve the ability to keep interest rates low. Their purpose for the low rate is to encourage people to spend and borrow. Inflation is remaining low, as are wages, because most employers are still wary of raising salaries. The lack of salary potential is weighing heavily on the minds of consumers who have seen a huge decline in jobs over the past two years. In fact, since 2007, the market seen a loss of 7.2 million jobs and the number of unemployed is up to 15.3 million. With numbers like that, it’s difficult for consumers to think positively about their payday cash, even if they are employed. Kimbrel added, “I don’t like seeing my paychecks now because it’s a reminder of how difficult things are right now.”
The wage problem
Mark Zandi, chief economist at Economy.com, said, “When people are unemployed and wages are weak, household spending is depressed and businesses don’t have any pricing power. This is the reason that inflation is not a problem.” The last time a strong wage gain occurred was back in 1973 when a double-digit inflation occurred due to oil prices reaching highs. As a result, many unions made the move to negotiate cost-of-living increases into their contracts.
More to SBDC Network