Why Americans' paychecks are shrinking

Companies' tax dodges result in the biggest drop in wages since the 1940s, and the numbers may be a sign of things to come.

By Jason Notte Jun 7, 2013 3:32PM
Image: Inflation (© Nick Koudis/Getty Images)If the economy is recovering, then why do U.S. workers' pockets feel as if they've been freshly picked?

Mark Gongloff at The Huffington Post points out that first-quarter data from the Bureau of Labor Statistics, released Wednesday, showed a 3.8% drop in average hourly pay for workers not employed on a farm.

That's the biggest quarterly drop since the bureau started keeping track of such things in 1947, and it takes a big bite out of that feel-good 9.9% boost in hourly pay that occurred in the fourth quarter of 2012.

That collective raise came as employers attempted to dodge fiscal cliff and sequester tax hikes, and the latest drop is just more bad news for employees. Hourly pay has grown by an average of 2% a year for the past four years, the weakest four-year stretch on record. Last year's 1.9% boost was the third-weakest ever, outdoing only the 1.4% gain at the start of the recession in 2009 and a 1.8% gain in 1994.

While that's boosting profits nicely, it's not doing a whole lot for employee productivity. Employees' output, per hour worked, rose 0.5% in the first quarter, according to the BLS, but it was still weaker than the 0.7% gain for all of 2012 or the 0.6% boost in 2011. All of that is way off the track of 3% average annual gains in both 2009 and 2010. But that's OK. Even when production was up, the Organisation for Economic Co-operation and Development says, productive economies stopped boosting worker pay a while ago.

As for the future, don't expect miracles. Even college graduates have seen their average pay decrease by $3,200 since 2000, and 284,000 of them are just grateful to be making minimum wage. While weaker productivity may mean employers will start hiring again now that they've bled their current workforce for all they can, there's nothing about the trends of the past half-decade to indicate free spending or job creation. The layoffs may be over, but there's no hiring. Unless you want to contribute your paycheck to a Kickstarter fund for a new co-worker, embrace the stagnation.

More on moneyNOW

Jun 7, 2013 4:15PM
The cost of living rises at a much higher rate than a persons pay, it can only end in disaster. As we are taxed to death and everything rises, people do the only thing they can and claw it back by not contributing to their communities or patronizing local businesses and in the end it all goes down. We are bombarded on our phones and at our doors to give to this cause or charity and in fact  it is harder and harder to take care of our own bills and lives. As we know prices and taxes never go down, and as governments over spend and line their own pockets what are you willing to give up now to survive in the future? Do I have freedom ? not really I can't drive my car anymore due to fuel price gouging, I don't go to movies or concerts, I canceled my cable television, I cook and eat all my meals at home. Why because politicians and companies don't feel I deserve these things anymore they seem to want the money I should have for my quality of life. And they can't figure out why employees aren't loyal and people aren't happy.
Jun 7, 2013 4:15PM

This will not stop until only there is no middle class left.

You will either be rich or poor. No in between.

Jun 7, 2013 4:02PM
This is upsetting for many reasons... The greed of corporations is ruining this country!!! Profits are up and workers pay is down... that means only the rich are making money and driving an even larger separation of wealth between rich and poor!
Jun 7, 2013 4:11PM
I'm unemployed - got laid off last fall.  Benefits have run out and don't qualify for the extension as I'm not looking.  The reason?  I'm 64 and nobody is going to hire me anyway, so why bother?  Just before I got laid off I got a torn vitreous in my left eye and had a vision problem.  Then a few months ago I lost all hearing in my left ear (huh? huh?) which just magically came back.  Who is going to hire someone with a vision and hearing problem?  So I went on early Social Security.  Sick of the rat race anyway and my paycheck getting smaller and smaller the older I got.  
Jun 7, 2013 4:28PM
The American Auto Industry is Booming again and even Fox-Business News has known and reported about that. There is a Fracking Boom going on in this country that some poster seem to have never heard about. When you last went to the Gas Station, what did you pay? Clearly the Oil Industry is doing extremely well. The Movie industry is doing extremely well with blockbuster after Blockbuster with Record Grosses in 2012. 2013 is doing well also. Disney is raising prices and folks are more than willing to pay up.

Meanwhile Corporate America is paying more only to the top Executives while telling the rest of us, take a lot less and be happy. Some posters are happy about that. The Majority of workers are tiring of this do More for Less. They are tired because it has been going on for over a decade. Times folks grow the stones and do something about it.

Jun 7, 2013 4:02PM

This is a simple matter of supply and demand. There’re a lot of unemployed people which means there’s a large supply of labor for sale. There are very few companies hiring which means there’s small demand for that labor which makes the price of labor decrease.


To make matters worse not only are wages low the cost of benefits, especially health insurance, are increasing rapidly. This means workers are taking a de facto pay cut as they’re taking home less this year than they did last because of the huge increase in the cost of insurance.

Jun 7, 2013 4:27PM
These must be paid professional writers responding to these articles.  Some of these off the wall, B. S. answers are amazing.  It's simple, the standard of living of most Americans has declined since the administration of Ronald Reagan, who declared war on middle and low class Americans that still exits today.  We have a Congress made up of million and billionaires who have changed every law that hindered the rich from getting richer and stopped the poor from getting poorer.  I see nothing to stop the United States from reaching Third World status.

The great Republican Ronald Reagan, said in a nationwide speech, the US is going to be a service economy. I may have been the only person in the US, that was upset, about that statement.

Now as Reagan predicted, we have a service economy, our mfg. jobs are gone. How many of you complainers, were in Seattle, in the nineties, when only a few union people were protesting?

How many of you complainers, were in Miami, protesting, when another great Republican GWB, passed free trade with Central America? Or more recently the one law, that the Republicans and Obama agreed on, free trade with Korea, Columbia and Panama. Americans are like a bunch of sheep being led to slaughter, and are to ignorant, to see what is really happening.

Jun 7, 2013 4:22PM

But the market is up today so joy-joy. As an old retired fart I feel for those watching their wages drop or stagnate. Our fixed interest savings income has been flushed down the toilet. Thought we had retirement well planned but it seems that was only a dream.


I do hope that things improve for those looking for work and those currently in the job market. Just re-think your retirement plans because it's easy to have the rug pulled out from under you.

Jun 7, 2013 5:27PM
This has been going on for the past 50 years since the early 70's. In an effort to maximize stock returns for those who control the market, Corporations have been cutting employee benefits and pay for the past 50 years. Does anyone recall when companies paid for health care for it's employees and American families could live well with only one parent working? Remember the social norm was well behaved and well adjusted children as a majority who grew up to go to work and pay their way? This wasn't a fluke. It was due to a parent being home raising the children. You want to blame Americas social and economical woes on someone? Blame it on the Corporations who have gutted employee benefits and pay and the Government that has allowed it through lobbyists and special interests and ALL IN THE NAME OF GREED.
Jun 7, 2013 4:21PM

Welcome to the one world Government, where you do as we say and not as we do!

Jun 7, 2013 4:39PM
Why do folks that serve the interest of Major Corporations hang around posting boards in large numbers? Why do these folks care not a dam about the well being of workers but daily stick up for the Barking DOGS? If higher paying Jobs were being created in Higher numbers, you certainly wouldn't give Obama credit for that so how can you claim he deserves credit for Jobs with lower pay.

Corporations are sitting of RECORD Amounts of Cash and Profits. Yet not a word from the daily Obama haters concerning how those Large Balance sheets only going to the top affects the rest of us in  the Working Population. Not a mention that a Corporation can and will do a $50 Billion dollar buyback of stock but can't Give Workers a Raise. Have the haters ever thought that when Workers Make More, they Buy More, growing the Economy. WE will never have a real recovery as long as those at the Top Hoard all the profits made from the workers at the Middle and near the bottoms only for themselves.
Jun 7, 2013 4:53PM

Top Executive pay however in this same 4 year span has increased 272% to all time highs!  And economists will have you believe its better to give them the money because they will put it in the bank which allows banks to loan it out for economic expansion even though there may not be a need to expand their business because the demand for their products or services arent there.


HOWEVER if you give that money to the workers they spend it which means the economy is expanding and profits are increrasing which means more people need to be hired which means a recovery.

Jun 7, 2013 4:11PM
Corporations used to feel obligated to their employees and employees used to feel obligated to their employers. This has changed as more people change their jobs more often. Also there is a greater need for skilled labor which is being filled by immigrants from Asia, India, and the Middle East who have the education and work ethic. Until Companies value their employees and employees value the work they do this problem will only get worse.
Jun 7, 2013 3:50PM
This took a person with a 4 year degreed ,overpaid nut job.   I would have written an article for the site for 1000.00 bucks and it would have been short and sweet.    Not like this writer that probably got paid by the word.   oh yea when the president says unemployment is down and pats himself on the back ,remember a lot of those Lost UNEMPLOYMENT BENEFITS because of time and a lot of those that did get work are low wage.
Jun 7, 2013 4:46PM
Every time you read one of the these articles you get different info.  One minute the economy is good the next it is stagnant, there is job creation then there isn't.  Are the reporters gathering accurate info or are they printing crap with no research.  It can't be both black & white at the same time.  I just want the truth.
Jun 7, 2013 4:08PM
The average drop in pay is because of the rise in low paying low skill service jobs and the decline of manufacturing and high skill service jobs. Less people are working for companies like Apple and Microsoft and more are working for Walmart and Target. Perhaps if we were to invest in education and healthcare we would have citizens who were smart, skilled, and healthy instead of a bunch of fat, lazy, stupid people. Not all Americans are fat lazy and stupid but more and more are becoming that way
Jun 7, 2013 4:25PM

SO.. as the same as stars...keep shrinking peoples pay and like a compressed star..we will explode!



Jun 7, 2013 4:00PM
The current administration is in the process of ruining the economy.  There has been no job growth, prices are going up, obamacare is a disaster, gas prices are high,  companies are cutting back, people are being laid off, there are few GOOD jobs, mostly low paying service jobs being created.  I'm sad to say that you are going to have more of the same while BO is in office.  He could care less about jobs, wages, inflation, etc.   There is and was no recovery summer, and anyone out there living in this economy knows what is going on.
Jun 7, 2013 4:54PM
The paychecks for most Americans are down; but the stock market is up. Unless Wall Street, who has been getting a stimulus induced free ride for the past 5-years, likes seeing American working more for less, does anybody see a disconnect here?
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