Tuesday, August 29, 2006

Wages don't keep up with cost of energy

Real hourly pay for all workers down 0.6%
By Brian Tumulty Press-Gazette Washington bureau August 29, 2006

WASHINGTON — Inflation in general and higher energy costs in particular have wiped out wage gains among manufacturing workers since the end of the last recession in 2001, according to the National Association of Manufacturers.

The association said Monday that inflation-adjusted wages of manufacturing workers fell 1.7 percent between 2001 and last month, while real hourly wages for all types of workers fell 0.6 percent.

The association's report — released a day before the more comprehensive annual Census Bureau report on income and poverty — framed the wage problem in terms of national energy policy.

At Hudapack Metal Treating Inc., which operates two factories in southern Wisconsin and another in a Chicago suburb, president Gary Huss said rising natural gas prices have all but eliminated his ability to pay bonuses to his 170 employees.

"I don't have the cash to do it regularly right now," Huss said, adding that he still tries to provide a modest annual wage increase.

The National Association of Manufacturers is calling on Congress and the Bush administration to enact a "Manhattan Project" to develop new energy technologies such as coal gasification.

"Over the past year, energy prices have risen 23 percent due to increased global demand, limited domestic supplies, natural disasters and global instability," John Engler, the association's president and chief executive, said at a news conference.

Manufacturing employment rose only 17,000 in the 12 months that ended last month. Employment on the factory floor among production workers increased by 170,000 jobs, however, and was boosted by gains in export-oriented sectors such as computers and electronic products and aerospace. Most gains were offset by losses among nonproduction manufacturing jobs, which David Huether, the association's chief economist, said could be due to consolidation efforts and outsourcing.

Liberal economists have pointed to rising corporate profits and the continued growth in income inequality as contributing factors to the decline in average wages when inflation is taken into account.

Dean Baker, co-director of the Center for Economic and Policy Research, agreed with the association's analysis. "Real wages would be rising modestly if not for rising energy prices," he said.

But Baker said "the other part of the story" is the widening of income inequality that dates back to the early 1980s and halted only during the late 1990s.

Even among manufacturing workers there is an income gap, with higher skilled workers getting wage increases that have outpaced inflation while low skilled workers have not, according to the manufacturers group.