Despite 1996 Growth, Wages Stayed Stagnant

Next month, the United States economic expansion will celebrate its sixth anniversary, a long time by historical standards. That growth has hiked corporate profits and stock prices. But many American workers have less to celebrate.

"At best we have achieved wage stagnation," says Jared Bernstein, an economist specializing in income numbers. "At worst, there are significant groups of workers whose wages continue to decline as they have over the past 15 years."

Mr. Bernstein, who works at the Economic Policy Institute, a Washington think tank, doesn't sound as upbeat as President Clinton did in his State of the Union message. "We have won back the basic strength of our economy," the president said Tuesday.

The wage numbers, says Bernstein, certainly do not justify any concern of Federal Reserve chairman Alan Greenspan. Last month, he told Congress that the "important question" in Fed interest-rate policy was potential wage inflation - "whether prospective labor market conditions will be consistent with the maintenance of satisfactory price performance." At its policymaking meeting earlier this week, the Fed left interest rates unchanged.

Income numbers are complex. Though wages are flat after taking inflation into account, family incomes have risen a little. That may be because more family members are working or have taken a second job. Or they have acquired other income besides wages.

Here are some statistics on wages, measured in different ways:

* Weekly earnings of full-time workers at least 25 years old fell in 1996 to $505 per week from $510 per week in 1995 and $525 in 1989. All these numbers are in terms of 1995 dollars. They also represent the median, or typical, wage, with as many workers earning higher wages as those earning lower wages.

The average wage, dividing all wage income for this group by the total number in the group, is misleading, says Bernstein. It is pulled up by the rapid growth since the late 1970s of earnings at the top, such as the big salaries of corporate executives.

* The employment cost index, which measures wages plus other benefits, rose 3.1 percent last year. That is slightly less than the 3.3 percent increase in consumer prices. So employers are getting employees' work for a wee bit less in real terms.

* The average hourly earnings of nonsupervisory, production workers increased slightly - 0.3 percent in the fourth quarter of 1996 over the third quarter of 1996. Workers are getting about six cents an hour more than in 1993. During the election campaign, the Clinton administration claimed this number indicated wages are "turning the corner." But Bernstein notes that real hourly wages are still 3.3 percent below 1989 and more than 10 percent below the 1979 level.

"The factors that have led to increased wage inequality and erosion appear to still be in place," Bernstein says.

* Ten million workers got a raise Oct. 1 when the minimum wage was hiked from $4.25 an hour to $4.75. Bernstein sees no evidence of a negative impact on employment so far. If employers did lay off some minimum-wage workers, most must have found jobs quickly, since the unemployment rate remains steady.

* Both median family income and median family net worth rose between 1992 and 1995, the Fed reported late last month. Median family income was $30,800 in 1995 and $29,100 in 1992 in constant 1995 dollars. But median family income was higher in 1989, before the 1990-91 recession, at $31,800.

These numbers come from a survey of consumer finance sponsored by the Fed. The results are similar to a Census Bureau study of incomes released in Washington last September.

Some conservative economists argue that all these income numbers are worthless, because the consumer price index has exaggerated inflation. A commission headed by Michael Boskin, an economics professor at Stanford University, reported late last year that the CPI overstates the cost of living by about 1.1 percentage points a year. That means real hourly earnings, instead of falling by 13 percent, have risen by 13 percent from 1973 to 1995. And real median family income over the same period grew 36 percent, not the puny 4 percent in the official statistics.

But Bernstein says the commission's CPI findings are "implausible." Many commission claims, he says, are exaggerated. They are based on "thought experiments" rather than empirical research, he says, and ignore ways the CPI understates inflation.