Falling Wages: Why Salaries Keep Sinking When Corporate Profits Are Soaring

By Lutterbeck, Deborah | Common Cause Magazine, Winter 1995 | Go to article overview
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Falling Wages: Why Salaries Keep Sinking When Corporate Profits Are Soaring


Lutterbeck, Deborah, Common Cause Magazine


Nursing used to offer secure, well-paying jobs. But nowadays nurses like Melinda Bagby worry about layoffs and are afraid to ask for a raise. A coronary-care nurse with 15 years' experience at Audubon Regional Medical Center in Louisville, Ky., Bagby is at the top of her pay scale, earning $21 an hour. But since 1989 her pay has gone up only 60 cents an hour. Audubon, owned by the country's largest for-profit hospital chain, Columbia/HCA Healthcare, is being restructured. Nurses worry that their ranks will be cut and that less-qualified nurses' aides will take over many of their patient-care duties.

It's not that Audubon can't afford to pay loyal employees like Bagby, but that corporate executives have put their growing profits elsewhere--including their own pockets. Columbia/HCA's profits increased by almost 25 percent last year, but Bagby's salary has increased less than 3 percent in six years, meaning that in real dollars her paycheck is worth less than it was in 1989. The company's CEO, meanwhile, saw his salary more than double from 1992 to '94, and investors in Columbia/HCA have watched the value of their stock holdings increase 129 percent in three years.

Neither Bagby nor her employer is unique in today's economy. While profits for all types of industries have soared to a 25-year high, employees' wages and living standards are actually backsliding. The median salary for a full-time worker is $475 a week, down 1 percent from a year ago and 4.6 percent below its 1979 level. Median family income dropped 7 percent, from $39,696 in 1989 to $36,959 in 1993, while the stock market rose almost 50 percent over the period.

The two trends are not unconnected. "One reason corporate profits are rising and stock prices have been soaring is that companies have managed to keep a lid on employee costs," says Labor Secretary Robert Reich.

Indeed, while companies used to go after the best-educated, most-competent person for the job and pay them what the market demanded, these days corporations are more likely to seek the candidate that can get the job done for the lowest cost. Sometimes that means a computer, sometimes an overseas worker sometimes a temporary employee and sometimes simply the least-experienced person.

Today's rising economic tide is not lifting all boats. Robust stock gains have not trickled down as pay raises or new jobs. Instead, in many industries fewer people are doing more work for the same pay--or less, in inflation-adjusted dollars--rarely complaining for fear they'll be fired. "There is a pervasive sense out there in the American workforce that [workers] are lucky to have a job," Reich says. And this job insecurity makes workers more likely to settle for low wage growth, he says.

Job creation is centered primarily in the service sector and high-tech computer firms. But it's hard to raise a family on money earned serving gourmet coffee, and no one learns computer programming overnight.

Layoffs add to workers' worries. "Every time an American worker hears about another mass layoff involving thousands of employees, he or she is further deterred from asking for a raise," Reich says. Over the summer some 96,920 workers were laid off or told they would be, and when those people try to find new jobs, they'll have a hard time matching their old salaries. Between 1991 and 1993, 4.5 million workers with at least three years on the job were put out of work, according to the Bureau of Labor Statistics (BLS). In that same period 47 percent of the workers who found new jobs took a pay cut; for 30 percent of them the cut was at least 20 percent.

During the 1980s job losses were the factory workers' saga. America's manufacturing base collapsed, taking 3.2 million goods-producing jobs with it from 1979 to 1993. By the 1990s these blue-collar blues had also become white-collar worries. Managerial and professional positions accounted for 24 percent of all permanent layoffs from 1991 to '93.

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