U.S. wages losing ground
Inflation likely to outpace raises next 5 to 10 years

By Art Pine, Bloomberg News
July 3, 2004

Companies are beginning to raise prices as demand for their products strengthens, but that isn't trickling down to U.S. workers in the form of pay increases.

A 2.2 percent rise in wages in the 12 months through May has been more than offset by a 3.1 percent gain in consumer prices.

It's unlikely that employees will get raises that outpace inflation over the next five to 10 years, said William A. Niskanen, former acting chairman of the President's Council of Economic Advisors during the Ronald Reagan administration.

"I don't see any substantial increase in average real wages for some time," said Niskanen, who is now chairman of the Cato Institute, a Washington research group. Niskanen and other economists cite global competition, which forces companies to keep costs down, shrinking union clout and continuing slack in a labor market with an unemployment rate of 5.6 percent, up from 4.2 percent when the last recession began in March 2001.