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Overview

The Great Recession has been tough on American workers. Not only has unemployment stayed stubbornly high, workers’ wages are failing to keep pace with the cost of living. After adjusting for inflation, average weekly earnings for American workers were 1.7% lower in September 2011 than they were a year ago.

Why are wages falling?

Several reasons. First, an uncertain business environment means companies are trying to keep costs—including wages—as low as possible. High unemployment also means companies don’t have to compete for workers with higher pay. Competition from cheaper labor overseas also puts downward pressure on American wages.  And rising health care costs also means that money that would have otherwise gone to wages is instead paying for premiums.

What about benefits?

Soaring health care costs mean that both workers and employers are spending more on coverage and that fewer workers can afford it. Premiums made up 7.5% of the total amount companies spent on wages and benefits in 2010, versus 5.6% in 2001. Just 63% of private-sector workers in medium and large companies had health insurance in 2010—down from 65% in 2008. Among workers in small businesses, just 42% had coverage in 2010. Retirement benefits are declining too. In 2010, 66% of workers in medium and large business and 35% of workers in small businesses participated in a retirement plan—down from 67% and 37% in 2008.

Are some workers faring better than others?

In 2010, the average American worker made $44,410.  But this masks a wide (and some say growing) disparity in people’s earnings. The American economy is putting an increasing premium on highly educated, highly skilled workers. The Economic Policy Institute says inflation-adjusted (“real”) wages for the top 5% of American workers has virtually doubled since 1973 while for the bottom 10%, real wages haven’t increased at all.

Key Facts