Studies Show Salaries Aren’t Keeping Up with Inflation

Dayton Daily News - September 3, 2006

Dayton Daily News

By Jim DeBrosse

CENTERVILLE — —Ed Walters, a 36-year-old technician for a local car dealership, hasn’t seen a raise in pay in four years. But that hasn’t kept “everything else from going up,” he said, especially his energy and health insurance costs.

“It’s become a struggle to make ends meet,” he said. “Like everybody else here at work, I can’t always go to movies, I can’t take vacations. All I can afford to do is to stay home with the kids and hang around the house.”

Separate economic reports released today by two liberal think tanks, Policy Matters Ohio and the Economic Policy Institute, put into numbers what many working people have felt for some time: their wages aren’t keeping pace with inflation at a time when corporate profits and pay for executives are soaring.

Median wages failed to climb for 90 percent of workers in Ohio and America between 2000 and 2005, despite the fact that worker productivity more than doubled during that period, according to the two reports. Meanwhile, corporate after-tax profits, adjusted for inflation, spiked 50 percent in that five-year period.

The two reports warn of a growing inequality between Americans who earn hourly wages and those who are paid top salaries and/or reap stock dividends from corporate profits.

In an analysis of Ohio income tax returns filed between 1988 and 2006, Policy Matters Ohio found that the increase in income of the top 1 percent of Ohio households exceeded the entire average annual income of nearly all earners in the bottom 95 percent.

Adjusted for inflation, the average income reported for the wealthiest 1 percent of Ohioans grew from $650,635 in 1987 to $760,368 in 2005, an increase of $109,733. By comparison, the entire annual income for households in the lowest 20 percent averaged one tenth of that increase ($10,175). Even Ohioans in the upper income bracket (80th to
95th percentiles) fell below that increase, reporting an average annual income of $91,667 in 2005.

“The climate is just ridiculous in this country,” said Jeff Shawhan, an electrician for a local auto parts supplier. “Hourly workers, even in the big companies like Delphi — look what they’re doing to them. And at the same time, the major executives are taking home million-dollar bonuses for making all these cuts.”

Shawhan acknowledges that he is lucky to have a job and that, as a union electrician, he is one of his company’s top wage earners. But three years ago, after he began receiving 2 percent wage increases, his wife, Laura, went back to work to help with the growing cost of their fuel bills, their teenage daughter’s education and their health insurance
premiums and deductibles.

Just before Christmas of last year, Laura Shawhan was diagnosed with breast cancer. Jeff took 34 days of unpaid leave in order to see his wife through chemotherapy, depleting his 401K fund to meet expenses.

“A bump like that really sets you back,” he said. “My wife doesn’t work a whole lot of hours anymore, but we really can’t afford for her to quit. Just when you think you’re getting ahead, gas goes up to $3 a gallon.”

Many households are working longer hours to bridge the gap between stagnant wages and rising living costs.

Policy Matters Ohio found that American parents today are putting in more time at work than those of a generation ago.

For middle-income married families with children, husbands added 61 hours of work to their year between 1979 and 2004 (1.2 hours per week), while wives added 478 hours annually (9.2 hours per week).

Policy Matters Ohio makes seven recommendations in its report, The State of Working Ohio 2006, that it believes can help remedy the growing inequities between rich, middle income and poor in Ohio, including raising the minimum wage, enacting a state earned income tax credit and providing broader health care coverage for working families.

(The complete report is available at
Amy Hanauer, executive director of Policy Matters Ohio, says change won’t happen unless there is a shift in attitude among American workers. “I think that with the decline of the unions, and with the decline in the degree to which we stay with one job throughout our lives, people have accepted more things (on the job) that they didn’t accept before.”

Many Americans, at all income levels, have adopted “the belief that all risks should be borne at the individual level,” she said. “The feeling is you should be ashamed if you’re not earning the wage you think you should be earning, as opposed to thinking that you, along with other workers, have a right collectively to make some demands.”

Hanauer said many people have forgotten that government policies often “decide who wins and who loses in our society. In setting tax policies and wage policies, in deciding how much to allocate to education and other needs, government helps to determine how the growing (economic) pie is divided.”

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