Despite Signs of Economic Recovery, Pay Is Stagnant

'It was the best of times, it was the worst of times,' is how Charles Dickens began his immortal depiction of the French Revolution in Tale of Two Cities.

He went on to say, somewhat less famously, 'it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.'

Feels sort of familiar? You're not alone. 

If you're an investment banker, your compensation this year will exceed even that of 2009, the year that Federal bailouts reinvigorated the financial markets after said individuals had cratered the global economy. If you are a CEO, your company is probably enjoying record profits and your board is discussing how to reward you for your performance, which is to say, more accurately, your good luck and timing.

But if you are not one of those and a few others of the annointed, your pay has been stagnant for over five years and, from an inflation-adjusted historical perspective, more like 30 years. And just in case you were thinking that all those reports mean your time is about to come, well, take a deep breath. As the following article explains, compensation is likely to lag until unemployment returns to more 'normal' levels, which could be another five years.

Meanwhile, lots of happy stories about the rejuvenation of American manufacturing  tout the 'reshoring' of industrial enterprises based, euphemistically, on 'cost control' and 'flexibility.' This is a pleasant way of saying that the aforementioned low wages and the absence of meaningful regulatory oversight give employers a larger pool of desperate workers and the right to hire and fire at will while challenging even minimal standards of safety and health. CEOs, meanwhile, continue to receive compensation increases based on these trends. Nice work if you can get it. JL

Andrew Ross reports in the San Francisco Chronicle:

The wage "stagnation" workers are experiencing even as the economy and job numbers continue to improve is going to last considerably longer than expected, according to economists at the Federal Reserve Bank of San Francisco.
You're going to have to be patient. Very patient. That wage increases come to a complete halt during recessions and don't recover immediately after is not unusual. But this time, the freeze and the decline in the real value of wages is "more pronounced than the pattern observed in past recessions. The economy has been recovering for four years and unemployment has declined considerably, but wage growth has continued to slow.
"The trend will probably continue ... long after the unemployment rate has returned to more normal levels," the economists write in a July paper.
The economists, basing their findings on Bureau of Labor Statistics data, said they do expect wage growth to "accelerate" sometime in the future, but don't say when. Right now, "the spike in workers who are experiencing no wage changes has reached record levels."
The upside: Could that be one of the reasons export manufacturing has been doing so well lately - its best in 50 years as a share of the U.S. economy?
Yes, according to the Boston Consulting Group, which says the declining "cost of labor" is a key driver in America's new global competitiveness. "Our analysis suggests that the U.S. is steadily becoming one of the lowest-cost countries for manufacturing in the developed world," says the BCG report, published last week.
It notes the increasing number of U.S. companies, like Ford and NCR "re-shoring" overseas manufacturing, at the same time as Asian and European companies, like Toyota, Siemens and Rolls Royce, are locating export manufacturing facilities here. The good news for U.S. workers: The shift will create up to 5 million new factory and service jobs here in the next few years, according to the BCG report.
So, what makes the U.S. labor market "more attractive than that of all other major manufacturers among the developed economies"? Labor costs, factoring in productivity, are far lower; the U.S. market has greater "flexibility" (i.e., less regulation); and it is "far easier and less costly to adjust the size of the workforce in response to business conditions."
One of the companies mentioned in the BCG report is Flextronics, a global electronics manufacturer founded in Silicon Valley, now headquartered in Singapore, which will be assembling the Google-owned Motorola Moto X smartphone in Fort Worth, Texas.
On a jobs board discovered by Atlantic Magazine, pay for 12-hour day and night shifts at the plant runs from $9.30 an hour for assemblers and $10.50 for quality control inspectors to $17 an hour for technicians and production leaders.
Someone's got to do it: About those 4,000 layoffs announced by Cisco Systems last week.
It was "one of the hardest decisions I've ever made," said CEO John Chambers at a CEO Summit in Durham, N.C., last week. But it had to be done, because "we have to transition in this inconsistent market." Transition, say, to the mobile market, which as leader of the company he has been slow to do.
Not unlike Microsoft CEO Steve Ballmer, who announced his retirement last week, little more than a month after sending out a memo to employees about "a far-reaching realignment of the company that will enable us to innovate with greater speed, efficiency and capability in a fast changing world."
Exactly, Chambers told fellow CEOs. "You have to build a culture as a leader that adjusts to change," which, in his case, involves firing 5 percent of your workforce after reporting a quarterly profit of $2.2 billion.
Yes, change. How tough it can be. As an example, as reported by the Triangle Business Journal, Chambers "asks a married exec in the crowd if he has thought of 'changing' spouses. He pointed to the man's red face as evidence of his point that even the potential of change makes us uncomfortable."
Get it? Now we know why Chambers - estimated net worth over $1 billion- has been promised by his board a bump from the $11.7 million he took in last year.