Monday, February 08, 2010

Small Business and The Average Employee Still Wonder Where The Recovery Is

Companies with fewer than 500 employees helped lead the economy out of the last four recessions since 1980. After all, they have created almost all of the jobs this country has gained for the last 30 years.

But not this time. The the contrary, small businesses continue to cut capital spending and dismiss workers, eliminating another 3,000 jobs in January.

According to a recent Bloomberg report, "because few economic reports capture small-business statistics, some economists say investors are being misled about the strength of recovery from the longest, deepest recession since the Great Depression."

And why isn't small business hiring?

Easy. No business. The consumer remains strapped and is staying home.

And why is that?

The answer to this is the most disturbing part . . .

Because the average American worker hasn't had a raise in about 30 years on an inflation-adjusted basis.

Chris Ferrell, in a BusinessWeek article entitled, U.S. Wage Growth: The Downward Spiral," summed up the problem like this:

The income story in America is deeply troubling. Inflation-adjusted average hourly earnings for production and nonsupervisory workers (a category that encompasses 80% of the workforce and leaves out higher-paid managers and supervisors) rose by an anemic 0.1% a year from 1979 to 2007, according to the EPI. A potent combination of economic and social forces has conspired to keep wages down for most workers with the exception of a brief period of white-hot economic growth in 1995-2000 . . . .

The traditional relationship between productivity improvements and higher wages has been severed. Productivity growth is the fundamental building block of better living standards. Wage growth and productivity growth usually move in tandem, but no longer. During the expansion of the 2000s, productivity jumped by 11% while median hourly compensation went nowhere.


Whether and when we pull out of the economic doldrums remains very much a question -- at least to the little guys.


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