Despite Economic Growth, Why 1 in 7 Americans’ Paychecks Remain the Same

For all the headlines this year about the booming American economy — robust GDP growth, strong consumer confidence, unemployment at a near-50-year low — a sizable share of the working population actually has less money to spend now than they did last year.

According to data from the Bureau of Labor Statistics, as cited by The Washington Post, 1 in 7 American workers (or about 14 percent) who stayed in the same job this year have seen their wages stagnate, while inflation has driven the cost of living up by about 2 percent.

While one would expect the tight labor market to be pushing companies to compete with one another by raising workers’ pay, it’s clear that many haven’t done so. Per an analysis by former Treasury Department economist Ernie Tedeschi published by the Post, the last time unemployment fell below 4 percent — which was two decades ago, in 1998 — less than 10 percent of workers who stayed in the same job all year received no raise at all. The current rate looks closer to the 16 percent we saw in the wake of the Great Recession, when many companies were still clawing their way back to health.

One possible reason that economists have put forward for the pay freeze: the decline of private-sector unions means that fewer workers have anyone to advocate on their behalf, so companies feel less pressured to offer raises, even to keep up with rising living costs.

Also, despite being nine years out of the last recession (making this the second-longest recovery in U.S. history), many employers likely still have it at the back of their mind when making business decisions, encouraging them to be more cautious with their spending in case another economic downturn hits.

This may be particularly true for retail, which has only recently begun to rebound after years of widespread store closures, sinking profits and seismic changes throughout the industry. Even the most successful retailers see others still floundering around them, which might be why they’re keeping their purse strings tight even as they have more to spend.

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