print this page

Inflation Erodes Working Class Purchasing Power

According to figures released by the Labor Department's Bureau of Labor Statistics, real average weekly earnings for most U.S. workers fell 0.5 percent in January 2008.

In 2007, real weekly pay of an average full-time or part-time production worker or other non-supervisory worker (blue collar workers) declined in seven months, remained unchanged in two months, and increased in only three months, according to BLS's revised figures.

Average weekly pay fell to $598.18 last month, a loss of 42 cents from $598.60 in December and $19.52 more than the $578.66 average in January 2007.

But after adjustment for inflation, real average weekly pay fell to $278.27 last month, down $1.42 from $279.69 in December and $3.86 less than the $282.13 average in January 2007.

Earnings figures are derived from BLS's monthly payroll survey of 400,000 businesses.

Inflation, conversely, driven up by higher energy prices, is growing about twice as fast as was the case one year ago. These trends have important implications. First, falling real wages will likely lead to diminished consumption, reinforcing slower macroeconomic growth. Second, the reality of squeezed paychecks for most workers helps to explain the primacy of economic concerns among voters in the presidential primaries.