One of the side-conversations that happened during yesterday's family event was with my oldest brother.
He was marveling that employers were offering entry-level jobs that required no special skills at $30 an hour and were not getting many job applications.
He remembers working for a lot less money than that. He also remembers when new employees started at a lower rate and then their wages increased with longevity.
Inflation
There are many "official" inflation values that are published. A common flaw in most of those published calculations is that they leave out "the volatile food, fuel and housing" costs.
It is commonly understood that the Fed has a "target" inflation level and they "print" money to hit that target. Their logic is that an expanding economy needs more money in circulation to support the increased number of economic transactions. 3% annual inflation is a commonly mentioned target.
If you divide the aforementioned $30/hr by the effects of the published rate of inflation, then a worker earning about $16.67/hr twenty years ago has the same buying power as somebody earning power as today's $30/hr (ignoring the effects of income taxes).
If you accept that the real loss of purchasing power is at least 6% after factoring in non-hedonistically* adjusted food costs, fuel and housing, then $9.40/hr provided the same purchasing power in 2006 that $30/hr does in 2026.
"Working your way up..."
My brother also mentioned his amazement that the "kids" entering the work-force feel that they are entitled to the highest pay-rate from the very first hour they work. "Back in the day" you had to be with a firm for five or ten years before you hit top-of-pay-scale.
I think that "pay me that now" attitude is due to the fact that employees no longer expect to work for the same firm their entire lives. Pensions only exist in the public sector so there is very little penalty to job-hopping. Since they only expect to be employed at the firm for three-to-ten years, there is no expectation of being around to reap promises of better treatment in the future. Consequently, the pay-ramp of the past has no appeal to the transient workforce.
My brother isn't worried about his kids. They are in their forties and well-launched. He is worried about the world his three grand-daughters and one grand-son will have to navigate.
I also share his worries, but for different reasons. I like to think that my kids/grandkids will have a robust set of problem-solving tools in their toolbox. But what is going to bite them in the backside will be the accelerating overhang of debt. All of that "free stuff" that politicians are promising isn't free. It is purchased with borrowed money.
Historically, the only viable move for the government is to debase the currency and for firms to shrink-and-cheapen the goods and services they offer. First slowly. Then rapidly.
*"Hedonistic adjustments" are a slight of hand used by economists to make inflation look lower than it is. Suppose you eat a rib-eye steak in a decent restaurant every Friday. As prices go up and your paycheck doesn't, then most buyers stairstep downward in their choices. They buy a cheaper steak, they start eating at less expensive restaurants, eventually they are eating Bar-S hotdogs and then they are eating a can of beans at home. The economists don't count that as inflation because the buyer is getting the same amount of protein and their enjoyment stays the same.
In my experience quitting a job and getting another has been the best way to get a promotion. Companies haven't promoted from within for decades. I have been the acting supervisor multiple times, but was always passed over in favor of an external hire. You're too valuable where you are, they'd say.
ReplyDeleteHR would always be offended when I declined to teach the new boss. If I am not qualified to do the work, I am not qualified to teach it, I said. Then I would look for another job. Companies demand loyalty, but they don't reciprocate. The younger generation are treating the companies the way that their behavior deserves.
I understand what you are saying tweell. But as an employer I got totally disgusted with giving employees raises and promotions and have them immediately use that as a stepping stone to go looking for another job with higher pay. And ask for early vacation then go looking for other jobs somewhere else in the country. Why should I have loyalty for them when they have none for me. All of my business friends are having the same problem. Glad I sold the business and quit being an employer. ---ken
ReplyDeleteThe US used to be a high trust society, that has been eroding for a long time. The loyalty problem is a symptom of that, along with the emphasis on short term returns over long term success (on all sides).
DeleteERJ:
ReplyDelete"there is {no} expectation of being around" ?
Aside: physically disabled clients of mine on quite limited budgets frequently use DoorDash/etc. for delivered meals. Not cheap!
When I ask why:
"Our caregivers can't cook".
"I'm one of your caregivers and I cook for you..."
"Yeah, but you're old."
"Um, don't the -younger- caregivers cook at home?"
"Duh, that's what delivery is for".
"But, cooking is way cheaper!"
"They can't afford to buy groceries and it takes too long"
"Nevermind. Over easy or sunny side up?"
"What's sunny side up?" (this actually happened).
Good catch on the missing "no". Thank-you.
DeleteI can see both Tweel's and CK's view in my own experience.
ReplyDeleteI learned long ago that companies will take everything you will give them and then cut you without a major concern if needed. And a standing joke in my industry for years has been if you want a promotion, change companies.
On the other hand, I have seen first hand evidence of individuals with little to no experience expecting better than starting pay rates and bearing the concept that after a year or two they will move up the chain; often this seems based on simply their time served rather than showing initiative and a good work ethic.
It is a problem for both sides and each side (I think) blames the other. The sad part is that with the increase of automation and the use of computers (even if not necessarily AI), workers are likely more at risk in the short term.
In terms of inflation, it is making itself felt. Already there are places we used to go and things we used to buy that we do not. In speaking with a friend this week who experienced a similar outcome, her sense was "Oh. I guess I am no longer your target market."
Excellent points all!
ReplyDeleteWhat about inflation as per wages now and then, eg 1965 I made 90 cents an hour but a new Impala [v8 air ps pb.auto.] was $1500.00? Gorgus.
ReplyDeleteSNIP The federal minimum wage in the United States in 1965 was $1.25 per hour. Perhaps your employer paid part of your wage with lunch as I remember that back then.
DeleteSOUND Money rant: $1.25 could have been 5 90% silver quarters. Today's MELT for those quarters is
$50.46
90% Silver quarters each have a melt value of $11.7393 this price is live and prices are updated every 15 minutes when the silver market is open. The current spot price of silver is $64.93 per troy ounce.
Job jumping IS the only way to advance in most careers today, it is not taboo, it is required. It is often looked at as an indicator of laziness if one remains at a company too long in today's market environment, as if one is repeating 6th grade again and again if not moving on
ReplyDeleteI recognize that is the current reality.
DeleteThe deconstruction of the social contract between employer and employee has several "costs" that are rarely recognized.
For instance, back in the day if your employer used SAS software, they would send you to a class consistent with your responsibilities. I think that happens much less often today because that skill will be added to the employee's resume and BOOM! they are gone.
That leaves the employee trying to guess which skill-sets will increase his value in the marketplace. That is throwing darts at a moving dartboard. For instance, I am a half-azzed programmer in Basic, Fortran and Pascal, none of which are particularly salable today.
ERJ, it does happen less often for that exact reason. Although I will say it also happened 30 years ago at my first job, where an employee went through law school at the company's expense and then found a new job.
DeleteThere is also a certain urgency - one might call it desperation - for those which provide such skills and certifications to demonstrate they are skills and certification worth having and increase one's employability. They are just as prone to trends as everything else; right now, Artificial Intelligence is now the flavour of the month.
I always preached that a 4% pay raise was a 2% pay cut because real inflation was generally around 6%.
ReplyDeleteI just hate to see the despair in the youngsters starting out. Unaffordable homes and vehicle costs that will wreck you. Even into the 1980's anyone could always get a beater car a couple hundred bucks if you needed to. Those days are gone. Jesus wept.