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Weak wage growth threatens economy, analysts warn

The U.S. economic recovery -- slow as it is -- is leaving workers' wages in the dust.

Average hourly wages, which took a big hit in the Great Recession, are growing slower than they did before the recession, and their real value compared to inflation has fallen over the past year.

The National Employment Law Project said in a study published last week that weak wage growth is permeating all industries. But, equally worrisome for the consumer-fueled economy, most of the post-recession jobs being created are lower-paying.

"However you look at it, wages for most Americans are just limping along, and it's become a real sap on the recovery," said Christine Owens, executive director of the law project, an advocacy group for low-wage workers.

Michael Enriquez, an organizer of some of the 99 Percent Spring protests in the Kansas City area, said the income pinch has motivated people to join the rallies.

"Many working people are finding it harder to make ends meet," Enriquez said. "They're working harder and longer for comparatively less. Their wages aren't keeping up with inflation, and that's connected to the great income disparity in the country."

According to the law project's report, average hourly pay for all private-sector workers rose 2.1 percent from March 2011 to March 2012. But when the effects of inflation are factored in, the real value of hourly wages fell 0.6 percent.

To compare with prerecession wage growth: In 2007, the year in which the recession began in December, inflation-adjusted wages grew 3.3 percent.

According to a similar wage-growth report released last week by the Conference Board, wage growth between 2008 and 2010 was the weakest since the 1960s.

"The severe depression of wage growth during the Great Recession is likely to impact consumer spending, inflation, corporate profits, income inequality and employee engagement for many years to come," said Gad Levanon, a co-author of the report for the non-advocacy, independent business membership and research organization.

"Moreover, the uneven distribution of this pain among different groups may carry deep social and political implications for the future development of the economy."

Leigh Branham, managing principal of Keeping the People, a consulting organization based in Overland Park, Kan., said he finds "tremendous pent-up frustration from employees who have put up with lower pay increases for several years in a row."

Branham's survey research indicates that sluggish wage growth "has changed the give-get equation: Employees who feel like they're being squeezed to give more with less pay are feeling like they're not getting in relation to what they're giving."

The Conference Board research found that new college graduates are settling for lower-paying jobs than they expected. Also, employers are able to hire more educated and experienced employees at wages equal to or lower than they were paying before the recession.

"Thus far in the recovery, stagnant wages alongside constant or growing revenue has meant a rapid rise in corporate profits, shifting income to the wealthier households that tend to be top stockholders," the board report summarized.

There is a small positive note in the board report, though. It said that continued slow wage growth "will make hiring U.S. workers relatively less expensive than hiring workers abroad or investing in labor-saving machinery -- which may ultimately increase overall employment."

The law project's conclusions fall in line with another data point, also released last week, by the Society for Human Resource Management. The personnel association's survey found that 32.1 percent fewer service-sector companies raised their new-hire pay rates in April this year than raised their pay rates in April 2011, said Joe Coombs, author of the human resource report.

Although overall hiring continues to be "fairly positive," the human resource report also detected "employment expectations trending slightly down for May, especially in the service sector," said Jennifer Schramm, the association's manager of workplace trends and forecasting.

In addition to base pay squeezes, fewer workers are obtaining employer-subsidized health insurance.

The Employee Benefit Research Institute reported last week that nearly half of wage and salary workers ages 18-64 worked for employers that didn't offer health benefits in 2010.

There's no indication that work-based access to health benefits has increased since then.

"Fewer employers are offering the benefit, fewer workers are eligible for it, and fewer workers are taking advantage of the benefit when it is offered, largely due to cost," said Paul Fronstin, director of the research institute's health and education program.