New Jobs + Big Profits + Wage Freeze = Bad Math

Here's an economic paradox. The economy keeps creating new jobs. But paychecks -- generally speaking -- are not rising. Over time, the results will undermine employee morale -- or far worse.

Among the stats worth tracking, according to an Associated Press report:

  • Employers added 252,000 jobs last month, wrapping up the best year of hiring since 1999.
  • Unemployment is 5.6 percent.
  • Instead of rising, average hourly pay actually fell in December.
  • Overall wages rose 1.6 percent in 2014.
  • 6.8 million are working part-time but searching for full-time work, up from 4.1 million before the recession.
  • 2.3 million people have stopped looking for work -- up from 1.3 million before the recession.
  • Retailers, auto makers and other sectors are generating strong revenues but maintaining lower headcount than pre-recession levels.
  • Nearly 60 percent of all jobs added in 2014 involved recent college graduates -- which may have held down overall wages.
  • Global competition from billions of workers will further pressure down wages.

Painful Bottom Line

Now, the irony -- and it's a big one:

  • Corporate profits are at their highest levels in the past 85 years.
  • Yet employee compensation is at its lowest level in 65 years.

That painful reality, pointed out by The New York Times, is unsustainable. As the timeless quote from The Good Earth stated: "When the rich are too rich there is a way, and if I'm not mistaken, that way will come soon." 

That "way" is revolution. Hopefully, those who drive the U.S. economy will get their act together long before that day potentially comes. 

We're already seeing anecdotal progress. Kentucky State's president shifted 25 percent of his salary (about $90,000 annually) to lower-wage employees, ensuring all workers earn at least $10.25 per hour -- up from $7.25 per hour, in some cases.

And if permanent raises aren't possible, hopefully businesses of all sizes are brainstorming annual bonus plans that share the wealth when times are good -- but control costs when times are tight.

Certainly, personal performance now plays into many of those bonus equations. Roughly 12.7 percent of annual payroll for 2014 involved performance-based annual bonuses, up from 10.8 percent back in 2008, according to Aon Hewitt's latest research.

Let's hope the bonus sizes have been growing -- to reflect the record profits that many businesses are generating these days.

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