Over the past decade, while wages have shown modest spikes, mostly benefitting higher-pay categories, the increases have barely kept pace with inflation, essentially wiping out any net gains in workers’ take-home pay.
In fact, when factoring inflation, real average wages have about the same purchasing power today as they did 40 years ago,
The numbers don’t lie. While wage growth in the U.S. recently increased 3.5 percent, against an inflation rate of 2 percent, the positive trending reflects a select rise in minimum wage baselines across several states and some growth in management pay.
To be clear, the increase was not reflective of an endemic, labor-force-wide spike in earnings that marks a new trend toward sustained higher earnings.
And, at the same time, inflation rates decreased from a sustained 2.8 or so percent range to 2.2 percent as spending was held back by a slower increase in the cost of rent and falling energy prices, factors that are far more temporary than endemic determinants of future inflation rates.
LOW WAGES NOT JUST A U.S PROBLEM
And weak wage growth isn’t just a problem in America.
Workers in Japan, the U.K., Germany, Australia, Italy, Spain and other countries are experiencing similar trend lines.
Among economists and financial analysts, it’s a great mystery. Why is it that wages and inflation have barely risen since the Panic of ’08, while economies keep growing?
And just recently, Federal Reserve Chair Jerome Powell said that the acceleration of “wage growth need not trigger too much inflation,” since the link between labor markets and inflation “has been greatly reduced.”
Yes, they have been “greatly reduced.” And trend forecaster Gerald Celente, who devised his “Five-0” Formula in 1999, predicted precisely why the 21st century economy would operate off a new set of equations and why wage growth would be dampened.
Celente defined those factors as:
• Overproduction —there are more products and services than can be consumed.
• Overcapacity —there is a glut of advanced facilities and excess service capabilities to supply the world market place with more than can be consumed.
• Open Markets —a borderless new millennial marketplace provides products and services free from traditional economic channels.
• Overpopulation —companies are now positioned to exploit a 6-billion-plus labor pool without geographic constraints.
• Online —a planet full of browsers will enable and drive a universal economic culture of cheap product and service production supported by cheap labor expenses.
Remember, this was forecast two decades ago, long before the days of massive online shopping and Amazon’s monopolization of the Internet retail sector.
It was before China was initiated into the World Trade Organization that opened up the global cheap labor stream.
In that short time, another 1.6 billion people were added to the planet … and ultimately the workforce.
Now, in 2018, we observe the state of the economy with an eye on the emerging economic trends that demonstrate how the “Five-Os” will continue to transform how we live and work. TJ
Beyond the gig economy that provides jobs with no benefits and security, and continuing wage uncertainty, high-tech will also play a significant role in driving wages lower. In the new world of technological innovations such as robotics, Artificial Intelligence, online retail and services, etc., from top to bottom, jobs will be replaced and the pay scale will continue to be lowered.
We cannot emphasize enough that this Five-O Formula is revolutionary and data proven … but not recognized by traditional economists and financial experts who are still operating under 20th century economic precepts.