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Food, fuel costs erode workers’ real earnings

/ Source: The Associated Press

Inflation-adjusted earnings for average workers have fallen 1.2 percent over the last year, the Bureau of Labor Statistics said Wednesday, as higher food and fuel costs have eroded purchasing power.

Earnings adjusted for inflation — also known as real earnings — have fallen for eight of the last 13 months and were down 0.5 percent in January compared with December, according to the labor statistics agency.

“A lot of people have lost a huge amount in their homes, jobs aren’t being created at a rapid rate and wages are falling behind inflation,” said Dean Baker, co-director of the Center for Economic and Policy Research, a Washington-based research group. “Workers, in this environment, can’t keep up their consumption. It’s bad for them as far as their living standards, but this is also a serious source of drag on the economy.”

Workers’ declining spending power could offset the results of Washington’s economic stimulus plan, he said. “But we’d be in even worse shape without it.”

Average weekly earnings were $592.74 in January, or roughly $30,800 a year. While that’s about $1,000 a year more than workers averaged in January 2007, inflation has increased at a rate of 4.3 percent for the same period, outpacing the 3.2 percent earnings gain.

The group that has lost the most purchasing power is retail workers, whose earnings, controlled for inflation, fell 4 percent over the last year.

The workers in the survey are in production and nonsupervisory jobs in the private sector, with the majority in manufacturing, natural resources and mining, construction and service industries. Farm workers are excluded from the survey.