Why are prices rising on good and services but Wages/Salaries are staying the same?

Question

I have a college degree and I am barely making more money than people I know who don't have degrees, this is this the whole reason I took on the debt to put myself through college?

Answer 1

I feel your pain.

The reason is called inflation. Inflation in the United States here recently has been caused by the rise in the price of oil. When the price of oil rises, transportation costs for goods rise and energy to used to create goods rise and some of the materials that are used to make goods rise such as plastic. Companies will hold off for so long on raising prices of consumer goods until their competition raises their prices then they see that as a window to raise their prices too. Many of these companies supply other companies with materials to make consumer goods which puts all that much more pressure on the companies they supply to raise their prices. So what you have starting is a domino affect.

Wages on the other hand won't rise because US wages now have to compete with wages from other countries such as China, India, and Mexico that have much cheaper wages. If the wages go up too much, the company moves their operation to another country because it is cheaper to pay the shipping than the increased wage.

Companies tend to keep wage increases at about the same gradual rate. However when our parents entered the workforce the US didn't have nearly as much international competition as far as wages are concerned. So if you took into account what they made verses what stuff cost back then, our parents with only a high school diploma made probably as much or more starting out than what us college graduates do with a college degree.

Add onto that that we are going to have to pay for their retirement and all the government debts their generation accumulated through wars and stuff that our generation will have to pay for and our generation is well...totally...well yeah...you get the picture.

We also don't have pensions like they did to fall back on and many of our generation can't even afford to buy a house and live in apartments. So they won't have a paid off house when they want to retire. It's not going to be pretty for Generation X's and Y's when they go to retire if we get to retire before we die.

I also believe the rich and companies are getting more greedy. Which makes the poor, even poorer. Look at the way CEO salaries have gone up compared to the average worker's salary. It's outpaced the increase of the average worker by 10-100 times or more.

I think a big reason for this whole mess of the rich getting richer and the poor gettig poorer is due to many of the decisions the Bush administration has made such as free trading with countries such as China and South America. And allowing other countries to put tarriff's on our goods but not us putting tarriff's on theirs. Or not making actions to prohibit companies from moving overseas.

In some ways, we are selling ourselves out. Yes, Japanese carmakers may assemble their cars here in the United States now, but that assembly job if it were an American carmaker would support 10 other manufacturing jobs in the US that supply it parts. The main portion of the auto industry isn't in the assembly plants but in the parts suppliers. US manufacturers use about 80% American parts, Japanese about 30%, European cars about 5-10%, and Korean cars about 2%. So think about it the next time you hear about Ford laying off 20,000 workers. Each of those supports 10 other jobs in the US. So that's about 220,000 jobs that just went overseas. About 220,000 jobs in one of the best paid sectors of American jobs.

Answer 2

People's wages have gone up. In fact, they have outpace inflation and in this way people's living standards have increased. It is true, though, that the minimum wage has not kept up with inflation, but most people get more than the minimum wage many states have minimum wages higher than the federal minimum wage. With regard to your earning almost as much as people without college degrees I would say first of all that if you are in the right job, then that should not be the case. Obviously, if you work at McDonalds with a college degree then you won't earn more than others (I'm not saying you work at Mickey D's, I'm just oversimplifying a point). Also, the most recent census data shows that a bachelor's degree is worth about 23,000 dollars. Meaning that on average people with bachelor's degrees earn $23,000 more per year than people with only high school degrees. Don't believe that inflation of goods and services is going up while wages remain the same. It's simply not true, just look at what people were earning (and not the minimum wage because without question that has not kept up with inflation) historically and you will see increases. Furthermore, during periods of great productivity growth (the information technology boom of the 1990s) you will see incomes rising much faster than inflation.

Answer 3

Executive compensation and shareholder return. The big money fueling the economy is staying at the top, and is financed by the effective decrease in income to the workers.

Consider that the money from stock market gains comes out of your pocket, and into the hands of investors. Diminishing effective wages to the workers prop up earnings.

Answer 4

amazing government agencies, they all give themselves the wage rise but forget about the small man. the rich get richer and poor get poorer!

Answer 5

In a word:

Profit