INDIANAPOLIS – In 2007, 143.2 million wage and salaried employees in the U.S. were paid $6.4 trillion. That averaged out to $44,652. Time passes. Prices rise. By 2019, the Consumer Price Index (CPI) had increased by 23.3%.
         
To keep pace with inflation, workers would get $55.056 a year, a 23.3% increase. The total of wages paid to those 143.2 million employees would then be $7.9 trillion.
         
That did not happen. In 2019, 156.5 million wage and salaried employees in the U.S. were paid $9.3 trillion, an average of $59,474. The money bucket used to pay workers had an additional $1.4 trillion in it to be paid out to the previous 143.2 million workers plus to 13.4 million new workers.
         
How should those added fund be paid out? One way was to place all workers on the same pay scale and used established criteria – productivity, years of schooling, years at the same company, favorite sports teams, and zodiac signs. This would be balanced so that the average employee was paid $59,474.
         
Existing employees might be happy to have 8% more than the cost-of-living increase. And new employees would be satisfied to work for a company that paid workers more than just the CPI increase.
            
Let’s now consider an alternative: The bosses are willing to give existing workers the CPI increase. However, corporate consultants convince the boards that existing workers can’t keep companies competitive. This warning leads to hiring young, highly educated, skilled people, the kind the State of Indiana says we need to attract.
         
Paying existing workers their $55,056 (keeping their buying power constant), the wage bucket still has $1.4 trillion dollars to pay out. This means the 13.4 million more recently hired workers could be paid an average of $106,806.
         
Such a system sets up a two-scale working environment. Existing workers would be displeased, but we have already devalued them. In addition, young, highly educated, skilled human resource folks can smooth the waters. This is done by offering sparkling buy-outs, fully paid additional education, and extensive training.

[Note: this high average wage of $106,806 justifies paying executives more since they now will have a Cracker-Jack work force and progressive companies to manage.]

Hoosiers should know, in 2007, Indiana’s wage and salaried employees earned an average of $38,017, which rose to $49,577 in 2019. Thus in ’07, we rested 14.9% below the national average, destined to fall by ’19 to 16.6% under that average.

In terms of buying power, the average Hoosier worker saw his/her buying power decrease by $3,262 over this span. Inflation accounted for 47% of that decline with 53% due to our failure to keep pace with the nation.  

Are we seeing existing workers squeezed out of our nation’s firms with a new attitude toward labor? Are we satisfied with our Hoosier Holyland sinking relative to the nation? 
         
Mr. Marcus is an economist. Reach him at mortonjmarcus@yahoo.com. Follow him and John Guy on “Who Gets What?” wherever podcasts are available or at mortonjohn.libsyn.com.