Each month, when the new jobs report is released, we are bombarded with news about the unemployment rate. And lately, the news has been mostly optimistic, with the unemployment rate slowly decreasing since its high of 10 percent in October of 2009.

But what’s not being talked about is what these new jobs are. Specifically, higher-paying jobs are being replaced with lower-paying jobs, and while American workers continue to be more and more productive, wages are lagging far behind.

Meanwhile, corporations – facing increased pressure by Wall Street to meet short-term expectations – have increased their profits by 84 percent in the last five years, one of the largest five-year increases in American history, according to the US Department of Commerce.

The Numbers

The most recent jobs report came out last week, and the news was not great, with the United States adding a mere 142,000 jobs in August – the smallest total since December. However, the unemployment rate dropped from 6.2 percent to 6.1 percent, and has steadily improved since 2009.

But the bigger story is that despite corporate profits increasing by $815.5 billion in the past five years, American wages have been mostly stagnant. Specifically, between January of 2009 and January of 2014, the median weekly income for a full-time American worker increased by $58, from $738 to $796 a month, or a 7.86 percent increase.

Compare that to the five years before 2009. Between January of 2004 and January of 2009, the median weekly income for a full-time American worker increased by $105, from $634 to $738, or a 16.56 percent increase. That came in a time when corporate profits only increased by 15.79 percent.

The takeaway is that from 2004 to 2009, corporate profits and wages increased at essentially the same rate. Meanwhile, from 2009 to today, corporate profits have skyrocketed, while wages have lagged far, far behind.


The primary reason for this trend is companies are replacing higher-paying jobs with lower-paying jobs. Specifically, companies are hiring less Americans for construction and manufacturing jobs and more for leisure, hospitality and retail positions.

The problem? The construction and manufacturing jobs pay, on average, more than $850 a week, according to Bloomberg. Conversely, companies only pay salaries of $360.95 a week, on average, to workers in the leisure, hospital and retail sector, or almost $500 less, according to Bloomberg.

A deep dive into the numbers shows that the construction sector is rebounding better than manufacturing sector, which makes sense because construction jobs are harder to outsource than manufacturing jobs. Generally, construction work has a direct correlation with the American housing market and has always been prone to highs and lows, while many companies have moved their manufacturing plants overseas and don’t plan on moving them back.

For example, in January of 2004, 14.3 million Americans worked in manufacturing. In January of 2014, 12 million Americans worked in manufacturing, despite the US population growing by 22 million over that time.

Meanwhile, 6 million Americans worked in construction as of June of this year. That’s a drop from the 7.6 million to 7.7 million people who worked in construction in 2007, when the country was massively overbuilding, but a 600,000 increase from the 5.4 million people working in construction in 2011, when the housing market was in shambles.


The US Department of Labor is finding that Americans are more productive than ever, although again, wages aren’t keeping pace. Specifically, from 2004 to 2009, worker productivity increased by 7.2 percent, and wages increased by 16.56 percent.

Compare that to the last five years. From 2009 until today, worker productivity increased by 7.97 percent, and yet wages increased by a mere 7.86 percent. In other words, workers are becoming more productive faster, and yet their paychecks are not keeping up.

What Does It All Mean?

The numbers tell a pretty clear story: Americans are more productive than ever before, which is resulting in massive profits but not substantially larger salaries.

There are some reasons for this, namely corporations facing increased expectationsby Wall Street, which puts all the emphasis on short-term gains instead of long-term growth. That’s prompting industry leaders to tightly-manage salaries, to continue to please investors and ultimately keep their own jobs.

There are some bright spots, as the education and healthcare sectors continue to add jobs at a steady pace, and wages in those industries have increased at a relatively stable pace as well. And the hope is as the job market continues to improve, workers will get more leverage to negotiate better salaries.

Eventually, even Wall Street might have to concede that.

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