NAM: Higher energy costs have cut US workers’ wages

Sept. 4, 2006
US workers’ real hourly wages have fallen because energy prices overall have climbed 80% since the end of the 2001 recession, said the National Association of Manufacturers in its 2006 Labor Day report on Aug. 28.

US workers’ real hourly wages have fallen because energy prices overall have climbed 80% since the end of the 2001 recession, said the National Association of Manufacturers in its 2006 Labor Day report on Aug. 28.

“Rising energy costs are clobbering workers’ paychecks,” NAM Pres. John Engler told reporters. “Over the past year, energy prices have risen 23% due to increased global demand, limited domestic supplies, natural disasters, and global instability. As a result, real wages have fallen by 0.5% over the past year when they should have gone up by 1.2%.”

Energy cost impacts are the single negative in a domestic economy where nonfarm productivity grew 2.3% year-to-year (slightly down from the 3.3% pace of the prior 3 years), 1.7 million new private sector jobs were added, and average unemployment fell below 5% for the first time in 5 years, NAM said.

This is the first US economic recovery in 30 years where energy prices have climbed instead of fallen, NAM Chief Economist David Huether said. “Healthy productivity growth, combined with a tightening labor market, has continued to boost workers’ real, inflation-adjusted wages,” he said.

“But while workers’ total compensation has continued to outpace inflation, wages have not. Surging energy prices have propelled inflation at a faster pace than workers’ take-home pay and have resulted in declines in real wages for working Americans,” Huether said.

Citing US Department of Labor figures, NAM said that real hourly wages dropped 1.7% for manufacturing workers and 0.6% for nonfarm business employees from November 2001 through last month.

Excluding energy price impacts, it calculated that real wages would have grown 2.2% for manufacturing workers and 3.3% for nonfarm business employees during the period.

Engler said that domestic gas prices, which are higher than prices for gas in Asia, Latin America, and Europe, have put the US at a competitive disadvantage. Growing imports of oil from foreign suppliers also are sending more money overseas, he added.

Unacceptable costs

“The increasing economic and security costs of increased dependence on foreign energy should be unacceptable to every American,” Engler said.

“I think the unacceptable security costs have been getting more attention recently. Not all the money we send to foreign countries for their oil is being used for roads and schools,” Engler said.

Noting that Congress passed the 2005 Energy Policy Act, he said that it was the first major federal energy legislation in 15 years and it still left many issues unresolved. “In today’s climate of fierce global competition, we can’t wait that long to make decisions about how to meet our country’s energy needs. Manufacturers are making investment and location decisions each week. The time to act is now,” he said.

Engler said that NAM is calling for a national debate on a comprehensive national energy strategy, which it believes should:

  • Maximize domestic exploration and production of energy.
  • Increase further efficiencies and conservation from existing fuel sources.
  • Massively invest in research to develop new fuels, technologies, and alternative energy sources.
  • Reform regulations to facilitate domestic energy production, innovation, and implementation of new technologies.

Engler said that short-term steps to increase domestic energy E&P include Congress successfully resolving differences in House and Senate Outer Continental Shelf leasing bills and quickly sending a bill to the White House, as well as making more federal energy resources available within the Arctic National Wildlife Refuge and other public lands.

NAM also supports improving federal new source review requirements and coal gasification, clean coal, and nuclear technology, he indicated.

As for alternative fuels, Engler said: “We’re committed as a nation, but more needs to be done. There have been reports the past few weeks that major oil companies are looking more closely at ethanol. That’s encouraging, but we need to look at more of what we already have.”

Noting that high gas prices are forcing many chemical and fertilized manufacturers to expand capacity outside the US, Engler said, “We could reach a point where we’re growing more corn to produce ethanol with imported fertilizer.”