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Labor Day Blues Show Jobs Don't Pay Like They Once Did

NEW YORK (TheStreet) -- Entering the Labor Day weekend, one thing is clear: Wages aren't rising, and truth be told, they haven't been rising for 35 years. What may turn heads during this long weekend is that the stagnant nature of pay is especially true for those at the middle and upper levels of employment.

Across the income spectrum -- among the wealthy, the middle-class and those living at or below the poverty line -- salaries in the first half of 2014 declined for most U.S. workers when adjusted for inflation, according to a study by the Washington-based Economic Policy Institute. And that's at a time when inflation has been extraordinary sluggish, well under the Federal Reserve's 2% target, despite dire warnings from hawkish economists.

This year's flat wage growth extends a trend that has been largely uninterrupted since 1979, economist Elise Gould said in the study made public earlier this week.

Read More: Jobs Report Allows Fed to Focus on Employment Instead of Inflation

Crunching numbers provided by the Census buearu, Gould discovered that salaries for even high-wage earners and those with a college degree are locked in a freeze-frame, much as those receiving a minimum wage. From the first half of 2013 to the first half of 2014, real hourly wages fell across all income levels except for a tiny 2-cent increase at the 10th percentile, Gould said. That modest increase was due to a handful of states increasing the minimum wage (Washington state's $9.32 an hour is the highest minimum wage). Of course, those states, which include California and New York, are home to some 40% of U.S. workers.

The last time the federal minimum wage was raised was July 24, 2009, to $7.25 an hour.

Sluggish or non-existent wage growth has corresponded with a surge in corporate profits, currently at their highest level in 85 years. Correspondingly, we're in the midst of stock market rally that shows few signs of abetting. Regardless of whether the rally continues, the S&P 500's 31% advance since the end of 2012 marks its strongest gain in more than 20 years.

"Employers have not put workers' increased productivity into their paychecks," Gould wrote. "We cannot have a stable economy and growing and thriving middle class without higher wages."

There may be hope for a boost in wages. Federal Reserve Chair Janet Yellen has taken the unusual step of using her perch to argue that wage expansion would be both good for U.S. employees as well as beneficial to the overall economy. Such a stand is a bold departure for a Fed chief that has placed the issue of wages into the limelight just as the mid-term election season heats up.

Ultimately, the topic of a raise in the minimum wage is as much a political question as an economic one. An increase in the minimum wage, inflation hawks argue, might prompt a raise in wages from the top down, and therefore spark a hike in prices. Yellen argues that the economy could handle such a development.

Whether Yellen will get her wish may depend on whether voters force politicians in Washington to make wage expansion a cornerstone of the 2014 mid-term elections.

Happy Labor Day.

Read More: GDP Is Better Than Good -- but Interest Rates are Still Not Going Up

-- Written by Leon Lazaroff in New York.

Follow @leonlazaroff

>Contact by Email.

Leon Lazaroff is TheStreet's deputy managing editor.

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