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Seem like you're earning less? You aren't alone
By Charles Stein | October 16, 2005

If you think you've had a bad week at the office, imagine what it would be like to be an employee of Delphi Corp. The auto parts giant recently filed for bankruptcy court protection, and its chief executive, Robert Miller, wants to cut the pay and benefits of union workers to $20 an hour from $65 an hour. Miller has made it clear that in today's global economy, unskilled workers can't command such lofty compensation.

The situation at Delphi may be extreme, but it is by no means unique. Pay is under pressure for a great many workers -- not just blue-collar people with limited skills.

''The combination of trade and offshoring has increased the supply of labor available in the United States," said Frank Levy, an economics professor at MIT.

To Levy's list you could add competition, technology, and immigration. All of them have allowed employers to tap into a expanded pool of workers -- both at home and abroad. As everyone who takes Econ 101 knows, when you increase supply, prices, in this case, the cost of labor, are bound to fall.

Consider the plight of pilots -- a pretty highly skilled group. At Delta, an old-line carrier, pilots earn an average salary of $157,000, according to the Department of Transportation. At JetBlue, one of the most successful upstarts, the average pilot salary is $91,000. With benefits tossed in, the gap is even greater.

Like Delphi, Delta is in bankruptcy. And like Delphi, Delta will almost certainly use the bankruptcy process to bring wages down -- probably way down. The JetBlues of the world have already demonstrated that there are people willing and able to fly planes for less. Presumably there have always been such people. Deregulation made it possible for the airlines to hire them.

In construction, the threat to wages comes from immigration. Over the past decade immigrants, both legal and illegal, have made huge inroads in the construction field, especially in residential construction. In 2004, 20 percent of the country's 10.7 million construction workers were foreign-born. According to Mark Erlich, executive secretary of the New England Regional Council of Carpenters, many of the illegal immigrants get paid in cash -- about $10 or $12 an hour -- and work for employers who pay neither taxes nor benefits. Those contractors clearly have an edge when it comes to submitting bids for work.

''Wages are depressed because the underground economy has taken over," Erlich said.

At Home Depot stores around the country, immigrants line up each morning to find work as laborers and handymen. If lawyers and doctors lined up outside Home Depot offering their services for modest fees, what do you think would happen to the paychecks in those professions?

Real estate brokers have earned a good living the past few years. Total real estate commissions reached $61 billion last year, thanks to the rising price of homes and the 5 to 6 percent slice of the pie brokers routinely take. But today those commissions are threatened by technology. Discount brokers, with the aid of the Internet, are willing to take smaller commissions, typically 3 percent, to provide the same service.

So far the traditional brokers have done a good job of protecting their turf. Still, you have to think that over time technology will erode their position and their compensation.

I don't want to paint an overly gloomy picture here. Not everyone's wages are falling. Over the past year, wages nationally climbed 2.4 percent. That was the smallest increase in more than 20 years, but it was a gain nonetheless. With benefits included, the gain was somewhat bigger.

But there are pockets throughout the economy where the pressure to cut is powerful. We live in a big and an increasingly open world economy, filled with people looking for an opportunity to do better. If employers can find them -- in India or on the Internet -- they will hire them. If those people happen to do what you do, be prepared for a decline in living standards. As the workers at Delphi have learned, sometimes the drop-off can be awfully steep.