Raises being erased by inflation

A growing number of area workers are finding themselves doing an inflation tango, as wage raises giv

A growing number of area workers are finding themselves doing an inflation tango, as wage raises give them a step up but soaring commodity prices set them two steps back.

Earlier this month, a 3 percent cost-of-living adjustment took effect for the 70,000 state executive branch employees represented by the Civil Service Employees Union. The raises came as part of the contract CSEA members ratified in January.

While that 3 percent COLA would have kept member wages in tandem with inflation last year — when consumer prices rose by a total 2.8 percent — it is increasingly losing its financial clout. Inflation in March reached 4 percent at an annualized rate, the U.S. Bureau of Labor Statistics reported Wednesday.

“From the workers’ point of view, this is a perfect storm,” said Ken Goldstein, an economist for The Conference Board, a nonprofit business research organization in New York.

As the nation tilts toward a recession, Goldstein said employers are being hit by an inability to pass higher costs onto customers for fear of losing business to competitors. Slowing economic productivity is also digging into employers’ profits, giving them less money to dole out to employees. And employers risk losing workers to more lucrative jobs, Goldstein said.

The Bureau of Labor Statistics said the nation’s consumer price index in March rose 0.3 percent, driven largely by higher energy and food prices. Inflation growth was flat in February.

However, inflation during that period was much higher for energy, which was up 17.6 percent, and food and beverages, which were up 4.4 percent. Those increases will hurt middle- and low-income workers, who must devote larger portions of their income to those items.

“Families are certainly going to get squeezed,” said Adrian Masters, a University at Albany economics professor.

Masters said the inflation runup can be traced back to the rise in the cost of oil and a weaker dollar. The monetary surge of oil, which Wednesday closed at the record high of $114.93 per barrel, has had far-reaching impacts, especially on food prices.

Food prices have also been affected by the nation’s new emphasis on ethanol as an alternative fuel source. That focus is prompting farmers to devote more land to corn instead of other staple crops.

By March, bread was 14.7 percent more expensive than a year ago and milk prices were up 13.3 percent. However, apparel prices over the year were down 1.4 percent, according to the Bureau of Labor Statistics.

“You only have to go to the grocery store to feel the impact of [inflation],” said Bill Lambdin, president of the National Association of Broadcast Employees and Technicians-Communications Workers of America Local 21, which represents 90 news, engineering and production workers at WNYT Channel 13 in Menands.

After a six-month standoff with WNYT management over a new contract, union members earlier this month ratified a four-year pact. The contract included annual 2 percent wage hikes through 2010 plus an immediate 1 percent increase that took effect April 1.

Lambdin said the union wanted higher COLAs, but it could not secure them, partly due to tumult in the broadcasting industry.

“If it fails to keep pace over the long term, it’s going to have an impact on people’s willingness to stay,” Lambdin said of workers’ wages.

Members of the Public Employees Federation earlier this month ratified a four-year pact with wage increases similar to those in CSEA’s pact. The union, which represents 58,000 professional, technical and scientific state workers, negotiated 3 percent raises for each April from 2007 to 2009 plus a 4 percent hike in 2010.

“It’s never enough to keep pace with inflation, but it is a step forward,” said PEF Vice President Joe Fox.

However, union workers’ wages are not alone in being outpaced by inflation. The Bureau of Labor Statistics earlier this month reported that over-the-year U.S. average wage growth slowed in March to 3.6 percent. Average hourly earnings in February rose by 4.5 percent.

Music retailer Trans World Entertainment in Guilderland employs 8,000 nationwide and 600 in the Capital Region. Trans World Chief Financial Officer and Senior Vice President John Sullivan said the wages of company employees are keeping pace with inflation. He would not detail the amount of workers’ annual raises.

Labor experts said workers who receive raises that trail inflation are still the lucky ones. Many employers are implementing wage freezes, slashing hours or eliminating jobs. U.S. companies cut 1 million jobs during the first quarter.

“Their belts are tightening and they’re feeling it at the grocery store and the gas pump,” said Karyn Dettbarn, the branch manager of Consumer Credit Counseling in Colonie.

Dettbarn said more area residents are falling behind on their mortgages and car loans as inflation takes a bigger bite out of their income. She said some people are adjusting to higher prices by taking second jobs or ditching cable television or landline telephones if they also own cellphones.

Masters at UAlbany said it is “inevitable” for wage growth to catch up with inflation. But that could take years, especially if oil prices continue to rise.

It could take months for employers to respond to the new inflation environment because wages are usually addressed when budgets are drafted at the end of the year, said Tom Minnick, vice president of human resources for the Business Council of New York State.

In the early 1980s, some employers gave workers midyear wage increases to counter double-digit inflation. Double-digit raises were also not unheard of during that time. But Minnick said he doubts the 4 percent inflation rate or anything slightly higher than that would spur employers into taking drastic actions to address the wage issue.

Last month, the 450 organized nurses at Ellis Hospital received 3 percent raises, as required under the four-year contract in August 2006. Those New York State Nurses Association members are slated to receive one more 3 percent COLA in March 2009 before their contract with the Schenectady hospital expires the following February.

NYSNA spokeswoman Nancy Webber was confident members’ wages would keep pace with inflation because nurses are in low supply and high demand. Most NYSNA bargaining unit COLAs range between 3 percent and 3.5 percent, but inflation-induced competitive pressures could increase those rates.

“It’s really a function of how badly they want to retain nurses,” Webber said.

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