What’s Your Time Worth? A Look at Consumer Goods
Which aspects of the U.S. economy are not increasing fast enough?
Whether the price of goods is increasing or decreasing compared with a person’s wages is an important indicator of the health of the U.S. economy. If people are spending more of their income on basic necessities, it means they have less to spend on other items and less that can be saved. The calculation of such indicators is complex and can sometimes be conducted and analyzed by people with an advanced business degree such as a Master of Business Administration. Let’s explore some economic indicators further and attempt to glean how well the U.S. economy is really doing.
According to the Bureau of Labor Statistics, in 2016 the average price of a pound of ground beef chuck was 17.9% of the typical hourly earnings of a production or nonsupervisory worker. This means that a typical nonsupervisory employee had to work about 11 minutes to earn enough to buy a pound of ground beef.1 That may seem like a lot for something that is a staple item for most households. As it turns out, even as the economy has been strong, wage increases have been lagging behind other positive economic indicators. As such, Americans have seen the cost of living increase without an equivalent increase in wages. This is something many business managers will tell you is troubling.
Based on economic statistics for May 2018, the U.S. economy extended its longest streak of job growth on record. The unemployment rate fell to 3.8% and there was a net increase of 244,000 jobs across a broad range of industries.2
With extended job growth and low unemployment, experts from the best business schools would generally expect wage growth to increase as employers compete to hire workers. This is especially true for workers in higher-paying skilled positions. But this increase is not happening as quickly as expected. While hourly earnings are starting to increase, if prices are increasing at the same pace or faster, the average consumer is not benefiting from their higher pay.3
The Consumer Price Index is the standard way for experts and business managers to determine if the cost of living is increasing. It measures the average change in the prices paid by urban consumers for a market basket of consumer goods and services.4 The Consumer Price Index indicates that prices have been increasing over the last 5 years.5 While U.S. average hourly wages have been increasing, they have been increasing more slowly than the cost of living.6 This indicates that U.S. households have less money left over after paying for their basic needs.
Economists have been confused by the lag in wage growth in this current period of economic growth. While there are many theories, there is not a clear answer. The good news is that the long-awaited pickup in wage growth appears to finally be happening. Average hourly earnings of production and nonsupervisory employees rose 2.8% from January to May 2018. This is the largest increase since the middle of 2009, when the economy began its period of expansion.7 Whether this trend will continue remains to be seen. What is clear is that while more people are working, to this point they are typically not seeing an increased quality of life. The last piece to this recent economic expansion is for wages to increase at a rate that keeps up with the rise in consumer goods prices.
Statistics and trends such as these involve advanced concepts of business and economics, and have an impact on U.S. policy. They are often compiled by and interpreted by people who have earned an advanced business degree such as a Master of Business Administration. This is just one example of the things people can do with a business administration degree. Whether you are interested in a career in corporate finance, accounting, leadership, marketing, or another area, an online MBA from an accredited university can be the perfect option. Some online universities offer a competency-based option that lets you apply what you know to complete your degree at your own pace.
As the U.S. economy continues to grow, we expect that workers will benefit in the form of more money to spend after buying basic necessities. However, until recently, wages have not been increasing as expected. It is up to those with advanced degrees, such a Master of Business Administration, to identify why wages are not keeping pace with the price of consumer goods, and to make the changes necessary to keep the U.S. economy strong.
Walden University is an accredited institution offering an online Master of Business Administration degree program. Expand your career options and earn your degree in a convenient, flexible format that fits your busy life.
1 Source: www.bls.gov/opub/ted/2017/pound-of-ground-beef-cost-17-point-9-percent-of-average-hourly-earnings-in-2016.htm
2 Source: www.bls.gov/news.release/pdf/empsit.pdf
3 Source: www.bloomberg.com/view/articles/2018-06-07/bad-inflation-wrapped-up-in-jack-in-the-box-tacos
4 Source: https://www.bls.gov/cpi/
5 Source: https://data.bls.gov/timeseries/CUUR0000SA0?output_view=pct_12mths
6 Source: https://tradingeconomics.com/united-states/average-hourly-earnings
7 Source: www.bloomberg.com/news/articles/2018-06-01/retail-workers-gains-drive-long-awaited-pickup-in-u-s-wages
Walden University is accredited by The Higher Learning Commission, www.hlcommission.org.