Despite a flourishing economy American workers are less confident about their financial security than they were two years ago. The U.S. has enjoyed four straight years of economic growth, but most families have lost ground: In 2005, more than 80% of American workers saw their inflation-adjusted wages fall for the second year in a row.

While the economy has been growing since 2001, all the benefits of that growth have gone into corporate profits, says Mark Zandi, chief economist at Moody’s Economy.com, a Pennsylvania-based consultant firm: “Corporate profits’ share of the national income is at a 60-year high—and that has come directly out of wages and salaries, which are at a record low.” And wages of the top 10% of earners—people making more than $90,000 a year—have risen much faster than everyone else’s. The average worker’s pay stayed almost flat at $27,000 from 1990 to 2004, one study finds.

The U.S. added 2 million jobs in 2005—about the same number as in 2004. Despite the devastation caused by Hurricane Katrina, the economy grew 3.6%, and the unemployment rate fell from 5.1% to 4.9%. But dramatic layoffs continue. Late last year, GM said it planned to cut 30,000 jobs. In January, Ford said it would eliminate up to 30,000 jobs too. Since 2000, the Big Three auto manufacturers have cut, or announced plans to cut, almost 140,000 jobs—a third of their North American payroll.

Most forecasters hope that economic growth will continue this year, albeit more slowly, since a cooling real-estate market and higher interest rates are likely to curb consumer spending. Higher energy prices, including home heating, will hurt spending too. And the burden of consumer debt will be heavier: This year, major credit-card issuers will increase required minimum payments from 2.5% to 4% of outstanding balances.

Notwithstanding the low jobless rate, there’s a lot of uneasiness among workers, notes John Challenger, chief executive of Challenger, Gray & Christmas, a Chicago-based outplacement firm. “Many people have been falling behind, especially in the middle class,” he says. In 2005, for the first time since the Great Depression, Americans borrowed more than they earned. “Wages haven’t kept up with inflation, and many employers have pushed the cost of health care back to employees in the form of higher premiums and co-pays,” notes Challenger. “Added to that, there’s the higher cost of driving to and from work and heating a home.”

That uneasiness is reflected in PARADE’s annual survey and other polls. “The experts tell the nation that the economy is strong, but the fact is the people you talk to—real people—are struggling,” says Donnie Betts, 53, a documentary filmmaker from Aurora, Colo., who earned $53,000 last year. Teresa L. Harrison, 46, an accounting technician from Lake Panasoffkee, Fla., who made $32,200, tells us: “My income will probably increase slightly this year, but I doubt the increase will cover the higher cost of insurance and gas.” Other respondents agree: “Salaries just don’t seem to be keeping up with the average person’s cost to live,” says James Norton, 41, of Baltimore, who earned $37,600 as a police records supervisor. Adds Paula Goldie, 51, of Troutdale, Ore., who made $40,600 as a municipal court clerk: “I feel like I’m treading water, hoping not to get swamped.”

The median weekly salary in 2005 was $659 (half of all workers earned more, half earned less). After inflation, that’s 1.9% less than in 2004. Average hourly pay for all production and nonsupervisory workers was $16.11—a 0.7% decline when adjusted for inflation. Workers’ retirement and health-care benefits also are shrinking—and not only in troubled industries. Financially healthy companies are freezing their pension plans to exclude new hires and/or younger employees—a trend that’s expected to continue. In a frozen plan, workers stop accruing benefits. This also hurts longtime workers, because they will retire with much less than they expected: Up to 50% of a pension is earned in the last five years on the job.

Health-insurance premiums rose 9.2% in 2005, more than 21⁄2 times the inflation rate. Some firms are saving money by switching to “limited-benefit plans,” which may not cover the cost of hospital care or serious illnesses. Others no longer offer health benefits: Only 60% of businesses now provide them, down from 69% in 2000. Since 2000, the premiums employers pay to cover workers have gone up 73%. The average cost of family coverage last year was $10,880. Companies are passing a bigger share of that expense to their employees. The average worker paid $2,713 in premiums in 2005. Some employees must choose between health benefits and higher wages. For example, Sue Greer-Pitt, 55, an associate community college professor from Jackhorn, Ky., earned $42,500 and got a 4% raise last year—but her raise was conditional on accepting a health policy that costs her more and covers less.

Anger at the disparity between record corporate profits and shrinking workers’ wages and benefits is a driving force behind “living wage laws,” in which states, municipalities and cities set their minimum wages higher than the $5.15 federal minimum wage, which hasn’t been increased since 1997.

The economy has grown while real wages have fallen because consumers keep spending—thanks to soaring real-estate values and low-interest loans. In 2005 alone, Americans borrowed an estimated $887 billion from their homes through mortgage refinancing and equity loans. The housing boom also has created 1.1 million jobs in fields like real-estate brokerage, mortgage lending, construction and the manufacture and sale of home products. Indeed, our survey respondents in home sales jobs reported the most dramatic 2005 wage gains. Ray Singhal, 62, a Minneapolis-area real-estate agent, saw his compensation jump 50% last year, to $600,000. And in Redmond, Wash., Michelle Traina, 37, saw her earnings jump from $44,000 to $96,000 after she was promoted from home sales representative to home sales manager.

But the housing market started to lose steam by the end of 2005. This year, economic growth is likely to depend on corporate spending. Businesses haven’t made substantial capital investments since the 1990s, but they are flush with cash, and many economists predict they’ll start spending this year. Mark Zandi of Moody’s Economy.com says it’s already happening: “Businesses are investing aggressively in machine tools, aircraft and construction equipment. If that continues, it should be a reasonably good year for job growth.”

The biggest growth will be in financial services, technology, health care and energy, John Challenger says. He predicts high demand for accountants, petroleum engineers, physical therapists, pharmacists, computer specialists, and international sales and marketing managers. Every problem creates new job opportunities: Fear of identity theft has opened up jobs in data security. And heightened national security creates jobs in defense-related fields, from aerospace to software development, as well as in law enforcement. Many police departments are offering higher pay, housing allowances and, in some cases, signing bonuses for bilingual skills.

Education is vital to getting a good job. On average, full-time workers with a high school diploma earn $585 a week; those with a college degree earn $1,029. Men with advanced degrees make $2,887 or more; women make $1,997 or more. But for most families, getting a college degree requires significant sacrifices. Since 1990, while median family income has risen 5.8%, the cost of a bachelor’s degree jumped 63% at public colleges and 47% at private colleges.

Workers need perseverance, stamina, flexibility and patience to succeed in this difficult environment. Among PARADE’s survey respondents this year, two young women seem to exemplify those qualities:

Betty Chu, 29, earned $38,000 as a program coordinator at Harvard Business School—15% less than she made in 2004 as an elementary schoolteacher. “I was willing to take the pay cut to work at Harvard because of the opportunities for advancement,” she says. “I’ve taken on a second job to supplement my income, and I’m finding more and more ways to cut everyday costs.”

Latoya Milana, 26, made $13,000 working full-time as a support professional in a group home for the handicapped. She’s also a full-time nursing student. In 2004, she left a $25,000 job as an accounts-receivable specialist in medical billing to continue her education. “Next year, I’ll make much more money doing a job I love,” she says. “But money isn’t everything. I’d rather make less at a job I love than more at a job I have a hard time waking up for.”

 

2005 Median Weekly Wages

Petroleum engineers: $1,923
Actuaries: $1,639
Lawyers: $1,609
Economists: $1,569
Chiropractors: $1,531
Aerospace engineers: $1,362
Medical and health-service managers: $1,089
Meeting and convention planners: $912
Loan counselors and officers: $861
Elementary schoolteachers: $826
Funeral directors: $768
Social workers: $700
Pest-control workers: $508
Animal trainers: $482
Actors: $481
Child-care workers: $332
Dishwashers: $296

Source: Bureau of Labor Statistics.

 

Hot Jobs In 2006 and Beyond:

International advertising & promotions managers: $33,760 to $145,000+
Pharmacists: $62,780 to $112,530
Personal financial planners:$31,340 to $108,740
Loan officers: $24,090 to $102,830
Physical therapists: $42,910 to $89,830
Nurses: $24,910 to $77,170
Electricians: $25,730 to $70,200

Source for average annual range of salaries: Challenger, Gray & Christmas, with data provided by the Bureau of Labor Statistics.