Wages and salaries, adjusted for inflation, decreased by 0.8 percent in 2005, after falling by the same amount in 2004. However, unlike in 2004, increases in benefits did not make up for the decrease in wages and benefits during 2005, resulting in lower overall inflation-adjusted compensation than the previous year. This decrease comes despite a 3.5 percent increase in the real (inflation-adjusted) GDP during 2005 and the lowest national unemployment rate since 2001.

The decline in overall compensation is driven by decreases in the earnings of private sector employees, where inflation-adjusted wages and salaries fell 0.9 percent in 2005, while state and local government employee earnings fell 0.3 percent. When benefits are factored in, the position of state and local government employees rose slightly in 2005, unlike that of private sector employees. While workers in the Baltimore area may be relatively shielded from the declines due to the influence of governmental employment in the area, the move from relatively high-paying, unionized manufacturing jobs to service sector employment, both locally and nationally, is one of the long-term causes of declining wages.

Ironically, even as U.S. workers' economic position was being harmed by declining wages and salaries, economic growth was driven in 2005 by consumer spending, financed in large part by borrowing and dipping into savings. For the first time since 1933, Americans actually spent more money than they earned, resulting in a negative savings rate. The sustainability of this deficit spending is questionable, particularly since a predicted normalization of the housing market will make ordinary Americans feel less wealthy. The recent U.S. economic growth has been financed and driven by consumers, rather than businesses, even while workers have seen little of the benefit, and U.S. workers will likely be unwilling and unable to continue increasing their spending while their wages decrease. Stagnating/declining wages, so assiduously pursued by corporate chiefs concerned with keeping costs down to increase profits and dividends, may actually prevent continuing real GDP growth in the U.S. Without wage and salary increases, and the accompanying federal reserve boggieman of possible inflation, it seems unlikely that consumer spending and the overall GDP will continue to increase at a strong rate.

Hailed in the business section of the NY Times as a sign that the improving labor market (low unemployment) is not driving up wage pressures, and therefore inflation, the declining position of U.S. workers continues the trend of consolidation of economic gains, both domestically and internationally, at the top, i.e., with capital.