Stagnant Wages Slowing Down Stronger US Economic Recovery

The United States economy is having "a slow but steady recovery" since the recession but this is being derailed by stagnant wages in the country, according to the former Counselor to the Secretary of the US Treasury, Steven Rattner.

The expert economic analyst, who is currently the chairman of Willett Advisors LLC, the investment arm for the immediate past New York City Mayor Michael Bloomberg's personal and philanthropic assets, told foreign reporters in a briefing on current trends in the US economy in New York City on Wednesday that the outlook of the US recovery from the economic crunch is good but the steady progress is being held back by generally persistent low wages nationwide.

"Economic growth appears to be accelerating modestly in parts because the effects of deficit reduction are diminishing, "he said. "However, stagnant wages remain a major impediment to a stronger economy."

Mr Rattner, who led the Obama Administration's successful restructure of the automobile industry, revealed there was a growth rate of 1.9 percent posted last year, and said whilst it is expected to rise to three percent this year, factors such as positive trends in job gains and improving jobs picture remain crucial to America's strong economic recovery.

The New York Times columnist contributor, however, is concerned with the lack of growth in the wage structure for employees. "It is a problem - there has not been much wage growth," he noted. "It was expected that we would see wage growth after the recession but that's not the case.

The American economy, which is the world's biggest, was recently boosted by report of improved unemployment rate of 6.7 percent in the country in February but Rattner believes the stagnant wage problem still has an adverse effect on the power of the recovery of the economy. "As a result (of stagnant wages), unemployment rate may remain unusually high and labor force participation rates will probably not rise," he said.

President Barack Obama, in a bid to improve the national wage situation, pushed for an increase to $10.10 as the national minimum wage in his State of the Union speech. However, Rattner, a democrat, doubts if the US Congress would support Obama to address the problem.

"Congress should not be expected to do much to help", as "the likelihood of passing the President's latest proposals is low and the possibility of fundamental tax and entitlement reform is even lower."

Rattner also cited other factors such as falling real median income - which he says has made the average American lost 8-9 percent of his or her purchasing power, rising gap between productivity and wages as corporate profits have been strong against wages, income inequality, and deficit reduction - which takes out purchasing power of the economy and lets it grow slowly - as contributions that have affected the strong recovery of the American economy. He noted that US income inequality is one of the worse in the developed world is, and "our ability to reverse it is limited.

One positive note, however, for Rattner is the manufacturing sector which is doing very well. He notes that US manufacturing, which he says pays high, has one of the highest rates in the world and for instance saw 10.5 million cars assembled in the US last year, has been a strong boost to the economy and its recovery and aided the steady progress being made.