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2005 US Salary Increases Go Into the Tank

12 October 2005

An analysis by Salary.com, a provider of compensation-related data, applications, and services, found that the increase in gas prices will effectively wipe out the expected average salary increase (3.7%) for the average worker in the US in 2005.

According to Salary.com’s figures, while average salaries will rise 3.7% year over year, the increase in gasoline prices has effectively cut that average salary by 3.3%. Commuting costs have risen 50% in the last year, as gas prices have risen from $1.91 to $2.81 per gallon.

At the current gas price level and average full-fleet fuel economy of 17.8 miles/gallon, average American workers, who earn the national average salary of $40,409, spend 3.3% of their paychecks ($1,341 per year) on gas needed to commute to and from work.

And that’s the average worker. Consider workers making the national minimum wage of $5.15 an hour ($10,712 per year) who are currently spending 11.3% of their salary on commuting gas.

Furthermore, $3.00, $4.00, even $5.00 per gallon gas prices no longer seem out of the question.

—Bill Coleman, Senior VP of Compensation

A gas price rise to $5.00 per gallon would cost the average worker $2,384 per year, a whopping 5.9% of their salary.

Gas Price Salary Cuts by Top 10 Cities
CitySalary Cut
Current Price
(avg. worker/year)
Salary Cut
$5/gal
(avg. worker/year)
Source: Salary.com
1 Brownsville, TX 4.6% 8.7%
2 Rochester, NY 4.5% 7.5%
3 Honolulu, HI 4.4% 6.5%
4 Riverside, CA 4.4% 7.3%
5 Albany, NY 4.3% 7.2%
6 New York, NY 4.1% 6.9%
7 Springfield, MA 4.1% 7.0%
8 Orlando, FL 4.1% 7.4%
9 Richmond, VA 4.1% 7.4%
10 Pensacola, FL 4.0% 7.3%

Salary.com calculated the effective gas price salary cut that workers are taking (by city) as a percentage of the average salary of that city. Some of the highest gas prices in the nation, coupled with above average commute times, landed the upstate New York towns of Rochester and Albany into the top 5. The Texas city of Brownsville showed up at #1, mostly due to the fact that wages are not keeping up with rising gas prices.

To calculate the effective gas price pay cut per metropolitan area, Salary.com used average commute time data from the US Census and the 2004 Urban Mobility Study by the Texas Transportation Institute. Average fuel economy was assumed to be 17.8 miles per gallon, based on the Texas Transportation Institute study. Fuel prices are based on regular grade gasoline as of September 22, 2005, as reported by the American Automobile Association (AAA) Fuel Gauge Report. It is assumed that commuters purchase gas in the city in which they work.

Average salary by metro was calculated by compensation experts at Salary.com and is as of October 1, 2005. All salary dollar values are pretax and based on a 40-hour workweek.

Data is based on a total of 500 commutes per year, to and from work, for 250 workdays. Salary.com assumed that employees work 250 days per year and that their travel is equally split between freeway and arterial street travel. The 88 cities used in the study were the sampling of cities analyzed for congestion by the Texas Transportation Institute.

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October 12, 2005 in Fuel Efficiency | Permalink | Comments (10) | TrackBack (1)

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Comments

This also ignores the costs of owning and maintaining their cars.

Makes the Boston sybway ($528/yr) or a bike ($100/yr in maintainance) a heck of a deal by comparison.

Has anybody calculated the effects of increased price for heating oil, natural gaz and eventually the follow up increased price for electricity and most goods with heavy land, air or sea transport component? The NET salary (decrease) for people on minimum and low wages will easily grow in the two digits unless the US economy makes a quick switch from imported OIL to alternative clean local energy sources. Such a switch could be very beneficial to the US economy because it would create new industries and a few million new jobs and progressively reduce OIL imports to zero. Unfortunately, $5 a gallon gas is required to drive the point home and finance the cost of transistion. Hiting the pocket book seems to be the best way to provoke the change of atitude required. Federal and States laws can be too easily bypassed or challenged. A simple progressive extra $2/gallon Federal gas tax coupled with effective compensation for the poors and appropriate subsidies to stimulate the inovators and buyers of hybrids and plug-in hybrids vehicles would be very effective and very easy to implement. If this transition would have started five years ago, OIL imports would most probably be down by 50% already, plug-in hybrids would be on the roads, a few thousand new high power wind mills and many solar generating plants would be producing 10% to 20% of all electricity used in the country. The latest OIL wars would not have required and the US heavy budget deficits would not be there. Even Katrina could have been more docile, etc etc. How can we NOT do it?

Re. Natural gas, I was just checking out the web page for my gas company:

"As of October 6, 2005, and based on industry forecasts, customers can expect winter bills around 45% to 55% higher this winter. For example, a typical single-family residential monthly bill could be around $115-$122 this winter, versus $79 last winter. A typical residential bill for someone living in an apartment could be around $50 versus $33 last winter."

http://www.socalgas.com/residential/prices/

Oh, on gas taxes ... I did a "google news" search today thinking I could find a story about proposed increases. What I got was a page full of news about tax rollbacks, refunds, and no-tax promises:

http://news.google.com/news?q=gas%20tax

I don't think the nation is quite in the "increase" frame of mind.

Probably because nobody has tried to sell this to the American public as any kind of imperative.  (It should have been done immediately after 9/11, but Bush is too cozy with the House of Saud.)

People would also be much more accepting if it came with a tax cut at the low income levels, like a deductible on Social Security.  If you pay an extra $20/week in (direct) gas taxes but you get $30/week more in your paycheck, you'll be okay.  Other things will cost more after a while, but the whole system will get more efficient with time.

Don't increase gasoline taxes, gradually move oil producer subsidies (billions) into tax cuts for average Americans.

Engineer-Poet is right. Any major extra gas tax would have to have an appropriate offset/compensation package for people on minimum and low wages so has not to drive those people further into poverty. However, that's exactly what will happen if nothing is done. In the long run, decent size plug-in hybrid vehicles could ease the transport burden on low income earners, if the extra purchase price is sufficiently offset with revenues from the gas tax. This notion may not (yet) be acceptable to many who can afford to drive huge Hummers and similar large SUVs and pick-up trucks but is it very democratic.

Why would you increase taxes instead of simply raising CAFE standards? Many people in this country can't afford health insurance and you want to raise their cost of living. Good luck with that. Fix the CAFE standards, push for gas alternatives or simply wait for supply and demand to take effect. Proposals for raising taxes only show a lack of real solutions and will never be accepted by the public anyways.

We already know that CAFE standards don't work; we got the SUV explosion in spite of them.  Only cost discourages consumption and drives buying decisions.

Many people in this country can't afford health insurance and you want to raise their cost of living.
Maybe you missed where I said we should allow deductibles on FICA and other taxes to make up for the fuel taxes and then some.

The problems with CAFE are: 1) they are set at far-away time horrizons and do nothing for us in the short term, and 2) they have consistently had loopholes that render them moot.

The currently proposed improvement, which uses "footprint" sizes (in square feet) to break SUVs into 6 categories is an obvious (and not "unintended") continuation of the loopholes strategy. If a manufacturer has an SUV that misses it's mileage goal, he only need to stretch it a bit, or extend its overhangs, to climb into the next category.

The biggest, baddest, SUVs are in category 6 anyway.

No, this is really sad because a gas tax is the only thing that is 1) immedate and 2) forever free from loopholes.

Unfortunately it is also politically impossible ... at least until enough people understand the stark choices we face.

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