PARADE Magazine's 2007 What People Earn

By most economic measures, 2006 was a great year. Despite rising interest rates, high oil prices and the sharpest housing downturn in 15 years, inflation was low, productivity rose steadily, corporate profits reached a 40-year high, the stock market soared and the unemployment rate dropped to 4.6 percent -- the lowest level in more than five years. Strong hiring in service businesses like education, health care, finance, travel and entertainment more than offset big job losses in the auto and housing sectors.

But in the midst of this booming economy, more than two-thirds of Americans told pollsters that they don't believe life for their children's generation will be better than it has been for them. Only 27 percent this year, 71 percent of respondents said the country was on the wrong track.

The Economy Booms, but Most Paychecks Don't
One reason for the widespread pessimism is that most Americans haven't seen the nation's economic boom reflected in their paychecks. Last year's 1.1 percent average raise was their first real pay increase in a long time. Workers' productivity grew an impressive 18 percent between 2000 and 2006 -- but most people's inflation-adjusted weekly wages rose only 1 percent during that time. This was the first economic expansion since World War II without a sustained pay increase for rank-and-file workers. Typical 2007 raises will be small, experts say. They predict slower economic growth and higher unemployment this year.

In the last five years, all the salary gains went to the highest-paid workers, says Mark Zandi, chief economist at Moody's economy.com. "Average income" is a misleading statistic, he explains: If one of 300 million workers gets a $300 million raise, for example, and the other 299,999,999 get none, the average salary has risen -- but only one person is earning more. "A better measure is median income -- the midpoint between the top 50 percent of earners and the bottom 50 percent," says Zandi. "And median income has struggled to keep up with inflation."

Statistics vs. Real Life
Many Americans feel that government statistics don't match their daily experience. "Inflation seems worse than official reports indicate," says Arden Davis, who made $94,300 teaching geological engineering at the South Dakota School of Mines and Technology last year. His view is widely shared. The Consumer Price Index (CPI) says inflation is low, but the cost of necessities like housing, utilities, health insurance and education is rising faster than wages for most Americans. "The CPI is heavily influenced by the wealthy, who do most of the spending," explains Zandi. "It doesn't reflect the budget of most Americans." Gary Earl Ross, who earned $64,900 as an English professor and author in Buffalo, N.Y., agrees: "Any wage increase I’ve gotten is offset by increases in the cost of living," he says, "and in the fall I'll have two kids in college." Marie Ouano made $75,000 last year performing X-ray and MRI exams as a radiology technician but says housing in San Francisco is so expensive, she's not sure she can afford to buy a home on one income.

High Anxiety Among Workers
"People are worried about the future," says Gary Fearn, who earned $9,000 last year as a minister in Pueblo, Colo. For many Americans, being employed no longer means being free of financial insecurity.

One reason is that employee benefits have been steadily shrinking. Only 18 percent of private-sector workers now have a traditional pension plan -- and 40 percent have no retirement plan of any kind at work. A majority of baby boomers -- Americans born between 1946 and 1964 -- say they expect to continue working after they reach retirement age.

The cost of health care keeps rising faster than wages or inflation. Fewer employers offer health coverage -- and fewer employees can afford to buy it. The upshot: Almost 47 million Americans now are uninsured, and most of them are in families with at least one full-time worker. Only 47 percent of parents in families earning less than $40,000 a year are offered health insurance at work.

The Rich Get Richer
Many Americans are troubled by the income gap between the nation's highest earners and everyone else -- a gap that has grown dramatically in recent decades. In the last five years, inflation-adjusted wages rose less than 1 percent a year for the vast majority of households. But for the top 5 percent of earners, they jumped 2.5 percent a year. And for the top 1 percent of earners, the gains were much bigger: In 2005, the average CEO made 369 times as much as the average worker, compared with 131 times as much in 1993.

"I'm sorry to say I feel the rich are getting richer, and the rest of us are fighting to survive," says DeAnna Forman, who made $25,000 as a bartender in South Lake Tahoe, Calif. "I feel like I’m always trying to catch up." Kirk Kuchera, who earned $8,300 as a behavioral counselor for youth in Austin, Minn., agrees. "It appears to me that the lower middle class continues to work its way down the economic ladder, while those at the top of the corporate ladder move higher and higher at an unbelievable pace," he says.

Experts are concerned about wage inequality too. "We're in an economy that provides outsized, almost lottery-style gains to certain people in certain professions," says John Challenger, president of Challenger, Gray & Christmas, a global outplacement firm. He worries that, with college so expensive, graduates are forced to seek higher-salaried jobs to pay off their debts, avoiding critical lower-paying fields like education and social services. Income inequality has a negative impact in well-paid fields too: The extremely lucrative business side of medicine has drawn so much interest, for example, that more than 40 medical schools now offer an M.B.A. degree as well as an M.D. for graduates who want to go into health-care management or to Wall Street, where a doctor can earn millions advising hedge funds on biotechnology investments. Meanwhile, there’s a national shortage of doctors in family practice, whose median income is $161,000.

But not all good jobs require a four-year college degree, says John Challenger. "Some of the best opportunities are for workers with an associate degree or some kind of vocational training. One type of worker in particularly high demand is interpreter/translator."

Of course, the best job is work you enjoy. "I'm happy to be doing something I really like," says Gina Campbell, who made $32,300 as a puppeteer for an educational children's theater company in Washington, D.C., last year. "I'm thrilled that I'm making as much as I am. Prior to this job, I'd had one full-time job and two part-time jobs and never made more than $22,000 a year."

Source: Bureau of Labor Statistics