On and off, I’ve been writing about the tenuous nature of the economy. The pundits keep talking about low unemployment and moderate growth. But, something doesn’t seem right to me: all I hear about are average people worried about being in debt up the wazoo, huge health care costs (and going up) and no retirement.

Now, comes a New York Times piece today headlined “Falling Fortunes of the Wage Earner: Average Pay Dipped Last Year for First Time in Nearly a Decade.” It’s actually an old story, described in a number of reports over the past few months by the Economic Policy Institute, among others. But, better late than never, I say.

As The Times’ Steven Greenhouse reports:

Even though the economy added 2.2 million jobs in 2004 and produced strong growth in corporate profits, wages for the average worker feel for the year, after adjusting for inflation–the first drop in nearly a decade.

All this was pretty predictable—it doesn’t take an economist (actually, it helps if you’re not an economist) to understand that if workers have no power to negotiate (because of the decline in union power), if they have to compete against workers making a fraction of what they make, and if companies are shedding jobs like crazy to fatten corporate profits, wages are not going to go up. Once upon a time when productivity went up—meaning, workers cranked out more stuff in a more efficient manner—wages went up. No more.

An understated point, though, in the article—after all, this is The New York Times—is that in many companies productivity gains have transferred to wages…to the wages and benefits of top executives, whose pay packages, and outlandish pension benefits, continue to grow quite handsomely, while average workers are told to make do in a leaner, global economy.

So, as the dollar keeps coming down eventually forcing interest rates up, as health care costs keep rising, as debt keeps rising (as it has for the past decade) and, now, we see wages are falling, who is going to keep spending money in stores to keep the economy propped up? Even the rich can’t shop enough to keep the good times rolling if average people finally run out of cash or credit. It may not happen a year from now or even five years from now but a brutal reckoning is inevitable.