Friday, May 01, 2015

The conversation shifts toward wages

If I may indulge myself in a quick note at a busy time: today's lead NYT editorial marks a kind of watershed to me.  Aptly titled Picking Up the Tab for Low Wages, it begins by noting the divergence between productivity gains and wage gains since the 1970s and then alleges a primary cause:
These dynamics are not inevitable. Low-wage employers, in particular, pay low wages because they can and the main reason they can is that Congress has failed, over decades, to adequately update the minimum wage and other labor standards, including rules for overtime pay, employee benefits and union organizing.
My thought is, here we are at last. The center of gravity in a national conversation over causes of inequality is moving swiftly from global hyper-competition and technology to education to tax policy and safety net programs to now, finally, labor policy . All of these factors are real, and all need to be addressed at once, but the fact is that our wage structure and the diversion of an outsized share of national wealth to management and shareholders are the result of political choices beginning, or accelerating, in the Reagan era.

You can feel the conversation shift to focus on the power imbalance between management and workers. Piketty's Capital in the 21st Century has a lot to do with it. Recent landmarks I can trace in my own reading include the screeds of billionaire investor Nick Hanauer (1, 2) , the Center for American Progress's recent report on inequality, which highlights labor law at the front of an appendix on recommended U.S. policy response to the trend (and which has been billed as a precursor economic plan for Hillary Clinton); a New York Times article spotlighting Denmark's $20 per hour fast food workers -- and of course, coverage of the recent spate of city-wide minimum wage increases and Democrats' embrace of a raise to $12 per hour by 2020.

Reagan Revolution rollback

1 comment:

  1. I certainly have no love of the owners of capital, but as a numbers guy I have to raise a caution on the discussion of low wages.

    James K Galbraith, who is far to the left, made some interesting points about wage inequality......

    The story that is often told about what’s happened to factory jobs, and what’s happened to wage rates, is not a good way of getting at the threat to that existence. The typical story is that median wages peaked in 1972 and have been stagnant and falling since then. As a result, it must be the case that people who are working now are much worse off than they were ten, fifteen, twenty years ago. That’s not an accurate story—at least not up until the crisis in 2008—because over that period the labor force became younger, more female, more minority, and more immigrant. All of these groups start at relatively low wages, and they all then tend to have upward trajectories. So there’s no reason to believe that life was getting worse for members of the workforce in general. On the contrary, for most members of the workforce it was still getting better.

    I have been in agreement with him for ten years.

    Let me make a simplified example.

    A small town has 100 workers. 50 of them make $50,000 a year, and 50 of them make $25,000 a year.
    So the average wage is $37,500.

    Now a new Walmart opens in town, and adds 50 more workers who make $25,000 each.

    So now the average wage is $33,333 a year. That is a decline of over 11% a year.

    Big deal!!!! The better paid workers are not making less.

    I do not mean that there are no American workers who make less than they used to. In meatpacking and other industries that destroyed unions, wages are down across the board.

    But be careful about generalizations!