How to give American workers a pay raise

incomegrowthdistributionThe majority of American workers are getting less and less benefit from the growth of the American economy.

The pro-labor Economic Policy Institute notes that, since 1979, the U.S. economy (gross domestic product) has grown by 149 percent and productivity has grown 64 percent, but actual wages of most American workers, adjusted for inflation, are flat or declining.

Recently the EPI published an 11-point program for boosting American wages.   Here it is, with my comments.

1. Raise the minimum wage.

2. Update overtime pay rules.

3. Strengthen collective bargaining rights.

Stronger labor unions give workers power over their wages and working conditions independently of laws and regulations.  This is the most important change and a key to all the other changes.

4. Regularize undocumented workers.

Hiring unauthorized immigrants and relocating business activities to low-wage countries are two ways of doing the same thing—escaping the requirements of American labor law.   It is almost like competing with slave labor.  Since it is not feasible to deport the millions of unauthorized immigrants now in the United States, the only choice is to bring them under protection of the law.

5. Provide earned sick leave and paid family leave.

6. End discriminatory policies that contribute to race and gender inequalities.

7. Support strong enforcement of labor standards.

8. Prioritize very low rates of unemployment when making monetary policy.

Keynesian economic theory says that a loose-money policy helps generate economic activity and jobs, but a tight-money policy averts the risk of inflation.  Currently the Federal Reserve System has been creating money, but pumping it all into big banks, and the big banks have not been investing in the real economy.   So we have the worst of both worlds.

I personally believe that our current economic crisis is the result of long-term problems that can’t be cured by monetary policy alone.

9. Enact targeted employment programs and undertake public investment in infrastructure to create jobs.

Employment programs targeted to high-unemployment areas usually only offer temporary help, because they don’t address the reasons why unemployment is high in certain areas.   Investment in infrastructure, on the other hand, is vital, not just to create jobs but because bridges, water and sewer lines and other vital structures are falling into disrepair.

10. Reduce our trade deficit by stopping destructive currency manipulation.

This is a difficult issue.  If the value of the U.S. dollar were allowed to fall compared to other currencies, American imports would become relatively more expensive and American exports would become relatively cheaper.   That might benefit American workers in the long run, but, in the short run, the main result would be higher prices.

11. Use the tax code to restrain top 1 percent incomes.

I agree with restoring the Clinton-era tax rates or making taxes even more progressive.  But my main problem with the economic elite—more the 0.1 percent or the 0.01 percent than the 1 percent—is that so many of them get their high incomes not by creating value, but by milking the system.  There’s a need to prosecute financial fraud and improve corporate governance.

Overall, these are sensible proposals, all worth considering.  Sadly, they will be regarded as threatening by the people in control.

LINKS

How to Raise Wages: Policies That Work and Policies That Don’t by Lawrence Mishel and Ross Eisenbrey for the Economic Policy Institute.

The Agenda to Raise America’s Pay by the Economic Policy Institute.  The short version.

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