Increasing Workers’ Wages

by Dave Schuler on March 19, 2014

I don’t think that Harold Meyerson appreciates the irony of this remark in his article about how to increase workers’ wages:

What corporate apologists won’t acknowledge is that workers’ incomes have been reduced by design. American business has adamantly opposed workers’ efforts to organize unions. Millions of jobs have been outsourced, offshored, franchised out, reclassified as temporary or part-time, or had their wages slashed, in a successful, decades-long campaign to increase the return to capital. Indeed, the only way to explain the soaring profit margins and stock values of recent years despite anemic increases in corporate revenues is that profits have come at the expense of labor. In forecasting the continued rise of profits in 2014, the chief economist for Goldman Sachs, Jan Hatzius, wrote: “The key reason is the continued slack in the U.S. labor market and the resulting weakness of nominal wage growth …. The subdued growth of unit labor costs has supported profit margins even in an environment of low price inflation.”

Contrary to Mr. Meyerson, I think that you’d expect exactly what has happened to happen in a very loose labor market, the opposite to happen in a tight labor market, and his organization supports a loose labor market.

He proposes eight different ways of increasing workers’ share of the pie:

  1. Legislate Wage Hikes in States and Cities
  2. Link Corporate Tax Rates to Worker Productivity Increases
  3. Link Corporate Tax Rates to CEO-Employee Pay Ratios
  4. Make Corporations Responsible for All Their Workers
  5. Help Create Benefit Corporations, and Don’t Tax Them So Much
  6. Help Workers Claim Their Share of Capital Income
  7. Raise Taxes on Capital Income and Redistribute It to Labor
  8. Change the Governance of Corporations

Of these I agree wholeheartedly with exactly two—#6 and #8—although I think we probably differ in exactly how we’d go about doing it.

I don’t think that Mr. Meyerson does a particularly good job of explaining why his proposals would have the results he claims to advocate rather than, say, reducing the amount of work available to Americans.

My own proposals would be somewhat different. I think I’d tighten the labor market here and stop incentivizing companies to send work overseas to avoid onerous and costly regulations, taxes, etc. There are different ways of effecting each of those but those would be my objectives.

{ 2 comments… read them below or add one }

TastyBits March 19, 2014 at 11:03 am

I would suggest that much of the income gap is the result of the wealth gap, and the existing wealth gap is the result of the 2008+ bailouts.

In reality, much of this wealth is paper assets not worth the amount printed on the paper, but the paper is still performing. This income is used to generate more income, and much of this newly generated income is the result of the government spending or Fed policy.

Had the bailouts not occurred, this wealth would have collapsed, and the wealth gap would not be as great. Since the wealth gap would not be as great, the income gap would not be as great.

Of course, it is difficult to raise money when your political donors are selling apples on the street corner.

Andy March 19, 2014 at 6:06 pm

Another irony is that some of what’s described is the result of union actions. Unions, both public and private, generally prioritize seniority above size of the workforce. There are so many cases where unions negotiate and get compensation increase which results in laying off workers.

My father-in-law will retire this year as a steelworker. Almost everyone at his plant is over 50. The reason is because new hires are always the first ones laid off and who wants a “union” job with no security? He strongly advised his son not to follow in his footsteps and it was good advice.

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