The Wage War

We Americans like simple, easy to distort constructs in our politics. “Tax and spend”, “fiscal responsibility”, “corporate excess”, and “union corruption” are all easy to sell ideas. When I write articles here or at The Pigeon Post, it goes without saying that provocative and opinionated articles are more widely read than carefully constructed pieces on economic policy. Will a politician cut my taxes or advance a program that I support, becomes the simple question that is asked and answered by campaign ads. As we are at the beginning of a long climb out of our economic downturn, this election is beginning to pivot on household money which, for most of us, means hourly wages.

Would the economy be better if there were less limitations on top producers (real or perceived) to earning money? Would the economy be better if a larger percentage of households had the opportunity (real or perceived) to earn more money? Would the economy be better if there were stronger safety nets in place? All of these questions are asked with regularity, and to an extent, the answers can define a person as liberal or conservative. But this cycle, beginning last November with questions about worker compensation at General Motors, has become more focused on how much fault to assign to workers that are paid a decent wage. We have begun to attack the success of regular working people.

There is a firestorm brewing in Connecticut, where the Republican candidate broached the subject of freezing the growth of the minimum wage. The wage floor, which has been a political football for an eternity, is always fun to kick around in the closing weeks of elections. Democrats have used it as a lever to encourage low income demographic voters to come to the polls, Republicans use it to leverage donations and support from small businesses (and Wal-Mart). The reality of the minimum wage is that it is a virtually meaningless floor; a distraction from important economic discussions. The real issues of compensation, in the U.S. economy, lie in health benefits, retirement, and what I will label here as union-level wages. We will look at the growing irrelevance of the wage floor first.

At the average cost of child care in the U.S. ($611 per month), it would take a minimum wage earner about 89 hours at work to break even. With most minimum wage jobs filled by part-time hires (so that firms can avoid fringe benefits like health care), the typical worker with one child would have difficulty breaking even when transportation costs are calculated. The wage does act to set the bottom of the wage market, but that could be accomplished more efficiently by taking the restraints off of organized labor. Libertarians beware, the ability to organize is no more or less a market force than anything else a business must face. Democrats, long in the thrall of traditional unions and long suspicious of simple economics, have missed opportunities because of their support for the minimum. But this point brings us neatly to the real issues of compensation faced in this cycle.

Business interests and their political allies, namely conservatives, have chosen to take aim at unions and the U.S. hourly worker. They aren’t aiming at the inefficiency of union breaks or the tendency of unions to cover for unproductive workers, they are focused on the wages and benefits specifically. Beginning with attacks on auto workers last year, the conservative movement has moved on to every other industry in America. They attacked union miners in the wake of the Upper Big Branch collapse. They attacked union teachers in New Jersey. They have now opened up the offensive to include every public service union in the country. We are bombarded by campaign messages and speeches telling us that state and municipal budgets are in deficit because of expanding costs, and that those costs exist because of unions.

Median U.S. household income has been stagnant for more than a decade…this means that the average working family is making do on less than they did in the 90’s. It is curious that some politicians and pundits think that this fact makes it the right time to attack classes of workers whose wage and benefit levels have kept pace with the economy. Another departure from reality is found when one breaks down the assumptions of the previous paragraph; with few exceptions, state and local governments aren’t in deficit because of exploding costs, they are hurting because of explosive declines in revenue. The bursting of the housing bubble deflated the budgets for school districts, firehouses, and police precincts across the nation, and those are services that few want to see scaled back.

We are being told that the wages and benefits of these unions, and those of non-union workers in the same economic sectors, are the reason for our economic problems. If they would just lower their demands, our jobs wouldn’t be shipped overseas. If there were no minimum wage, smaller firms could compete with foreign markets. This is nothing less than a load of horse-dung. The average wage in China is less than $700 per month. The average wage in Mexico is less than $600 per month. Thailand checks in at less than $400 per month. Interestingly, workers in all three of these countries are free from worry about where they get there health care. When one considers these numbers, the question becomes obvious: how low would U.S. wages have to fall for us to be “competitive” with other countries? Are those who support these attacks on union-level wages of the belief that a $4 per hour job base is good for the United States?

The notion that we should allow our public infrastructure to crumble, our public eduction to falter, and our wage levels to drift into third world status, just so the most successful business interests can get richer is disgusting. The idea that, through the success of those at the top, the economic status of the rest of the nation will improve has been thoroughly debunked. Untaxed income does not trickle down; the number of U.S. millionaires has continued to expand in this recession even while working households continue to falter. There is a pathetic and infuriating contradiction in the economic arguments of this election cycle; we are told that those who lack jobs do so because they are lazy or spoiled, or unmotivated. At the same time, the same jaded souls attempt to blame those who work in public service jobs for a good wage (firefighters, police, teachers, road-workers, agricultural support workers, and others) for the economic problems in our nation.

Well aside from the services these folks provide, the wages of everyday Americans go directly into the economy. It is simple math and reality friends, working Americans regardless of their level of thrift, cannot afford to hoard high percentages of their paychecks. Wages from union workers go to groceries, utilities, mortgages, and retail. Wages from union workers pay for the “success” of small and big business alike. It isn’t immediately apparent that cutting the wages for teachers to give more money to Wall Street titans is either more fair or better for the economy at large. Our economy is suffering because it lost $2 trillion of demand when the housing bubble burst. It is the cause of the lion’s share of our current deficits at the federal, state, and municipal level. It is the cause of most of the layoffs of the past 36 months, layoffs that do nothing more than breed more layoffs. The only thing that cutting wages does is cut more demand out of the economy, and our economy needs all of the demand it can find.

The Rational Middle is listening…

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