Another Take on Slow Wage Growth, Part II

Yesterday, I elaborated on a WSJ article and some historical data highlighting slow wage growth.  While some policymakers may just shrug and insist that slow wage and GDP growth are the “new normal,” others seem to believe that simply waving the magic $15 minimum wage wand will fix everything.  Both are wrong.  Here is what could and should be done, regardless of what side of the political aisle we’re on:

  • Corporate tax reform now.  The mere suggestion of corporate tax reform ia controversial, as “wage justice warriors,” (my reference) accuse reformers of siding with “big, greedy” companies and ignoring the plight of the worker bee.  But Laurence Kotlikoff, economics professor at Boston University, who is well-respected by both the right and the left, has found that the burden of the corporate income tax falls on the worker bee in the form of reduced wages.  Read his study here.  He estimates that replacing the corporate tax entirely with a wage or consumption tax would boost wages by up to 12 percent.  It would also boost GDP immediately by 6 percent!
  • Wage and benefit flexibility now.  In Part I, I showed that over ten years, the growth in the cost of benefits has slightly surpassed the growth in wages.  In an ideal world, where people are free to determine their own benefits that best fit their needs, wouldn’t it be nice if some benefits could be waived in exchange for more pay or vice versa? For instance, Rather than relying on costly mandates, the government should consider policies that increase workplace flexibility.  For instance, many employees would prefer to receive compensatory time off in lieu of overtime pay, but the Fair Labor Standards Act (FLSA) requires overtime work to be compensated with time-and-a-half cash wages.  This means that employees who work extra hours one week are unable to offset those hours with comp time in a subsequent week.  Since the 1970s, federal and state employees have been allowed to substitute comp time off in lieu of overtime wages.
  • Flexible health plans now.  One benefit that is sapping young workers of any wage increases they get is the requirement that they must purchase a “bells and whistles” health care policy under Obamacare.  My colleague, Devon Herrick, recently addressed this in a Townhall column.  Young workers, who tend to earn less on the age/earnings continuum, can no longer purchase limited benefit plans (mini-med plans) that fit their budget and allow them more take-home pay to spend on other goods.  Devon notes, “High medical spenders tend to be older individuals whose bodies are damaged from years of neglect and poor lifestyle choices…In an attempt to transfer subsidies from low-spenders to big-spenders, Obamacare has purposely undermined affordable coverage.”  Bottom line:  younger workers are screwed.
  • Less regulatory burden now.  Mandated benefits are just a portion of the regulatory burden faced by businesses, especially smaller, start-up firms.  According to the Small Business Administration, regulatory costs are nearly $11,000 per employee for firms with less than 20 employees.  This means more money going to compliance, less going to investment in capital and workers.  On the bright side, the JOBS Act, passed in 2012, eased some of the requirements for small firms that were created under Sarbanes-Oxley.  But more needs to be done.
  • Support high-paying jobs, dirty jobs and skill enhancements now.  From reading Internet news, one would think that 90 percent of U.S. workers are employed in fast food or big box retail.  Not a day goes by that there is not some protest somewhere demanding some wage that is way beyond the level of skill required for the job.  A better idea would be – instead of wages that must accommodate skill sets, how about skill sets accommodate wages?  If workers want $15 or more an hour, why not learn the skills that pay $15 or more an hour?  Not only would this require public policy change by resisting the temptation to mandate a $25 wage for a fry cook, but attitude change by individuals as well.  According to the Bureau of Labor Statistics, among 20 of the highest paying jobs are surgeons, anesthesiologists, psychiatrists, dentists and family and general practitioners.  Not into years of med school and six figure debt?  How about nurse anesthetists, architectural and engineering managers, petroleum engineers, information systems managers, marketing managers or air traffic controllers?  All have a median annual salary of over six figures.  Meanwhile, while Hillary is on her “coal apology” tour in West Virginia, she might take note that all of those dirty jobs she and the president have been gleefully working to destroy pay quite well, with median hourly pay far above $15 an hour.  Same for tool and die makers, millwrights, industrial engineering technicians and many others.  Ironically, politicians on the left bemoan the loss of manufacturing jobs, but they quickly pick and choose the ones that shall remain in the United States, while turning their noses up at entire industries that don’t fit their political special interests.

This might be a start to jump-starting wage growth and GDP growth.  Or maybe I’m just being unreasonable.  At any rate, we don’t have to accept the new normal.

 

 

 

 

 

 

Comments (1)

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  1. Brian Williams. says:

    Great post, Pam.

    Congress: Are you listening?!

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