Sunday, December 7, 2014

How to End Wage Stagnation and Bring Back/Increase Jobs

Two of the most important issues facing our country is how to improve the wages of workers (as opposed to management), who make up the bulk of our workforce and whose spending accounts for a large share of our economy, and significantly increase the number of living-wage jobs either by bringing them back to this country or creating new ones.  These issues are important from a variety of perspectives: economic, of course, but also moral, societal and national security.

We have seen wage stagnation for the past few decades because workers no longer have any clout.  Whether a workplace is unionized or not, corporations haven’t given raises because they know that workers have no place else to go.  They can’t leave even if they are disgusted with their pay because alternative jobs just aren’t there.  They’ve gone overseas, making it an employer’s market.

So how do you change the situation?  There is going to be much talk in the coming months about revising the tax code, both for individuals and as it applies to corporations.  As a general matter, I would argue that any tax break for corporations should be tied to their better performance in a variety of areas affecting the public good, such as the environment and wage stagnation.

I would therefore suggest a new provision that would provide that if corporations give workers a percentage raise in a given year equal to the percentage rise in profit, then such corporations would get a tax break.  Corporations need to be incentivized.  Some might say they should be penalized if they don’t provide such a raise, but that would never fly in Congress.

The same is true for bringing jobs back to the US.  At some point, given increasing labor costs overseas and what will be increased transportation costs, it will make economic sense to bring jobs back here.  In the meantime, the government needs to provide a tax incentive for companies to expand domestic operations that provide living-wage jobs.

But in addition to the problem of jobs being sent overseas, one must face the following fact.   In an age of ever-increasing application of technology to the production process, the same number of jobs are not going to be created even if production is brought back because they just aren’t needed to produce the product.  

That means that a large share of the increase in good-paying jobs needed to keep the economy and the middle class robust will have to come in the form of public works projects.  Luckily, there is no end to the infrastructure projects, both improvements and new, that are desperately needed to support our country’s functioning at the highest level.  

Thus, the government will need to embark on an ambitious plan, similar in scope to the Interstate Highway System, to insure an ongoing strong economy, not just in terms of GDP increase but in the strength of the middle class.  The radical Right will no doubt respond by kicking and screaming about socialism and the deficit.  

But such a plan is even more justified now than the Interstate Highway was when Republican President Eisenhower proposed its enactment.  While Eisenhower’s rationale that the system was needed to improve the country’s defense was overstated (it was more honestly an economic measure), one can argue with a straight face that the proposed infrastructure plan is critical to the nation’s security, both in a physical functioning sense as well as in the strength of the economy.

This is a challenging time for the United States.  If we do not rise above petty bickering and join together to support a nation that is strong, not just in military might and the power of its multi-national corporations, but in the health and welfare of the average citizen, then we are doomed to become a shell of our former self, a Potemkin village.