Sep 02 2013

A Labor Day Message from Robert Reich

Trimmings for Labor Day

Robert Reich

Sunday, August 25, 2013

The good news this Labor Day: Jobs are returning. The bad news this Labor Day: Most of them pay lousy wages and low if non-existent benefits.

The trend toward lousy wages began before the Great Recession. According to a new report from the Economic Policy Institute, weak wage growth between 2000 and 2007, combined with wage losses for most workers since then, means that the bottom 60 percent of working Americans are earning less now than thirteen years ago.

This is also part of the explanation for why the percent of Americans living below the poverty line has been increasing even as the economy has started to recover – from 12.3 percent in 2006 to around 14 percent this year. More than 35 million Americans now live below the poverty line.

But wait a minute. Over this same period, productivity has grown by nearly 25 percent. That means the typical American worker is now producing a quarter more output than he or she did in 2000.

So if wages have flattened or declined for the bottom 60 percent, yet productivity has increased, where have the gains gone? Mostly, to corporations and the very rich.

Few of these workers are teenagers. Most have to support their families. According to the Bureau of Labor Statistics, the median age of fast-food workers is over 28; and women, who comprise two-thirds of the industry, are over 32. The median age of big-box retail workers is over 30. These workers typically bring in half their family’s earnings.

They deserve a raise.

At the very least, the minimum wage should be increased from the current $7.25 an hour to $10.50 – and to $15 in areas of the country with a higher cost of living. Had the federal minimum simply kept up with inflation from the late 1960s, it would already be well over $10 today.

Unlike industrial jobs, these sorts of retail service jobs can’t be outsourced abroad. Nor are they likely to be replaced by automated machinery and computers. The service these workers provide is personal and direct: Someone has to be on hand to help customers and dole out the burgers.

And don’t believe critics who say any wage gains these workers receive will be passed on to consumers in higher prices. Big-box retailers and fast-food chains have to compete intensely for consumers. They have no choice but to keep their prices low.

This means wage gains for low-paid workers are most likely to come out of profits – which, in turn, would slightly reduce returns to shareholders and compensation packages of top executives.

It would not be a tragedy if some of these shareholder returns and compensation packages had to be trimmed in order that low-wage workers at McDonald’s, KFC, and Walmart got a raise.

Indeed, if this nation is to reverse the scourge of widening inequality, such a trimming is necessary.

1 comment

  1. ek hornbeck

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