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Robert Reich (Why Wages Won’t Rise) – I think he’s right

None of these changes has been accidental. The growing use of outsourcing abroad and of labor-replacing technologies, the large reserve of hidden unemployed, the mounting economic insecurities, and the demise of labor unions have been actively pursued by corporations and encouraged by Wall Street. Payrolls are the single biggest cost of business. Lower payrolls mean higher profits.

via Robert Reich (Why Wages Won’t Rise).

For whatever reason lately, Facebook has been showing me items from robertreich.org as “new” even though they’re months old. The piece above is from January, I think it is still true today. I haven’t seen much wage growth in the economy at large. All of the reasons that Reich gives appear intuitive. If you have studies suggesting otherwise, I’d certainly read them. I hope we can agree that unions are pretty much under continuous attack. If you don’t, I don’t believe you’ve been following either the Republican Presidential primary race or the recent to-do’s over employee unions in Alaska, Kansas and Wisconsin.

While the incentives for individual corporations to reduce wages and worker rights as much as possible are enormous, it’s not sustainable. In the United States we live in a consumer driven economy. The economy needs sales in many sectors to grow. The 0.1% just do not have enough needs and wants to spend the same amount of money that the bottom 99% used to spend. So eventually, when all of the high wage jobs in this country have been outsourced or automated, consumer spending will go into free fall and business will fail on an economy wide scale.

It’s a classic tragedy of the commons. A confident middle class with money to spend is important to the economy as a whole. But driving wages to the bottom gives near term profits to any individual company. That’s why I believe in a mandated living wage, limits on working hours without overtime pay and stronger unions.

If you don’t like those ideas what are yours? What market incentives can we give to American business so that sustaining a viable middle class aligns with individual companies as well as the economy as a whole?

Reference:

US wealth inequality – top 0.1% worth as much as the bottom 90% – http://www.theguardian.com/business/2014/nov/13/us-wealth-inequality-top-01-worth-as-much-as-the-bottom-90

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