Interestingly, the experts quoted in the article -- "human resources" consultants, investment-banking professionals and academic economists -- express surprise at this "wage stagnation" trend, saying things like "the factors normally associated with higher pay have rebounded," that this trend "did not conform to traditional economic explanations," and that "Normally, real wages track productivity." The article described as "two unusual trends" the reality that "Wage growth has trailed far behind productivity growth over the last four years, and the share of national income going to employee compensation is low by historic standards."
Thus various "abnormal" conditions leading to the current loss of real wages are suggested by these experts: "soaring health insurance costs" or "a sudden spike in oil prices". Interestingly, the article argues that "Most economists" do not attribute the wage stagnation to "foreign competition from China, India and other developing nations". However it then quotes a representative of investment firm Morgan Stanley who attributes wage stagnation to "foreign competition; corporations that are moving jobs offshore; the uncertainty of businesses over demand; and management's ability to substitute computers and other devices to replace workers." (Are these all "abnormal" trends? I thought they were the expected consequences of the globalization and digitalization of the economy.)
One big problem with these explanations, besides the fact that the conditions they invoke are themselves now "normal," is that not all workers suffered flat wages in the last few years; instead, a polarization was at work:
The overall wage figures hide a split, with an elite group getting relatively large gains. In a study of census data, the Economic Policy Institute, a liberal research group, found that for the bottom 95 percent of workers, after-inflation wages were flat or down in 2004, but for the top 5 percent, wages rose by an average of 1 percent, with some gaining much more. The upper-income group enjoyed strong pay increases largely because of bonuses, stock options and other inducements and because of robust demand in certain fields, like law and investment banking."
Coupling this polarization with the "strong growth in corporate profits" cited in the article, it seems to me that it is incorrect to explain worker wage stagnation through appeal to external factors supposedly outside the control of capital such as health care costs and oil prices (especially since steady rises in both of those costs over the next decades, rather than being "sudden" and "unusual" trends, are instead among the most predictable aspects of our economy) or to the new rules of the game in the global digital economy (which we as a society must manage with the goal of social justice for our weakest members). Whether in uncertain or stable environments, corporate owners and managers, by definition, make strategic decisions about how to turnover their capital in the shortest time and with the greatest profit. Under the strategy these actors have chosen, all but the highest-demand laborers are increasingly threatened with replacement by technological automation, "offshore" competition, or, less sensationally but no less effective, a move by the firm to a neighboring city, county, or state.
Nowhere is the role of government -- at federal, state, or local levels -- discussed in the article, but I think it should be. If profits of corporations (and their owners) and salaries of "the top 5 percent" of workers (often including decision-makers in these same corporations) continue to rise while wages of the rest stagnate, perhaps this itself is the "unusual" economic trend which demands correction -- capping profits and salaries for the social good through labor organization, consumer action and, yes indeed, government regulation.
Source: Steven Greenhouse, "Falling fortunes of the wage earner," New York Times (12 Apr 2005).
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