Low bar of higher wages

Posted: 8 August 2016 in Uncategorized
Tags: , , ,


Last week, Alan Blinder (a professor of economics at Princeton University, former vice chairman of the Federal Reserve, and informal policy adviser to the Hillary Clinton campaign) made the case that Hillary Clinton’s policy package is more likely to raise workers’ wages than anything Donald Trump has come up with.

He’s right—but only because, like much else in the current presidential campaign, the bar has been set so low.

Consider Trump who, over the course of the past year, has argued pretty much every side of the wage debate. First, he was in favor of a low minimum wage, then he stated that wages are too high, then he considered the federal minimum wage too low, then he wanted to abolish the federal minimum wage, then states should decide what the minimum wage should be, and finally he’d like to see a $10 an hour federal minimum wage (and states should be able to legislate any increases above that). Phew!

And Clinton? As Blinder explains, her package includes a higher federal minimum wage, tax-deductible profit-sharing, increased vocational education and apprenticeships, pre-kindergarten education for all, and a more generous Earned Income Tax Credit.

They’re all better than anything Trump has offered—although we should keep in mind that, aside from the minimum wage (to $15 an hour, at least in the party’s platform, thanks to Bernie Sanders, and only “over time”), they’re all tax-financed subsidies to employers.


And they’re all steps forward only because of how far workers’ wages have fallen (even worse than Blinder himself admits).

As I showed back in July,

throughout the entire period of the so-called recovery (from June 2009 through May 2016), real wages for non-managerial labor have risen only 3.8 percent (from $20.48 an hour to $21.25)—and only 4.8 percent above their recessionary low (of $20.27 in October 2012)—and, in both cases, that’s mostly because inflation has been so slow.

If we take a longer view, things look even worse. Real hourly wages (in 2015 dollars) remain less than what they were in April 1978 ($21.48) and even further below their post-1964 peak ($22.37 in January 1973).

So, even though workers’ wages have been climbing, unevenly, from their absolute low (of $18.07 in August 1994), they still remain below what they were more than five decades ago.

So, yes, Clinton’s plan is a lot better than Trump’s bluster—but only because, in the United States, the political and economic bars have been set so low.

  1. womanity13 says:

    How adjusted is that latest spike? Retired, but seems even 1994 had much more real purchase value than anything since. Voodoo Reaganomics permanently crashed economic life in 1981 with even worse–Sixth Extinction level–consequences to the standard of living and environment. Please excuse amateur view, appreciate your work.

  2. David F. Ruccio says:

    We’re talking about $3 an hour (or $6000 a year) in real terms compared to 1994. But that’s using the Consumer Price Index, and we know workers face much higher prices in a whole host of categories, especially in healthcare and education. Not to mention insecure jobs, higher deductibles, contributions to their own retirement, and so forth. Higher real wages don’t mean life is necessarily easier for workers today.

  3. womanity13 says:

    Thank you. Those sweeping CPI exceptions make the “real” $3 seem near slavery in practice, imho, with no relief for bare necessities of life much less a sustainable civilization. Power to ya.

  4. […] jobs and the anti-labor bias of free-trade agreements, has argued that American workers’ wages are too high and economic policy should focus on lowering tax rates for corporations and wealthy […]

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