Why wages won't rise
Jobs are coming back, but pay isn鈥檛. The median wage is still below where it was before the Great Recession. Last month, average pay actually聽.听
What鈥檚 going on? It used to be that as unemployment dropped, employers had to pay more to attract or keep the workers they needed. That鈥檚 what happened when I was labor secretary in the late 1990s.
It still could happen 鈥� but the unemployment rate would have to sink far lower than it is today, probably below 4 percent.
Yet there鈥檚 reason to believe the link between falling unemployment and rising wages has been severed.
For one thing, it鈥檚 easier than ever for American employers to get the workers they need at low cost by outsourcing jobs abroad rather than hiking wages at home. Outsourcing can now be done at the聽聽of a computer keyboard.
Besides, many workers in developing nations now have access to both the education and the advanced technologies to be as productive as American workers. So CEOs ask, why pay more?
Meanwhile here at home, a whole new generation of smart technologies is taking over jobs that used to be done only by people.听 Rather than pay higher wages, it鈥檚 cheaper for employers to install more聽.
Not even professional work is safe. The combination of advanced聽sensors, voice recognition, artificial intelligence, big data, text-mining, and pattern-recognition algorithms is even generating smart robots capable of quickly learning human actions.
In addition, millions of Americans who dropped out of the labor market in the Great Recession are still jobless. They鈥檙e not even counted as unemployment because they鈥檝e stopped looking for work.
But they haven鈥檛 disappeared entirely. Employers know they can fill whatever job openings emerge with this 鈥渞eserve army鈥� of the hidden unemployed 鈥� again, without raising wages.
Add to this that today鈥檚 workers are less聽economically secure than workers have been since World War II. Nearly one out of every five is in a part-time job.
Insecure workers don鈥檛 demand higher wages when unemployment drops. They鈥檙e grateful simply to have a job.
To make things worse, a majority of Americans have no savings to draw upon if they lose their job.听聽of all workers are living paycheck to paycheck. They won鈥檛 risk losing a job by asking for higher pay.
Insecurity is now baked into every aspect of the employment relationship. Workers can be fired for any reason, or no reason. And benefits are disappearing. The聽
Workers used to be represented by trade unions that utilized tight labor markets to bargain for higher pay. In the 1950s, more than a third of all private-sector workers belonged to a union. Today, though,聽of private-sector workers are unionized.
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聽higher profits.
The results have been touted as 鈥渆fficient鈥� because, at least in theory, they鈥檝e allowed workers to be shifted to 鈥渉igher and better uses.鈥� But most haven鈥檛 been shifted. Instead, they鈥檝e been shafted.
The human costs of this 鈥渆fficiency鈥� have been substantial. Ordinary workers have lost jobs and wages, and many communities have been abandoned.
Nor have the efficiency benefits been widely shared. As corporations have steadily weakened their workers鈥� bargaining power, the link between productivity and workers鈥� income has been severed.
Since 1979, the nation鈥檚 productivity has risen聽, but workers鈥� median compensation has increased by just聽. Almost all the gains from growth have gone to the top.
This is not a winning corporate strategy over the long term because higher returns ultimately depend on more sales, which requires a large and growing middle class with enough purchasing power to buy what can be produced.
But from the limited viewpoint of the CEO of a single large firm, or of an investment banker or fund manager on Wall Street, it鈥檚 worked out just fine 鈥� so far.
Low unemployment won鈥檛 lead to higher pay for most Americans because the key strategy of the nation鈥檚 large corporations and financial sector has been to prevent wages from rising.
And, if you hadn鈥檛 noticed, the big corporations and Wall Street are calling the shots.听
