The Patriot Post® · Why Is Wage Growth So Slow?

The stock market is booming, unemployment is low, and consumer confidence is on the rise. In fact, a Bloomberg poll conducted over the summer revealed that workers “claimed their careers and financial dreams were improving — a number that tied for the record high in the poll’s four-year history — while a majority believed the stock market would continue its meteoric rise for the rest of the year.” Seems like the perfect environment for workers to put a little more money in their wallets, right?

Unfortunately, wages aren’t increasing, and most workers are wondering why they still can’t make ends meet when all the economic indicators are moving in the right direction and President Donald Trump keeps touting the economy’s strength.

Pinpointing the culprit for low wages isn’t easy. “Explanations for the falloff abound,” Robert VerBruggen writes in National Review. “Some say it’s a statistical artifact of one kind or another. Maybe the numbers are failing to capture the benefits of major technological gains that don’t cost a thing to the user (and thus produce no measurable ‘output’), such as Internet search engines. Maybe the data are thrown off by the increasing tendency of companies to stash profits overseas, removing them from the measured output of American workers. Maybe people are spending more time goofing off in the workplace, and their productivity during the time they actually work has gone up.”

That is perhaps more guesswork than economic theory. To be fair, there’s no single factor resulting in stagnant wages. Of course, there are politicians who claim to know the cure, but most of them favor bigger government programs, higher taxes on the rich, and a higher minimum wage. But none of these solutions is going to produce real wage increases over the long-term. Taking money from one group of Americans and giving to another sounds appealing to the masses, but it’s not a proven way to boost wages across the board.

VerBruggen continues, “Some economists point to the automation of routine tasks (which is to say, the substitution of capital for labor). Others point out that in developed countries, globalization typically takes the form of offshoring the most labor-intensive tasks. Further possibilities include massive accumulation of capital by the wealthy (the view of lefty superstar economist Thomas Piketty); a fall in investment prices, making capital more attractive relative to labor; and the declining bargaining power of workers thanks to the demise of unions and the consolidation of major industries.”

Hot Air’s Jazz Shaw has some interesting theories as well. Shaw suggests that when prospective employees “go in for the interview and the prospective employer offers you $16 dollars per hour instead of the $25 you were expecting, there’s a fairly good chance you’ll take it because it’s still a lot better than unemployment checks.” In fact, he argues, “If you try to push them too hard for more money there are others out there who will likely take it.” Possibly, but decades of relatively stagnant wages surely can’t be the result of interviewees being too shy to ask for big bucks.

Another possible cause of wage sluggishness relates to the impact of social networks. Sure, making business connections is important, but today’s young workers are more likely to network than in previous generations, so it’s hard to believe that workers have suddenly abandoned the importance of making connections with prospective employers. And while having connections is a good way to land a job, it doesn’t guarantee a high salary.

All these explanations are interesting and worth exploring, and they probably play some role, but there has to be more than social theory to explain what’s happening. What’s interesting is that few experts mention the tremendous growth in the size and scope of the federal government in the past 50 years. Certainly, the proliferation of policies, codes and mandates is costly to businesses both large and small. Maybe full- and part-time workers would enjoy higher wages if their employers didn’t have to hand over so much money to Uncle Sam before cutting their employees’ checks.

Clearly, solving this problem will require the type of political will and unity that we haven’t seen from Congress. Fortunately, we’re enjoying a strong economy in the first year of the Trump administration, so maybe the businessman-turned-president’s policies can help boost wages for American workers.