The liberal wonks at the Economic Policy Institute are having a moment right now. They’ve been warning for years that middle-class wages were stagnating. Suddenly, as they put it in a new paper out today, “There is now widespread agreement across the political spectrum that wage stagnation is the country’s key economic challenge.” They’ve long called the decline in unionization the biggest factor in that stagnation; Democrats are increasingly embracing that argument.
Looking to seize that moment with the Democrats gearing up for 2016 – a list that absolutely starts with Hillary Clinton, the party’s presidential frontrunner - the group is releasing a detailed breakdown of the policies it believes will prove effective for lifting wages, and which plans would fall flat.
The policies that work, as EPI puts it, mostly break into two categories: ways to reduce unemployment and ways to empower workers. (You can see them all in this 11-point “Agenda to Raise American Wages.”)
The former includes continued monetary easing from the Federal Reserve – until such time as non-inflation-adjusted wages are rising at 3.5 percent a year, well above what wage growth is today – and increased government spending on research, infrastructure and direct employment programs. The latter includes raising the federal minimum wage, changing federal labor regulations to allow millions more salaried workers to collect overtime pay and, of course, making it easier to form unions. Conservative economists criticize all of those proposals.
EPI’s list of policies that won’t work contains almost anything you might find in a Republican presidential platform right now – tax and spending cuts - along with a lot of education measures favored by Democrats and Republicans alike.
“Policies that will not help to raise wages,” EPI’s Larry Mishel and Ross Eisenbrey write, “include individual or corporate tax cuts, austerity, increasing college or community college completion, deregulation, and policies aimed at increasing long-term growth.”
Pro-business groups in Washington are sure to recoil at almost every piece of the plan, except for EPI’s call for comprehensive immigration reform (on the premise that people working under the table draw lower wages than people working legally, thereby pulling down pay for everyone else).
They’ll especially hate the final piece: using the tax code “to restrain the growth of top 1 percent incomes” – through measures to discourage the growth of Wall Street, which research shows has delivered big income gains to financial professionals at the expense of the overall economy; to suppress CEO pay by tying corporate tax rates to a ratio of executive pay to median worker pay; and by raising top income tax rates on the highest-earning taxpayers.
Binding all the recommendations, economically and ideologically, is EPI’s long-standing argument that inequality and wage stagnation do not result from workers lacking the right skills to succeed in today’s economy, or from taxes being too high and government too large, but from an economic theft of sorts – the richest and most powerful Americans diverting the gains of economic growth from average workers to themselves.
As Mishel and Eisenbrey write, “stagnation is not inevitable. It is the direct result of public policy choices on behalf of those with the most power and wealth that have suppressed wage growth for the vast majority in recent decades.”
Wage stagnation, they add, was caused by bad policies. Which is why they believe different policies could fix it.