GOOSING THE ECONOMY….It might be a mistake to get dragged into this, but Mickey Kaus responds to yesterday’s snark about burger-joint economics with this:

I’m not denying income inequality is rising….My suggestion is only that if you keep the economy going and stop new immigrant entrants from flooding in at the bottom, entry-level wages will eventually rise and people will start complaining (as they did in the late 1990s) about the “U-shaped” economy in which the rich and the poor were gaining faster than the middle.

Set aside the immigration thing. I think the evidence suggests that immigration has — at most — only a small effect on wages at the low end (see here and here), but that’s certainly an arguable point. I’m more interested in Mickey’s contention, which he’s made more than once, that the real key to boosting entry-level wages is to “keep the economy going.”

Consider the evidence. The average income of families in the bottom fifth of the population has been flat for more than 30 years, through good times and bad. In the most recent five years of economic expansion, using the BLS data that Mickey points to, it’s been even worse: wages for the bottom 10% (after correcting for inflation) are flat. Wages for the bottom 25% are flat. Wages for the median worker are flat. And that was during a period of sustained economic growth. How long is it supposed to take for an economic expansion to turn into a tight labor market? Over the past three decades, the only time the median wage has increased significantly was during the late 90s, and that was thanks to the most intense, highest-flying bubble in a generation. We can’t count on that happening again any time soon.

I’m as big a fan of a hot economy as the next person, but the stubborn fact is that economic growth over the past three decades has produced next to no gains for the average worker. And even if it did, what’s the magic key to manufacturing an endless expansion? None that I know of. There’s a Nobel Prize waiting for the guy who can figure out how to do away with the business cycle.

I happen to think that median wage stagnation has gone on long enough that it’s plainly a serious problem and plainly something that needs to be addressed via policy. For some reason, the free market has disconnected wage gains from productivity gains in recent years, and there’s no indication that this is going to change on its own. For that reason, I favor things like a higher minimum wage, looser union organization rules, saner trade policy, more labor-friendly tax policies, and — yes — an immigration policy that would have the effect of reducing total immigration.

But just keeping the economy going and leaving it at that? Nobody knows how, and it doesn’t seem to work anyway. Unless we’re giving up, there has to be more to the answer than just that.

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