You Cannot Fix the Economy without Raising Wages

It’s tiresome to continue repeating the same mantra again and again, but it must said once more: until wages go up, the economy will still continue to fail the middle class:

The economy is adding jobs at a rapid pace, the Labor Department reported Friday, but there’s still one major holdout to the recovery: wages.

Employers increased their payrolls by 295,000 workers in February, exceeding expectations, and the unemployment rate fell to 5.5 percent, its lowest point since spring 2008. But wage gains continued to lag, rising only 0.1 percent in February for private-sector workers after a reported 0.5 increase in January. That resulted in a mere 2 percent advance over a year earlier, washing away the encouraging jump in January.

Job growth is good, of course, but most of the jobs tend to still be lower-wage service industry work.

Job growth last month was heavily concentrated in the service sector, with leisure and hospitality adding 66,000 jobs, as well as an expansion of 54,000 jobs in education and health. Construction added 29,000 jobs in February, while manufacturing increased a modest 8,000. Gains were also made in professional services and the trade and transport sectors.

For decades now public policy makers have disguised wage stagnation by inflating asset values, financializing the economy, democratizing debt via credit, and using free trade policy to decrease the price of consumer goods at the expense of domestic jobs. The Great Recession was just one of the many bills that came due as a result of that misguided approach to economic policy.

It will be impossible to fix what is broken without fixing wages. Unfortunately, wages won’t magically increase on their own: a combination of plutocrat-friendly policy decisions combined with mechanization and globalization ensure it. It will take active management to soften the blows of the latter and undue the corrupt mistakes of the former to bring wages back up to where they belong in a functional economic machine.

David Atkins

David Atkins is a writer, activist and research professional living in Santa Barbara. He is a contributor to the Washington Monthly's Political Animal and president of The Pollux Group, a qualitative research firm.