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Archive for January 21st, 2011

Ezra Klein indirectly rebuts my post from last night (of course I’m under no illusion that he has read it). He argues that it’s hard to pay workers well in America. I think he’s wrong, but this is the crux of his argument:

So then the question is why were manufacturing jobs traditionally high-wage jobs? There seem to be a few answers to this (unions, industrial policy, capital intensity, etc), but the one that I’ve found most persuasive is that they could be. To a degree I really didn’t understand before picking through the endless tables and graphs in ‘Where Are All The Good Jobs Going?‘, high wages were a choice that businesses could make. Some of them were forced into making that choice through unions and some of them were lured into making that choice because they wanted the best workers. But a lot of them just made that choice because, well, they could…

Foreign competition has made the wage gap between different sorts of workers vast: Paying American workers a good wage while the other guy pays Thai workers a bad wage leaves you at much more of a competitive disadvantage than paying American workers a good wage while the other guy pays American workers a mediocre wage. Unions are partially in decline because of policy, but they’re partially in decline because these forces make it very hard for them to survive. Bottom line? It’s hard to pay workers well in America now, even if you want to…

I’d really like to find an answer that’s more interesting than “education” here. And maybe I will. I’m toying around with the idea that we’re in a weird interregnum period in which a lot of other countries have become rich and educated enough for their workers to compete with our workers but not quite rich and educated enough for their workers to begin buying things from our workers, and that this’ll largely sort itself out as time goes on.

I don’t think Ezra’s last paragraph will bear much fruit- these forces of globalization seem unlikely to equilibrate. Regarding his fallback of education, I think most of my rebuttal comes in my post from last night, which of course is completely ripped off of Larry Mishel’s excellent work. The important fact, though, is that profits have been doing just fine- yes, they fell during the crisis, but they have soared in the recovery.

Profits show that businesses can choose to pay better; however, because labor is weak, they don’t, and because their political power is strong, they have to give back relatively less in corporate taxes. The power gap is the reason why businesses can afford to pay better wages, and create more jobs, but choose not to. The power gap will not go away on its own, but will only accelerate without a political movement to restructure our economy.

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