Our World in 2018

their employers, workers’ wages are
salaries in the medical industry. Every
year, the US wastes a trillion dollars –
about $8,000 per family – more than
other rich countries on excessive
health-care costs, and has worse
health outcomes than nearly all of
them. Any one of several European
financing alternatives could recoup
those funds, but adopting any of them
those now profiting from the status
quo.
A
related problem is increasing
market consolidation in many
sectors of the economy. As a
result of hospital mergers, for example,
hospital prices have risen rapidly, but
hospital wages have not, despite a
decades-long shortage of nurses.
Increasing market concentration is
probably a factor underpinning slow
productivity growth, too. After all, it
seeking and monopolization than
through innovation and investment.
Another problem is that the US
federal minimum wage – currently at
$7.25 per hour – has not increased
since July 2009. Despite broad
public support, raising the minimum
wage is always difficult, owing to
the disproportionate influence that
wealthy firms and donors have in
Congress.
Making matters worse, more than
20% of workers are now bound by
non-compete clauses, which reduce
workers’ bargaining power – and thus
their wages.
Similarly, 28 US states have now
enacted so-called “right-to-work” laws,
which forbid collective-bargaining
arrangements that would require
workers either to join unions or pay
union dues. As a result, disputes
between businesses and consumers
or workers are increasingly settled out
of court through arbitration – a process
that is overwhelmingly favorable to
businesses.
Yet another problem is outsourcing,
not just abroad, but also within the
US, where businesses are increasingly
replacing salaried or full-time workers
with independent contractors.
The food servers, janitors, and
maintenance workers who used to
be a part of successful companies
are now working for entities with
names like AAA-Service Corporation.
These companies operate in a highly
competitive low-wage industry, and
opportunity for advancement.
The earned income tax credit (EITC)
has provided a boost in living standards
for many low-paid US workers. But,
because it is available only to those
who work, it puts downward pressure
on wages in a way that unconditional
would not.
Unskilled immigration also poses
a problem for wages, though this
is controversial. It is often said that
immigrants take jobs that Americans
do not want. But such statements are
meaningless without some reference
to wages. It hard to believe that lowskilled
Americans’ wages would
have remained as low as they did in
the absence of inflows of unskilled
immigrants. As the economist Dani
Rodrik pointed out 20 years ago,
globalization makes demand for labor
more elastic. So, even if globalization
does not reduce wages directly, it
makes it harder for workers to get a
pay raise.
Another structural problem is that
the stock market rewards not just
innovation but also redistribution from
.T
G
has grown from 20% to 25% over the
same period that median wages have
stagnated. The increase would be
even higher if executive salaries were
.
OUR ECONOMIES
The final problem on our
preliminary list is political. We have
.
The Consumer Financial Protection
Bureau, despite having uncovered
major scandals, is now under threat,
as is the 2010 Dodd-Frank legislation,
which introduced measures to prevent
another financial crisis. Moreover,
President Donald Trump has indicated
that he wants to eliminate a rule
requiring money managers to act in
their clients’ best interest. All of the
deregulatory “reforms” currently being
proposed will benefit capital at the
expense of workers and consumers.
The same is true of US Supreme
Court rulings in recent years.
The court’s decision in Citizens
United v. FEC, for example, gave wealthy
Americans and even corporations
the ability to spend almost unlimited
amounts to support candidates and
engineer legislative and regulatory
outcomes that work in their favor.
If this account of stagnant median
wages and rising top wages is correct,
then there may be a silver lining to our
era of inequality, because it means that
the US’s dysfunctional labor market
is not an irremediable consequence
of unstoppable processes such as
globalization and technological change.
Broadly shared progress can be
achieved with policies that are designed
workers. And such policies need not
even include redistributive taxation,
which many workers oppose. Rather,
they can focus on ways to encourage
competition and discourage rentseeking.
With the right policies,
capitalist democracy can work better
for everyone, not just for the wealthy.
We do not need to abolish capitalism
or selectively nationalize the means
of production. But we do need to put
the power of competition back in the
service of the middle and working
classes.
OUR WORLD | 2018
Copyright: Project Syndicate, 2018. www.project-syndicate.org
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