It’s the Wages, Stupid
In an astonishing reversal, The New York Times publishes a call for the Biden administration to raise America’s wages.
You can’t get much more mainstream than The New York Times. Our national paper of record has made and destroyed careers in politics, entertainment, and finance. It has served as America’s compass in moments of great stress, pointing the way forward when war and disaster threw the nation’s future in doubt.
That’s important to note because The New York Times published a remarkable editorial at the end of November that could well change conventional economic thinking for a generation. The editorial board called for the incoming Biden administration to prioritize raising America’s wages above everything else. And by calling to raise America’s wages, they made the essential point that doing so would be good for the whole economy.
But don’t take my word for it. Let’s read the Times editorial board’s own words:
Raising the wages of American workers ought to be the priority of economic policymakers and the measure of economic performance under the Biden administration. We’d all be better off paying less attention to quarterly updates on the growth of the nation’s gross domestic product and focusing instead on the growth of workers’ paychecks.
Set aside, for the moment, the familiar arguments for higher wages: fairness, equality of opportunity, ensuring Americans can provide for their families. The argument here is that higher wages can stoke the sputtering engine of economic growth.
The Times has absorbed the lessons of Seattle’s Fight for $15, and they have come to the conclusion that when more people have enough money to fully participate in the economy, the economy is stronger for everyone.
In order to understand how big a deal this is, we have to look back to January 14th, 1987, when The New York Times’s editorial board published a piece calling on lawmakers to lower the federal minimum wage from $3.35 an hour to zero dollars an hour. Titled “The Right Minimum Wage: $0.00”, the editorial doesn’t waste any time getting to the point:
“Anyone working in America surely deserves a better living standard than can be managed on $3.35 an hour,” the Times conceded, before lowering the boom: “But there’s a virtual consensus among economists that the minimum wage is an idea whose time has passed.”
This editorial marked the height of the trickle-down economics era, when Ronald Reagan’s calls to slash taxes, regulations, and wages was fully absorbed into the economic mainstream. The “virtual consensus” that the Times alludes to was the mistaken belief that if the federal government cut the minimum wage to nothing, everyone who wants a job could find one — even if that job only paid a few quarters an hour. When full employment is reached, the wisdom of the free market and workplace competition would supposedly raise wages even higher than before. Trickle-down even wormed its way into the imaginations of leading Democrats — so much so that they often bought into the false idea that large minimum-wage increases could kill jobs and raise costs.
Nearly 34 years later we can see the folly behind the Times’s thinking. The federal minimum wage has been $7.25 an hour for over a decade, and America’s wages are still artificially low. With all this information in mind, The Times has now changed course. We’ve tried it the trickle-down way and the typical American experience is objectively worse. It’s time to raise America’s wages.
In fact, the past 40 years of trickle-down doctrine has exacted a massive toll. As I’ve mentioned before, a new report from RAND calculated that over the last four decades, the wealthiest .01 percent of Americans have taken some 50 trillion dollars from the bottom 90 percent of all Americans. These stolen profits are directly attributed to the policies promoted by mainstream economists, such as a low minimum wage, fewer regulations, and shockingly low taxes on the wealthy and corporations.
If I had a nit to pick with this new Times editorial on wages, it’s that they didn’t set a figure identifying how high American wages should be. Now that RAND has supplied a price tag for American income inequality, we can see exactly how much the median American worker would be making right now if we hadn’t fallen prey to 40 years of trickle-down economics.
Put simply, the median American worker should be earning between $48,000 and $63,000 more per year.
Imagine what your community would be like if you and all your neighbors had that kind of money to spend. Picture the restaurants and shops and services that would be thriving thanks to your increased spending power, and the good-paying jobs that would be created by your increased consumer demand. People would be able to start small businesses, and invest in their kids, and not live as though they’re always one paycheck from disaster.
Try to imagine what your local government would be capable of, if taxes took these higher wages into account. Rather than scraping up pennies from rainy-day funds to keep basic safety net services limping along, lawmakers could have combated the pandemic by paying people to stay home and help businesses hibernate through lockdowns. Teachers and social service workers would be rewarded for their hard work. So-called “essential” workers would be suitably compensated for their hard work and sacrifice. Rather than a handful of billionaires hoarding hundreds of billions of dollars over the past few months, we’d have an economy that would come roaring back to life once vaccines were distributed.
So, yes, The New York Times is exactly right. The mainstream has finally rejected trickle-down thinking that only benefits the wealthiest Americans. Now it’s time to start taking America’s wealth back by raising America’s wages — by a significant amount.
