10 votes

Are low wages stalling America’s economy?

That's what Rex Nutting at MarketWatch thinks.

Low wages are holding us back. Since the official end of the recession more than four years ago, the average wage has barely kept up with inflation, even though workers are more productive and are creating more profits for the owners they work for.

Since June 2009, real average weekly earnings have increased 0.3% per year , even as productivity has increased 1.5% per year. Most of the income gains have gone to the highest paid workers, including the bosses. Real median weekly wages have actually declined 0.8% per year since 2009.

Slow income growth means consumer spending has also grown slowly. Most households are still trying to avoid taking on too much debt (like they did in the 2000s), so they don’t have the purchasing power to buy the additional goods and services that the economy could be producing.

If those additional goods and services can’t be sold, then businesses won’t hire the workers who would produce them, nor will they invest in the buildings or equipment that would be needed.

Continue at MarketWatch.

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The "Low Wages" issue is a boogieman distraction

Why do people keep falling for the same distractions? Wages aren't the problem. We could double or triple most wages in this country and those businesses would be just fine. In fact, they could often lower their prices at the same time. How? You tell me...

Retail price $100.00
Sales and marketing at retail shop $15.
.....Sales and marketing income taxes $1.50.
Retail overhead $5.
Retail financial expenses $25.
Wholesale price $50.
Retail profit $5.
.....Taxes to business $1.70.

Wholesale materials $6
Manufacture labor $11
.....labor income taxes $1.
manufacturing financial expenses $30.
manufacturing profit $3.
.....corporate taxes $.60.

Add up each of the various categories for each and both retail and manufacturing. It should be plainly obvious afterwards that the entire issue of minimum wage is moot and nothing but a divisive diversion.

Bonus question: If the web finally realized one of its goals (to consolidate retail and manufacture, by eliminating the sales and marketing), what would the numbers look like then?

bad logic

When someone claims that low income prevents consumers from spending money they don't have, my response is:

The employers wound up keeping more money by not giving it to their employees. These employers now have more money to spend.

When they spend it, it stimulates the economy and provides more jobs to people who have to produce goods and services for the employers.

Some of you are close, keep climbing up

so you can look down.

There are 3 major gravitational effects at work on the "American worker":

1. The graph starts roughly with the "post war" period, rather an ironic name since war never stopped after the "war to end all wars" but we came out of that one at a new pinnacle of industrial production and THE REST OF THE CIVILIZED WORLD WAS IN RUINS. Remember when Made In The USA meant it was the best? For a while that also meant it was probably THE ONLY choice you had. We had a virtual global monopoly on production.

2. Production costs (along with durability and longevity) have plummeted (along with values and ethics) as production has GLOBALIZED since then along with LABOR and increasingly with technology SERVICES. Brainshare has increased overseas while it's descending here. The American worker now competes with the Chinese and Indian worker. Seriously. Are you even paying attention? Lump all robotics and automation and 3-D printers right into this pile.

3. We all know the economic and monetary policy at work here.

4. Global population continues to boom. This is a factor in it's own right and it's a multiplying factor to all of the above.

5. We all know the folks in control increasingly see us as an impediment. We used to be a revenue generator and now we're a cost factor.

Given all this you know where we are and it's pretty easy to tell what's gonna happen.

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also the WWII bubble

We are only 60 years post WWII when the US seemed to have a monopoly on manufacturing in the west. Plus the east was under the sway of communism Now the other nations are getting on their feet and we have competition.

It does seem that regulatory state is killing initiative. We should at least be letting people help themselves at local level so people can get ahead without going $100,00 in debt for business or education loans.

Vickie

The graph is interesting

When I saw the graph ,, the thoughts I had come to my mind, My University presiden giving our commencement speach and saying how bad he felt that there were no jobs.. 86. And then I flashed to Bill Cinton, and I remember people were happy, buying, being paid .. there was money, because that's when I poiticaly connected the dots.. that this bump was the affect of being sold out..

And my feeling is that we are experienceing a controlled demolition of the republic.

And then there's always that war on drugs.. which gives us a prison industrail system that has corporations like Wachenhut that provide jobs for inmates earning less than a Chinese factory worker, and this is much of our export business, blue jeans, military uniforms.. domestic items..

It seems to me wages are about moving people around.. not allowing people to settle so to speak.. cash flows as people flow..

anyways, those are my random thoughts.. I think in terms of a living wage, which is a problem beyond mom wage.. for example, in many big cities many first responders are not paid enough to find a rental home near work.. they have long commute, which gives more burdons.. more gas, more insurance, more chance of accidents.. I've met people who communte 3 1/2 hours to work one way.

Gold is a more contant reference over time, IMO.

Back in 1972, I was making 2.5 gramsAu/hour

Free includes debt-free!

No, Communism

Globalisation, and corporate theft are stalling the economy, just as it is meant to.
Communism really only works when the majority of the population are peasants.

No, no no.

The stalling economy is keeping wages low.

The only way to increase the real price of labor is increase demand for it. Demand for labor is currently being suppressed by over-regulation and a bad tax regime.

If the US were the easiest place in the world to start a business with the lowest cost of doing business, employers would naturally bid up the price of labor.

Author of Shades of Thomas Paine, a common sense blog with a Libertarian slant.

http://shadesofthomaspaine.blogexec.com

Also author of Stick it to the Man!

http://www.amazon.com/Stick-Man-Richard-Moyer/dp/1484036417

Exactly.

People need to understand that things like corporate taxation actually help corporations by raising sharp barriers to entry thus keeping out competition. Regulation is the same way, and putting an X employee floor for some regulation just makes it that much more apparent.

Even with all the monetary hampering being done, if you made all regulatory agencies advisory only, and used the commerce clause to rescind state monopolies, like with insurance and health care provider licensing, all licensing, the economy would take off.

Let the FDA and USDA put warning labels, let the AMA and interior decorator unions put warning labels on unlicensed practitioners, let OSHA put warning labels, let them label up whatever they want but let people make choices.

Markets clear if allowed. Employees and retirees will become employers if not prevented.

We've seen the failure of fascism. Let's try freedom. As much as I do not want the welfare state, we could afford it better if we freed the markets.

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Yes low wages are definitely

Yes low wages are definitely stalling the economy. Of course the only way to fix that is to create such a demand for labor that wages must be raised in order to entice workers. In a few areas of the country like North Dakota and west Texas where they are drilling a lot of oil wells, that is exactly what is happening. McDonalds has to pay 16 dollars an hour go get anyone to work.
I am not sure how we get the manufacturing jobs back to this country when we have to compete with starving people in other countries that will work for 25 cents an hour. Perhaps a zero % corporate tax rate would entice some corporations to build some factories over here.

These facts are ignored

by the limo libs.

Are you are thinking this is the DAILY KEYNES?

I can't believe this is actually a post on the Daily Paul. HELLO what about Austrian Economics?!

Wages are an EFFECT, not a CAUSE. Consumer spending is too LOW?!? Yes, just stimulate spending with low interest rates. Sure. What a joke. That is the very foundation of what causes business cycles, booms and busts, which is the core lesson of Austrian economics. Ron Paul is very disappoint. (sp)

Everyone pondering over this "Market Watch" bs MUST...read...Mises blog... everyday... to understand more economics. Educate yourself please, read their stuff, or you will fall into the pit of despair of economic delusion.

Insanity.

(edit: just got trolled by Nystrom? methinks)

tasmlab's picture

Put that graph on a 100 point scale

And it would look pretty flat, with 2010 registering just a percentage point below the highest peak ever.

Not sure what to make of it.

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Suggestion - You might want to drop second 'ARE' In The Title..

Hope all is well with you and the family..

Boom!

No,

What's stalling America's economy is the government at every level telling the American people that they are not allowed to create wealth unless they do it in a completely unsustainable way(compliance codes), and they pay the government:

1. To allow them to do it(licensing)
2. Everytime they do it(sales tax)
3. Because they did it(income tax)
4. Because they did it somewhere(property tax)
5. Because one day they might not be able to do it(unemployment insurance)

I could really go on alot longer but I'm in the middle of something

Anyway, just think if we could take all that money and put it into capital investment...

Séamusín

Bingo.We've reached a point

Bingo.

We've reached a point where government is so costly and so intrusive that it's on autopilot to be a bigger and bigger drag on the economy. George Will has described it as like a growing number of barnacles on a ship - the greater the growth in barnacles the greater the drag on the ship.

Low wages are a symptom, not the cause.

Never trouble trouble til trouble troubles you. Fortune Cookie

Diamond Dog's picture

Yes, and get used to it.

Yes, and get used to it.

The Diamond Dog is a real cool cat. | Reporting on the world from an altitude of 420.

The plan,

that was executed by Corporate owned Politian's in both DEM/REP parties is the main reason. N.A.F.T.A. destabilized this Country at the family level on up!
1st- enable and make possible massive individual debt.
2nd- take the jobs away from the masses so they default.
3rd- Create an environment of fear and intimidation.
4th- Devalue the savings of the masses.
5th-??????

NOSHEEPLE

more like

lack of industrial jobs. No offence but any 15 year old can be a cashier. If you are doing the job of a 15 year old you will get paid like a 15 year old. Over regulation, and cronyism, and the government and fed sending all our resources to wall street is the problem. Main street doesnt need a hand out main street needs a break.

Michael Nystrom's picture

But that doesn't answer the question

Fine, you don't need a high level of skill to do most jobs anymore.

Most high skill jobs have either been shipped overseas or automated.

That being the case, and if the American economy is built on consumption, and people only 'get paid like a 15 year old' - then what?

Those jobs aren't coming back. We hear that all the time. And automation will eliminate more and more jobs.

I'm not against that, but the question remains.

All art is only done by the individual. The individual is all you ever have, and all schools only serve to classify their members as failures. E.H.

automation will eliminate jobs?

That's what they said about the car and about the computer.
Also, the economy is not consumption driven, it is savings driven.

“With laws shall our land be built up, but with lawlessness laid waste.”
-Njal Thorgeirsson