Commentary

Lowering wages won’t lead to recovery

Marketplace Staff Oct 6, 2010
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Commentary

Lowering wages won’t lead to recovery

Marketplace Staff Oct 6, 2010
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TEXT OF COMMENTARY

Kai Ryssdal:Everybody with a hand in the American economy — from Timothy Geithner on down — whether they’re talking about currency markets or economic stimulus or tax policy right is really talking about one thing.

Here’s commentator Robert Reich.


Robert Reich: Everyone’s worried about jobs, understandably. In all likelihood, this Friday’s jobs report will show that the jobs situations continues to be bleak. Some say the only way out is for jobless Americans to accept lower wages.

But this way of thinking just substitutes one problem — lack of jobs — for another. I mean, we could create tens of millions of new jobs if everyone was willing to work for, say, two dollars a day — which is the going rate in many developing nations, including China.

It’s no great feat to create jobs by becoming poorer. In fact, we’re already doing it. Since the start of the Great Recession, millions of working Americans have had to settle for lower wages in order to keep their jobs. Or they’ve lost higher paying jobs and can only find work that pays less. Or they’ve lost their benefits. Or their co-pays, deductibles and premiums have soared. And their employer no longer matches their 401(k) contributions.

Two-tiered wage contracts are the rage in labor relations. Older workers stay at their previous wage; new hires get lower wages and smaller benefits. Even wage freezes morph into lower wages as inflation eats into the value of the dollar. For three decades now, America’s median wage has barely budged, adjusted for inflation.

Some say the best way to get jobs back is push the dollar down relative to foreign currencies. A weaker dollar boosts our exports, because everything we sell is then cheaper to foreign consumers. And more exports means more jobs. But this is just another way of creating jobs by getting poorer.

A falling dollar means everything we buy from abroad becomes more expensive. Imports are around 18 percent of the U.S. economy, so a dropping dollar is exactly like an extra tax on 18 percent of what we buy.

Don’t be fooled. It’s no big accomplishment to create jobs by getting poorer. We’re already on the way. The real goal is to create more good
jobs.

Ryssdal: Robert Reich was the Secretary of Labor in the first Clinton Administration. His new book is called “Aftershock: The Next Economy and America’s Future.”

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