![]() It’s great that others are starting to explicitly talk about wages. Doing so, however, won’t change the fact that a greater supply of more educated workers won’t happen for a while, and when it does it might mean a faster decline of college wages and not much of a wage boost for the non-college educated workforce. Sure, those with more education earn more, and we should definitely expand access to higher education. So, the problem is longstanding and, in my view, getting deeper and more entrenched.Īddressing wage growth is not simply a matter of more human capital, as we can see by the fact that white-collar and college graduate wages and benefits have been dead in the water for ten years or so. Wages were also stagnant for the entire 1979-95 period that preceded the late 1990s boom. As things stand, wages and compensation (wages plus benefits) have been stagnant across the board for about ten years, including the recovery from 2002 to 2007 and the downturn since 2007. Generating broad-based wage growth would require diminishing the immense leverage employers now have with nearly every type of worker, from low-wage service occupations to STEM workers to other white-collar workers. ![]() Increasingly inequitable wage growth means that the tax/transfer system will need to become increasingly progressive each year in order to obtain the desired equitable income outcomes (after-tax and transfers) that Brad correctly notes are the basis for more equitable patterns of social mobility. It’s easy to see why efforts to obtain more equitable income results must go beyond increasing transfer income to the bottom and middle and shifting the tax burden away from those income groups. Since wages and benefits are the predominant source of income for most families (at least in the bottom 99 percent), obtaining more equitable market outcomes necessarily means creating more equitable wage and benefit growth. But the failure to address wage growth is prevalent on the center-left, starting with the president. Along these lines we should, of course, further socialize retirement (make Social Security more generous and provide a universal mandatory savings to supplement Social Security benefits to obtain a higher income replacement rate) and continue down the path to a strong health care system. ![]() ![]() Sure, the bigger government and more public investment Brad recommends would provide more and better growth and, possibly, increased economic security. This issue must be front and center, or we will never generate the policies needed to achieve the broadly shared prosperity we all want. While Brad buries the goal of equitable wage growth in the grander category of “obtaining substantial equality of result right now,” I think economists and policymakers must explicitly focus on generating broad-based wage growth when discussing income inequality. But, like many of my colleagues on the center-left, Brad overlooks what I see as the key economic challenge of our time-generating broad-based wage growth. Last week, Brad DeLong posted what he called his “ Seven Cardinal Virtues Of Equitable Growth.” I (pretty much) applaud them all: manage the macroeconomy boost public and private investment shift from value-subtracting industries (health care administration, prisons, finance, carbon energy) to value creating sectors create a carbon tax more immigration obtain more equality of opportunity in 50 years by obtaining substantial equality of result right now a well-functioning economy will need a larger government (addressing health-care finance, pensions, education finance, research and early-stage development) relative to the private economy than the twentieth century did.
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