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Why are wages stagnant?

For some, it’s hard to see why wages have been stagnant because the answer is politically incorrect. When people don’t like a politically incorrect answer, they suppose the real answer must be something more complicated than the obvious, even though they can’t come up with a stronger answer. I’ve reported on the reason for stagnant wages in the past, but recent declines in the job market continue to confirm my opinion, so the subject is worth a brief review.

 

Why are wages stagnant even though unemployment is back to pre-recession levels?

 

Everyone knows that wages are largely stagnant because high paying, full-time jobs have been replaced by low-paying, part-time jobs. That’s the surface answer, which is entirely correct but doesn’t reach to the “why.” At the same time, everyone now knows that most people who lost their jobs have dropped out of the work force so that unemployment is low only because those people who are not seeking jobs any longer (who have given up) are not counted. But how is it possible that the unemployment rate is down if so many people have failed to return to the work force?

That question is the elephant in the room that no on is talking about. Again, they settle for a surface answer that it is due to jobs becoming part-time, but that’s not the bottom “why.” So, here’s a straight and unpopular answer that digs deeper.

High-wage jobs lost during the Great Recession have been replaced with low-wage jobs because low-wage workers have been made intentionally and readily available by the government’s immigration policies. (Both the expansion of legal immigration and the turning of a blind eye toward illegal immigration.) That is the underlying reality that makes all of this possible.

Do the math. The number of immigrants allowed into the U.S. since the Great Recession began almost exactly equals the number of jobs lost in the U.S. during the same time period.

While neither Democrats nor Republicans will talk about this, the government has been, as I call it, “insourcing the outsourcing.” Big corporations with potent political lobbies have numerous jobs that have to be done inside the U.S.. Corporations like hotels, for example, were deprived of the kind of outsourcing to India and China and Mexico that helped manufacturing companies make more money under free-trade agreements.

Naturally, they would want the same benefit that was experienced by businesses that could move operations overseas; but, if you’re a hotel or a restaurant, the work has to be done where the hotel is located. It doesn’t do any good to move the hotel out of New York when that is where your hotel has to be to take advantage of that market.

The government’s answer on how to outsource jobs that have to be done inside U.S. boundaries is to bring in as many people as possible from the same countries to which we outsourced other jobs. Immigrants from those countries would naturally find minimum wage to be a huge raise from what they can get in their own countries. They will gladly come by any means the U.S. government allows to take those jobs at a wage and benefit level that would cause American workers to drop out.

You see, American workers are not resigned yet to living in corrugated tin shacks, as apparently they should be. Nasty American workers who feel entitled to living in a decent house with secure benefits in exchange for the labor they provide! Those entitled Americans went on an undeclared strike and dropped out of the labor force by retiring early if they could when participation meant downscaling to the tin shack.

 

What is the outfall of stagnant wages due to loose immigration?

 

The unintended result, however, is an economy that cannot get off the ground because the new work force cannot afford to buy any more than basic necessities. Nor is the new work force accustomed to high consumerism. They are used to economizing in ways the U.S. hasn’t seen since the Great Depression, so they’re not likely to energize the economy by spending money. So, even though the jobs that were lost in the Great Recession have been replaced, there is no power in the economic engine.

 

“With so many low-wage jobs created, there may not be sufficient income growth to boost demand and GDP growth beyond the current tepid pace.” (CNBC)

 

That’s right. When capitalists keep wages and benefits suppressed long enough, they kill their own market. Greed has a downside, and Capitalism says it will eventually become somewhat self-correcting if your take things down that far. The correction, however, is painful for everyone.

It is inevitable that the U.S. economy would stall when we’ve allowed in about one and quarter million immigrants since the Great Recession began who will gladly work for far less than natural-born U.S. citizens. How could it not stall with low-wage immigration at that level when jobs are already scarce? The United State’s immigration policies have forced gradual impoverishment upon the middle class by compelling middle-class American workers to compete against third-world laborers if they want to get their jobs back. Guess who lost?

Adjusted for inflation, middle class workers, make less today than they did in the seventies.

Now, even the creation of low-wage jobs is slowing back down. The economy created only 126,000 jobs in March, which was its worst showing in fifteen months until that number was subsequently revised down by about 40% to become the worst number in even more months.

Still, there is another contributing factor to stagnant wages, which is politically incorrect for half of American and will be refused as an answer by that half — ObamaCare.

 

Why are wages stagnant because of ObamaCare?

 

Consider two obvious financial factors that all employers have adjusted for when making room for ObamaCare. Whether you realize it or not, when companies budget for payrolls and when they decide how much they are willing to pay workers and how many they can afford to hire, they always include the cost of benefits. Surprise? Shouldn’t be. It’s obvious. It’s real money. Yet, the people pushing for ObamaCare never spoke of what impact it would have on employment. The math is simple:

ObamaCare raised the cost of insurance. Naturally all companies in the U.S. (since all are affected) would be highly disinclined to raise wages and highly inclined to lower them so that their payroll costs don’t go up. So, that suppresses wages that are already suppressed, and the cost if fairly substantial, so the wage suppression is fairly substantial. (Math is unfriendly lie that. It could care less whether you like the answer.)

At the same time, ObamaCare mandated that all full-time employees and close-to-full-time employees receive health insurance. That created a backdoor for companies to avoid this pressure and deal with the problem by turning full-time employees into part-time employees in order to avoid having to insure them. It’s a big incentive to go with a part-time labor voce. So, ObamaCare has contributed to the suppression of wages but also to the move toward part-time employees.

And guess who is most willing to work part-time? The most desperate. An immigrant will more gladly struggle with the difficulties that come from cobbling together two or three part-time jobs and more willingly live without benefits than a native American because it sure beats what that family had before moving here.

However, under ObamaCare, those that work part-time jobs don’t have to go uninsured because insurance will be provided for them by the government and will be paid for by the same companies that are paying to insure their employees. It all comes back aground in the end. Someone has to pay for it.

The cost of insuring so many more people has assured that wages stay down because the cost of benefits has risen. Again, it’s just math.

I’m not all that opposed to universal health care, and that’s because I hate to see poor people go without medicine in any country, especially our own, just because they cannot afford its high cost. Let us not, however, kid ourselves about the fact that implementing ObamaCare exactly when the economy was at its lowest point in decades and lacked resilience, certainly has applied a strain to an already failed economy.

The timing could not have been worse, and refusing to do the math is just economic denial. You can’t throw an extra sack of potatoes on a dying horse and expect the horse to keep moving.

 

 

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