Raising Wages Can Increase Employment

The unemployment problem we are currently facing is more than just an unemployment problem.  In fact, there is an employment problem.  According the Steven Greenhouse in his book, The Big Squeeze, employees have seen stagnant wages as adjusted for inflation for about the past 30 years while the pay of CEO's has risen nearly 300% for most profitable companies.

Furthering that astounding artifact of the labor force, according to data retrieved by the Bureau of Economic Analysis, November showed that corporations boasted the highest profits ever recorded (at least in the last 60 years).  It seems the recession is affecting the lower rung of workers (and not so working people) more than anything.

It's enough to induce a bit of head scratching about our economic ideology behind just what spurs the economy.  Should we be buying, buying, buying, to help jump start the economy?  It seems as though we must be spending our money, or else how can those profits be so inflated?

On a side note, one might ask, 'If profits are this high during a recession, than just how helpful would a tax cut extension really be to the working folk?"

All my liberalism aside, I fight with the moral dillema of fantasizing about a regulated wage increase.  It's so very counter-free market.  I think idealistically, if corporations had free reign and taxes were exteremely low or nonexistant, competition could increase, personal wages would be a bit higher, and the market would regulate itself to a certain extent.

In that train of thought, though, I find myself considering the many variables that contribute to our extremely low wage situation. 

• Globalization and outsourcing
• Increased mechanical technology
• The proliferation of the global village
• Corporate lobbying
• Shareholder pressure

I'm not going into detail about all of those reasons for decreased wages, but what I will say, is that the situation is a bit more complex than cutting taxes or paying for job improvement programs.  We can't simply increase unemployment benefits and other so-called entitlement programs, when the issue is that many Americans are not the lazy, tax sucking drain on society that we all wish they were so we could argue for lower tax rates.  No.  They are actually working.  As as social service worker (formally, anyway--because, it cost too much for me to work), I can attest to the fact that many people seeking some form of assistance not only worked 40 hour a week jobs, but most had second jobs.  Many even had a full-time working spouse. 

The middle class is no longer with us, and the lazy entitlement grabbers have become the work horses of America. 

Why, then, would I suggest that companies should pay higher wages to decrease the unemployment rate?  Well, simply put, people could work less.  I already told you that I'm a former social worker.  I quit my job after having a child.  My husband works a low-wage job from home, but we are doing quite okay.  In fact, we're doing better than we would be if I worked the same low wage job I had before I quit.  It paid less than 20K a year and it required college education or a combination of college and several years of experience.

I'm not uneducated, you see.  My county's per capita income is $23,000.  We also have a lot of wealthy folk in our county, if that says anything about that per capita income.

I digressed.

While I couldn't afford to work, or I could, but didn't see the value of profiting $300 a month at the expense of being with my kids, many people work because they have no choice.  Even people with dual incomes are now eligible for social assistance.  Why should tax payers pay the wages of multi-billion dollar corporations?  Why should so many full time workers have tax-funded social healthcare for their families when CEO's are making astronomically inflated salaries because they've squeezed the pay of their lower workers so much that profits have steamed up through the stratosphere?

Imagine two people making minimum wage with two children.  Each makes about $15,000 a year.  Together, they have a household income of $30,000.  For the spouse to work, she pays an extra $15 a week in gasoline, $40 a week for the school aged child's extended day, and $120 a week for her infant's child care.  She's paying around $9100 a year just to work (not including possible other expenses, such as a second vehicle payment, work clothing, Etc.  She's bringing home $5200 a year after basic work expenses.  Oops.  That figure doesn't include taxes or Social Security and Fica (and goodness forbid she and her husband should be in their 20's, as they'll need to put about $40,000 away each year just to retire at a similar income at age 65.  They don't even make that much.

So, what could happen if the husband got a $3.00 per hour raise?  He'd now make $21, 320 a year.  Wow!  What a drop in income that would be if she quit her job, right? 

Well, technically, yeah, but no.

You see, his gross income and her gross income are almost $10 more than what he'd make with a $3.00 raise, so it almost seems like it would be a blow.  But, if she's only taking home $5200 a year after basic work expenses, she might as well just stay home with the baby until he's old enough to go to school.  Together, they have a financial float of 20,200, but a $3.00 raise puts him at a $1,120 annual advantage.  That's sweet.

She could quit.
Someone unemployed can take her job.
They'd have a little more income for expenses.
They might apply for LIHEAP (Low Income Home Energy Assistance) a little less frequently.
It's all good.

I know the argument.  I can hear you screaming it at me through your fingertips (though it looks like no one comes here, so maybe not).  "If you increase wages, employers won't afford to increase jobs!!"
That's why I think regulation helps.  If they are competing with each other, but they all have to do it, it benefits them all.  They'll just have lower profits, but they all will have lower profits. 

Increase wages, and jobs will increase.  It's my congressional plan.