The dominant economic paradigm in American thought has always placed a strong emphasis on efficiency, and concomitant concepts such as individualism and autonomy. A corollary to this thinking is that the individual is dynamic and efficient whereas the government is an ossifying bureaucracy, resistant to change and anathema to efficiency. The individual is the creator of wealth; the government is the parasitic redistribution ary usurper that feeds upon this wealth. This aversion to government assistance and oversight of the economy has had dramatic and substantive effects on our nation’s social structure and welfare system. By maintaining a “laissez-faire” approach to the market, workers have been subject to the many vagaries an unregulated market unleashes; such as unemployment and slow wage growth. Inflation, slower wage growth, and deregulation have led to economic chasms separating the richest from the poorest, but instead of the federal government trying to vigorously assist the less fortunate, it has actually grown stingier and more averse to helping.
The politicians routinely speak of the positive effects of finding a job; as if America’s poverty would dissipate if the poor would simply find an entry-level position. But the government’s failure in ameliorating the harm caused by slow wage growth prevents catechisms such as “find a job” from being the panacea politician’s promise. Observing several indicators of the American labor market creates an unusual and frustrating picture of wage growth and its impact on American workers. Four seemingly disparate graphs and statistics, when viewed concurrently, paints a revealing picture. Firstly, according to a comparative study of welfare systems, .”..
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when people of prime working age who had been depending primarily on public transfer income shift into paid labor, they get fully 43 percent more money on average in the US” (Goodin 139-140).
One gets the initial impression that “work” is the necessary corrective for poverty. However, another finding in the same study claims that .”.. median equivalent income increased by between 15 and 16 per cent in Germany and the Netherlands, respectively, it increase only just 1 per cent in the U. S… the U.
S… also does far worse at promoting economic well being for average citizens” (Goodin 130).
These two statistics, when viewed together, are troubling. Real income growth was only one percent for the average family; less than the average growth of inflation.
However, despite this abysmal growth, moving from welfare to work still leads to a 43 percent jump in earned income: these statistics show that our redistributed income is paltry, not that wages are getting stronger. The conviction that America’s emphasis on efficiency and autonomy would result in increased wages and substantive growth did not benefit median incomes (Goodin 130).
Furthermore, in what can be initially construed as efficient, promising behavior, “The US made by far the fullest use of its potential workforce, with the other two countries (Germany and the Netherlands) far behind.” (Goodin 132) However, figure 8. 1 shows the proportion of the American population in poverty (post-government transfers) to be at eighteen percent, whereas in Germany it is around eight percent and in the Netherlands around four percent (Goodin 154).
The deleterious effects of prosaic wage growth are obvious: firstly, it is clear that American labor is more industrious; however, we then see that even though there are more Americans working, there are substantially higher rates of poverty and dismally low income growth. This is the crux of the economic problem: Americans comparatively work harder yet see less tangible benefits in terms of social mobility and rising incomes.
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Now that slow wage growth has been identified as a vexing economic problem, it is important to analyze how this problem came to exist. It is impossible to expound upon all of the factors that led to slow wage growth, but to be succinct, a burgeoning emphasis on “skills” over manufacturing, a new focus on deregulation, globalization and the concentration of shareholder power, and productivity halts caused by unforeseen shocks to domestic and foreign supply which made firms especially cautious all worked to decrease worker’s bargaining power and keep wages languid (Levy 189).
Starting in 1973, due to tumultuous foreign supply problems which raised both food and oil prices dramatically, productivity growth would average around 1 percent, down from the 1960’s high of 3. 3 percent (Levy 42).
This miserly growth rate would sustain itself up until at least 1995 ( (Levy 42) The heavy handed policies utilized to curb inflation and increase productivity, initiated by President Carter and carried on by each successive President, would usually result in deregulation to “free up” the dynamic market. As industries became deregulated (airlines, railroads, and trucking being the obvious examples) and more competitive, job stability decreased, as firms were looking to cut costs and employee’s lost their bargaining power (Levy 53-56) Not surprisingly, family income remained static: in 1996, median family income was around $43, 200 dollars, about equal to its value in 1986 and $400 below its values in 1989 (Levy 56); even less surprisingly, less skilled workers, who have less bargaining power, were impacted the most.
Providing overview and context as to how this situation arose is important, but what many people miss is that lurking behind statistics is actual human misery. These statistics are representational, and when one speaks of low wage growth or any litany of social ills, there are people actually suffering from them. The Washington Post reports that “the ranks of the uninsured, the bankrupt and the long-term unemployed have all crept up the income scale, proving these problems aren’t limited to the poor… the growing income gap corresponds to a long term restructuring of the workforce that has carved out jobs from the center”; even decidedly middle class workers are not immune to the vicissitudes of the market (Witte, “As Income Gap Widens, Uncertainty Spreads” 9/20/04).
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This article details the story of Scott Clark and his former co-workers, who were previously middle class but have since been relegated to “entry-level” jobs for around half of what they used to be making. Cases of abject poverty are obviously more serious, but the meager wages offered to any “entry level” position severely impacts both the uneducated who enter those jobs willingly and the displaced middle class who seeks those jobs as a “support” after being downsized. Wages for the poor have simply failed to keep pace with the rich; the wage difference between a 30 year old college graduate and 30 year old high school graduate is, on average, over fifty percent (Witte, “As Income Gap Widens, Uncertainty Spreads” 9/20/04).
Allan Greenspan captures the desperation and urgency caused by stagnant wages when he claims this bimodal distribution of income was “not [a] very desirable thing” in a purportedly democratic country (Witte, “As Income Gap Widens, Uncertainty Spreads” 9/20/04) The difficulties engendered by income inequality and limpid wage growth for the middle class threatens to radically change the American concept of “the poor.” The individualistic American culture has ingrained in the popular consciousness an image of a parasitical welfare recipient living off the government largess while contributing nothing to society; the rapid decline of the “middle class” and problems with wage growth should rightfully eliminate that concept, as more and more working Americans find themselves on the brink of impoverishment. Greenspan was correct when he said this is a problem which must be addressed now — allowing the deleterious effects caused by wage inequalities to continue unabated will severely weaken the quality of life of a sizable portion of the American population.
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