D. Dowd Muska


The Bipartisan Plan for Stagnant Compensation

May 01, 2014

Is the economy roaring back to health? Look to the paychecks.

The National Employment Law Project’s recent review of private-sector staffing since the Great Recession does not offer hope: “We find that low-wage job creation was not simply a characteristic of the first phase of the recovery, but rather a pattern that has persisted for more than four years now. Deep into the recovery, job growth is still heavily concentrated in lower-wage industries.”

The NELP’s leftists note that an important milestone has been reached. According to the Bureau of Labor Statistics, in March, the number of private positions surpassed its January 2008 peak. (That’s not a typo -- there was no net job gain in America’s accountable, reality-based sector for six years.)

But as “The Low-Wage Recovery” documents, the quality of the gigs generated during the rebound isn’t impressive. While lower-wage industries (retail, hospitality) accounted for 22 percent of job losses in the Great Recession, they’re responsible for 44 percent of employment growth since the slowdown hit rock bottom. Comparable shares for mid-wage industries (construction, durable-goods production) are 37 percent and 26 percent; for higher-wage industries (engineering, law), 41 percent and 30 percent.

The analysis doesn’t reach back further than the recession. If it had, the numbers would be scarier. Compensation, for those unable to land a government sinecure, has been close to flat in the last few decades.

A quarter-century snapshot is revealing. Between 1988 and 2013, the average hourly value of private pay and benefits grew from an inflation-adjusted $27.16 to $29.13. That’s “progress” of only 0.3 percent a year, despite a massive boost from the boom times of the late 1990s.

Such dismal results are all the more infuriating when one grasps the widespread, bipartisan consensus on what’s good for American workers. Contrary to the claims of pundits panicked over “gridlock,” in the post-Cold War era, political elites attained near-complete agreement on the mechanisms needed to raise the U.S. standard of living.

The groupthink’s first assumption is that schooling is essential to success in the workplace. Teacher-union political muscle, “equity” lawsuits, and inattentive taxpayers yielded government K-12 education obscene windfalls. Class size shrunk. Non-instructional personnel exploded. Preschool and full-day kindergarten became common. And revenue flooded into tertiary education. In 1988, 20.3 percent of the adult population obtained at least four years of college instruction. In 2013, the figure had risen to 31.7 percent.

The establishment’s second precept is that science and technology, funded and choreographed by Washington, contributes to wealth creation. Even The Wall Street Journal’s editorial page believes that basic research is a “proper role for government.” So scientists kept their seats on the subsidy train. Again, looking at the 25-year period, federal spending on research and development rose from $116 billion to over $135 billion. States, eager to brag about their prestigious university systems, added to the largesse.

Finally, conventional wisdom holds that planning is preferable to laissez-faire. Politicians and bureaucrats now consider themselves experts at “economic development.” Between 1988 and 2013, the U.S. Department of Commerce’s inflation-adjusted budget more than doubled, from $4.5 billion to $9.9 billion. (Bill Clinton was a big fan.)

At the state level, tax-abatement, infrastructure-improvement, and job-training schemes are pervasive. IT, nanotech, stem-cell research, entertainment production, space tourism, “green” power -- if your enterprise is fashionable, there’s a solid chance that it can land a sweetheart deal. (At a 2006 shovel-turning ceremony for the new headquarters of a soon-to-be-bankrupt subprime lender, Connecticut’s governor beamed, “This is the new financial-services industry. These are high-paying jobs -- career jobs. These are the jobs we want for the future.”)

Municipalities aren’t about to be left out. They pursue downtown “redevelopment,” spending and/or borrowing billions for sports arenas, convention centers, zoos, aquariums, museums, and shopping promenades. Eminent domain, prior to the U.S. Supreme Court’s Kelo decision, was a frequently used tool.

For private-sector workers, the triumvirate -- more education, R&D “investments,” and crony capitalism -- has flopped. If anything, the policies have been counterproductive, since all three tactics expand the payrolls of rapacious government entities.

Subpar compensation growth has many causes. Foreign competition is fierce. Investors demand that costs be constrained. An older population is less likely to innovate and invent. NIMBYism, fueled by junk science, is rampant. Popular culture elevates sloth and ignorance, and thus, goldbricking is severe. (“Cyberslacking” is pandemic.)

But isn’t it time to recognize the role “public servants,” suffused with “vision,” have played? It’s blindingly obvious that their prescription for stronger wages and better benefits has failed. Shouldn’t they face consequences for their incompetence?

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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