If economy is growing, why aren't workers' wages growing?

If economy is growing, why aren't workers' wages growing?
BY RALPH MARTIRE
Copyright by The Chicago Sun Times
September 2, 2006



Just in time for Labor Day, the federal government released some good news about the economy: It's growing, continuing a five-year trend. Incomes across all households are up, while corporate profits hit their highest point since the 1960s. And to whom do we owe this apparent good news? Why, the American worker. Continuous increases in worker productivity (along with inflated consumer spending financed by credit card debt and mortgage refinancings), has driven economic growth. Recognizing the importance of workers to our economic well-being, the U.S. Department of Labor's Web site says Labor Day allows us ''to pay tribute . . . to the creator of so much of the nation's strength, freedom, and leadership: the American worker.''

Noble sentiments, those. The problem is, sentiments don't put food on the table or pay rent -- wages do. And, despite the rosy economic news, workers have been completely excluded from the recent prosperity gains, even though they're largely responsible for causing them. The truth is, as corporate profits surged, wages for the vast majority of Americans stagnated or declined.

What about the fact that average income is growing? That's true enough, but misleading. Average income increased overall solely because incomes at the very top exploded. For 80 percent of workers, incomes actually declined on an inflation-adjusted basis since November 2001. The Center on Budget and Policy Priorities notes this is the only time income for most workers declined during any four-year-long economic recovery, going back 40 years.

Think about it this way: If Sally police officer and Joe plumber are sitting at a bar, their average income would be, well, average. Now if Bill Gates Jr. joins them, the average income of our three bar patrons suddenly increased astronomically. Still, only one of the three can afford to buy drinks for the house.

Even the seeming bright spot that median household income finally grew after four years of decline, if by a meager 1.1 percent, masks reality for working families. Once you eliminate households headed by those over age 65, median income for everyone else dropped. It's especially troubling that incomes declined as worker productivity increased. Sylvia Allegretto of the Economic Policy Institute noted, ''Traditionally, a mature recovery combined with growing productivity leads to wage gains, not losses. Workers aren't sharing in benefits created by their improved productivity.''

Meanwhile, the value of the national minimum wage has dropped to its lowest point in 50 years. Wages and salaries now constitute only 45 percent of the country's economy, a historic low. An additional 1.3 million Americans became uninsured last year as health-care costs continued to escalate at rates three times greater than wage growth.

All of which makes many policy debates seem grossly off-point. For instance, why, during a time of skyrocketing corporate profits and worker productivity, is it controversial for Congress to increase a minimum wage that's at historic lows? Why shouldn't Chicago consider a living wage ordinance? And since all the data demonstrate how essential a high-quality education is to both getting hired and earning a decent wage, why doesn't Illinois finally get around to school funding reform, so every kid has the skills to get a good job?

Well, because many believe the rhetoric that government should, to put it mildly, get the hell out of the way of our capitalist economy. Under this worldview, private sector economic growth will distribute its benefits to all, leaving government no role to play in big, economic quality of life issues such as reducing poverty, providing health care, mandating wage levels or even educating kids. The data, and sound capitalist theory, say otherwise.

In The Wealth of Nations, Adam Smith, the father of capitalism, maintained that what improves the lot of the working classes, who constitute the greatest proportion of society, ''can never be regarded as an inconvenience to the whole.'' He continued: ''It is but equity that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.'' Maybe Labor Day celebrations would be more festive if instead of being paid tribute, workers were actually being paid.