By William Reinsch
◾Compensation is in more than cash, and, in fact, other benefit costs (health insurance, retirement account contributions, transit subsidies, etc.) have been rising faster than wages, which may be constraining employers’ willingness to raise wages.
◾The decline in the number of workers represented by labor unions means fewer gains from collective bargaining.
◾Worker educational attainment has not kept up with the demands of more technologically sophisticated jobs.
◾Increases in the number of noncompete clauses limit job-switching, and licensing requirements restrict entry into certain occupations.
◾Well-documented declines in manufacturing employment have led to a shift to work in lower-wage sectors.
◾Low productivity growth is the economists’ general answer to what we are currently experiencing.
◾My personal favorite is that today’s CEO’s are too focused on stock prices and returns to shareholders rather than the long-term health of their company and its workers to the detriment of both.There will never be consensus on the causes of wage stagnation, except possibly in the history books 100 years from now, when it won’t do us any good. The correct answer is probably all of the above, along with trade, which cannot be absolved of all blame for the pressures of competing in the global marketplace.The lesson for policy makers is to remember the Serenity Prayer and figure out the things we can change and focus on them rather than beating our heads against the wall over things we cannot change. Clearly, globalization is in the latter category. We may not like it—the president clearly does not—but it’s here, and it’s not going to go away. (We can discuss the good things it has brought, like out-of-season fruits and vegetables and cool new technologies, another time.) Trying to return to a world where everything is made domestically is unrealistic at best and disastrous at worst, and it will not produce the wage increases the president would like. We would be far better off looking at the items on the list above that we can change and doing something about those.The above writer, William Reinsch, holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C. Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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