Note to Bernanke: Not Such a Big Surprise that Wages Didn’t Rise
What raging socialist said that? None other than Federal Reserve Chairman Ben Bernanke, addressing the House Financial Services Committee on Wednesday.
He went on to note that "Not only are jobs growing slowly, but all the measures of wages and compensation show gains below inflation over the last year" even though corporate profits were strong. But, the New York Times reports, "he expressed hope that corporations would use some of those profit margins to meet demands for higher wages from workers without raising prices to customers."
From his mouth to God's ear.
The Times article concludes with Bernanke expressing surprise that wages hadn't already risen more. From the standpoint of pure economics, this might be surprising: perhaps wages should already have risen more in tandem with a tighter job market, high productivity, and high profitability. But from the point of view of political economy, the study of how political decision-making interacts with the economy, it's not surprising at all.
In the last several years, Congress and the President have acted to restrict Americans' access to overtime pay, allowed the real value of the minimum wage to erode, devoted fewer resources to investigating wage and hour violations by employers, and appointed/approved nominees to the National Labor Relations Board who made it harder for working people to join unions -- one of the most effective ways to get increased wages.
All of these political decisions by our elected representatives contributed to an economic climate in which working people are less able to get a good deal in the workplace -- in other words, we have economic growth, but most people are not enjoying the benefits -- or to put it yet another way, wages are not growing.
I've got to get in another shameless plug for the Drum Major Institute's annual Middle-Class Scorecard, because this type of political decision-making that shrinks the existing middle class and makes it harder for low-income Americans to work their way into the middle class is exactly what we track. (Also check out the 2004 Scorecard for votes on overtime pay).
We can't expect people to "react politically" as Bernanke says, in an effective way unless we the people understand who among our elected representatives bears responsibility for stagnant wage growth despite a strong economy and who fought valiently (if unsuccessfully) to create an economy that works for the middle class and aspiring middle class.