Can you remember the second day of the Republican National Convention? That was supposed to be economics night, with the advertised theme “Make America Work Again.” Awkwardly put, yet the phrase suggests that America suffers from mass unemployment and that Donald Trump’s braggadocio would bring the jobs back. Both notions are false.
The unemployment rate, which peaked at 10% in the aftermath of the Great Recession, has been at or below 5% all year. The American job machine has created more than 14 million net new jobs since employment bottomed out in 2010. Yes, jobs remain scarce for some people, in some places and in some occupations. And the labor-force participation rate could be higher. Still, more Americans are working than ever before.
The real problem American workers face today is getting decent pay for their labor: They need a raise. Or, more precisely, the bottom 99% of workers do.
The median inflation-adjusted hourly wage grew only 5.7% from 1973-2015, according to astonishing data compiled by the Economic Policy Institute. That comes to 0.1% a year. Worse yet, wage gains have been even more meager for workers below the median. If you want to understand why the typical American worker is angry, start here.
Real wages did better higher up the wage ladder. But even at the lofty 95th percentile, the cumulative gain was only 45% over 42 years, or about 0.9% a year. Meantime, wages for the top 1% rose about 180% over the same period. The next president’s top goal should be to raise wages for the other 99% of Americans. But how?
Last year, Mr. Trump evinced deep concern over low wages by opining that “our wages are too high.” Too high for whom? Though he has occasionally paid lip service to increasing the minimum wage, his actual views on wages remain enigmatic. Scanning the Republican platform, I found two suggestions for raising wages: limit immigration and lower the corporate income tax. If you listen to the candidate rather than the platform, you’ll pick up a third: trade protection.
In contrast, Hillary Clinton has presented an extensive list of policies that would raise wages, starting with a higher minimum wage. While raising it would affect directly only the very lowest wage earners, evidence suggests that raising the wage floor pushes up other low wages as well.
Mrs. Clinton also advocates widespread profit-sharing as a way to put more money into workers’ pockets. She would promote that goal both by using the presidential bully pulpit and by providing tax incentives for businesses that share profits. Since the scholarly evidence suggests that profit-sharing raises productivity, such tax breaks will partly pay for themselves.
Increased vocational training and apprenticeships for the non-college-bound are also major Clinton policies. The standard response to the huge wage gap between workers with and without a college degree is to send more students to college and get more of them graduating. That’s fine, but not everyone is a good candidate for a college degree, and many well-paying jobs don’t require one. The U.S. can increase its productivity and reduce inequality by ensuring that the right people get vocational training and apprenticeships.
And then there is what may be the surest way to raise wages over the long run: providing pre-K education for all American children. Mrs. Clinton has promoted this idea for decades. By now, an extensive body of research shows that children who receive high-quality pre-K education perform better in school, are less likely to be incarcerated later in life, and generally go on to earn higher wages. Only shortsightedness has prevented the policy from being adopted: It takes 15-20 years to realize the payoff from educating a 3-year-old.
Finally, let me add one policy that President Obama and House Speaker Paul Ryan already agree on: increasing the now-paltry Earned Income Tax Credit for childless workers. This tax credit is a wage subsidy, but it is tiny for those without children. Only wage-earners are eligible, so even those concerned about “takers” mooching off “makers” should like the idea. The EITC has enjoyed bipartisan support since it was started during the Ford administration.
Add it all up-a higher minimum wage, profit-sharing, vocational education, apprenticeships, pre-K for all, and a more generous EITC-and you have a policy package that, while no miracle, is almost guaranteed to give American workers a raise. It’s a lot better than bluster.