Wage Suppression: Guiding Principle of Corporate America

Think lower tax rates for corporations and wealthy individuals are the number one driver of policy choices for corporate America? Think again. There is one thing the corporate elite in America despises more than higher tax rates at the top: Higher wages for workers. Indeed, virtually every policy choice of the elite in America serves their desire to suppress wages.

This is readily visible in the resistance of the corporate elite to an increase in the minimum wage or any measure that would strengthen organized labor. But it’s far more pervasive. It is evident in any policy choice that impacts the supply curve or demand curve for labor.

For example, Paul Ryan and the austerity crowd are itching to reduce Social Security and Medicare benefits. They tell us they’re concerned about deficits. But cutting Social Security and Medicare will force workers to lengthen their careers. More workers competing for the same number of jobs would drive wages lower. Could that be the real motivation behind entitlement cuts?

Consider the safety net in America. At our current level of national income and wealth, we easily could afford to lift all Americans out of poverty. Our per capita national income for a family of four is almost $200,000, which is about ten times the poverty level. Why do the wealthiest in our society resist this act of human decency? Are they really so obsessed with the one percent of safety net beneficiaries who game the system that they’re willing to inflict misery on the other 99% (including millions of children)? Do they really believe Americans would be so content to live at the poverty level that they would refuse to work? Or does our elite fear the enhanced bargaining power workers would have if they were not forced to work at absurdly low wages simply to avoid starvation or homelessness? Consider, in that regard, how an improved safety net would affect the balance of power in the fast food workers’ strike.

Is the wailing over pensions and other benefits for public employees and the desire to trim government jobs at every level only about budgetary concerns? Or is it about taking pressure off wages in the private sector, which has to compete with the public sector for workers? After all, every time a job in the public sector is lost or made less attractive, the supply curve in the private sector shifts towards lower wages.

This guiding principle of Corporate America usually is consistent with conservative politics, but not always. Take immigration. The corporate elite is pro-immigrant and firmly in the progressive camp. Immigrants make for cheap labor. When they’re deported, their American replacements often demand higher wages. Even if that were not the case, the presence of immigrant workers increases the total number of workers, again shifting the supply curve for labor towards lower wages.

Indeed, immigration is a tough issue for the elite because it has a more visible connection to wages. The average American worker isn’t readily aware of the connection between safety net benefits and wages, so he can be sold the ridiculous notion that the so-called takers in society are living high on the hog off food stamp benefits. But working-class conservatives understand instinctively the connection between immigrant workers and wages. Progressives understand the connection as well, but generally are pro-immigrant based on compassion. Thus the unusual political alignment of the elite on this issue.

Corporate America would argue that the correlation between wage suppression and policies urged by them is coincidental.

That’s nonsense. The divergence of productivity and wages over the last three decades, as shown below, is inextricably tied to the extreme inequality in America today.

Cumulative change in total economy productivity and real hourly compensation of production/nonsupervisory workers, 1948–2011

wageproductivity

Source: Economic Policy Institute, State of Working America, 2012, Table 4U

That widening gap between wages and productivity is sitting in the bank and brokerage accounts of the wealthy. If wages rise, the gap closes, inequality narrows, and America’s corporate elite transition from obscene wealth to mere affluence, from private jets to flying first-class. And they’re not about to let that happen.

2 responses to “Wage Suppression: Guiding Principle of Corporate America

  1. Your concern for the poor is laudable but your analysis poorly serves them. The rapidly increasing workforce hides the fact that ongoing members of the workforce are seeing significant pay movement. The broadening of the base of the pyramid as new entrants crowd in hides this phenomena.

    • The point you made, even if valid, has absolutely nothing to do with what I said in the post. Both the post and your comment are connected to worker compensation, but that’s the extent of the overlap. Your comment was the equivalent of jumping into a conversation about last year’s World Series to say that Babe Ruth had 714 career homers. Yes, both subjects involve baseball, but so what?