Lane Kenworthy versus Jared Bernstein:
Can we get wages rising?, by Lane Kenworthy: In the United States, wages for people in middle-paying jobs and below have been flat for more than three decades. This has gone on for so long now that we should see it as the new normal, rather than a temporary aberration. There are a host of causes: intense product market competition (whether global or domestic), shareholders obsessed with short-term profits, mechanization, the shift from manufacturing to services, firms’ ability to offshore, “pay for performance,” immigration, stagnant educational attainment, weak unions, and a flat minimum wage.
I suspect (here, here) that some of the left’s chief strategies for solving this problem — reviving manufacturing, strengthening unions, and full employment — aren’t likely to be achievable. Indeed, I don’t see any reason for optimism about wage growth for the lower half going forward. I therefore think it’s worth exploring alternative ways to ensure that household incomes and living standards can keep pace with economic growth.
Jared Bernstein has some characteristically thoughtful comments. His main point is that we shouldn’t give up on rising wages. He thinks in particular that there’s a reasonable chance we can get the labor market tight enough to push wages up, as happened in the late 1990s. He and I agree that much hinges on the Fed’s approach. Here’s Jared...
I agree we should try to get the Fed to take more seriously its full employment mandate. That would be an enormously beneficial policy shift. But it’s a difficult battle...
Let me put in this way: Given that we’ve had a labor market tight enough to push wages up in only a few of the past 30-plus years, is it wise to see this as a likely solution to wage stagnation?
Ultimately, though, I think any disagreement between Jared and me here is one of emphasis. Jared wants us to keep seeking ways to get wages rising again. I do too, but I’d like to see more exploration of non-wage paths to rising incomes and living standards.
These approaches are not necessarily independent (so it's not one or the other). For example, in order to get the "non-wage paths to rising incomes" Lane discusses, workers need to have enough political power to force politicians to pay attention to their needs. One way that can happen is through unions or some other means of organizing and concentrating individual workers. I think the political empowerment of the working class is a necessary first step (e.g.), but how to make that happen? That's the hard question.