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Third Coast Pillory: Trump, Wages, and the Working Class

Photo by Marc Nozell | CC BY 2.0

Photo by Marc Nozell | CC BY 2.0

 

Trump’s promise of a “great” America is premised to some degree on rising wages. With the majority of the country working class, wages are how people pay the bills and keep the lights on. Since the 1980s, the average weekly salary has only increased by approximately 25 dollars, while since 1982 to 1984 we have seen the cost of living more than double (see Table 24). It just seems logical that wages have to increase for Americans to do any better. Yet, it is rather dubious whether Trump has any policies that would actually lead to increased wages for the working class.

Average Weekly Salary in the United States, 1979 to Present

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Trump has tapped Andrew Puzder for Secretary of Labor, who is a staunch opponent of raising the minimum wage. In itself this a foreboding sign, seeing as raising the minimum wage would be a sure way to bring wages back in line with worker productivity. As economists at the Economic Policy Institute point out, “although Americans are working more productively than ever, the fruits of their labors have primarily accrued to those at the top and to corporate profits, especially in recent years.”

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Listen, if the cost of living goes up by four percent and you only get a raise of two percent, you’ve lost two percent year-upon-year. That means you are sliding backwards. You can’t pay Twenty-First Century expenses on a Twentieth Century salary, period. Stagnating salaries and increased cost of living has brought us to having almost a majority of millennials making less than their parents did at a similar age.

Mean Rate of Absolute Mobility by Cohort, 1940 to Present

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This is part of an even deeper crisis. Since Adam Smith, we have known that you actually need quite a bit of economic growth to reap rewards in terms of increased wages for the working class. The economist Thomas Piketty immortalized this in the simple formula “r > g”, where if the rate of return on capital (i.e. investments) is higher than the rate of economic growth then inequality will continue to increase. Piketty argues that only during one historical period, post-World War II was growth higher than the return on capital and thus inequality declined.

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Also, for growth to outstrip the return on capital, Piketty shows the rate of capital actually must come down, not merely for growth to rise. For the rate of return on capital to come down, there has be to an increase in the top tax rate so as to redistribute the wealth society as a whole has created. That is, in accordance with the majority of Americans, the rich need to pay their fair share.

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The current rate of approximately three percent economic growth nationally and globally is insufficient to bring about a reduction in inequality. This is compounded by the historically low tax rate, 39.6 percent, leading to less and less redistribution of the wealth that is produced. Under these conditions the rate of return on capital will continue to outstrip economic growth. With investments more important to policy makers than wages, the majority will continue to stagnate as the cost of living increases. It remains to be seen how Trump, who is going full bore ahead with Reaganomics 2.0, will be able to reign in that rate of return on capital and increase growth to levels sufficient for wage increases. It is even less likely that Trump will regulate business in any way that would restrain the cost of living from continuing to rise.

An important corollary is presented by Karl Marx, the inverted proportion between wages and profit. So, if profits are increasing, generally wages are decreasing, as income and wealth are concentrated more and more in the hands of the rich. We see this over time in the Federal Reserve Data:

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What we know, and part of how the rate of return on capital is brought down, is this tendency to drive down wages is only reversed when the working class collectively demands that it stop. Thus, as unionization rates decline, as well as a declining rate of strikes and other labor protest activities, so do wages, and thus increasing profits for the already well off. Once again, we can see historically that higher rates of union activity and protest is during the same era of higher taxes, higher wages, and lower inequality:

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With these dynamics between business and workers, along with continuing automation, it seems to me that any politician promising a better life while not actually altering these conditions is participating in theatre. Working class interests are not the same as business interests, and addressing our concerns means actually working to increase labor’s power in the economy and increasing wages. If we do not address these matters, it becomes more and more likely that whom you are born too will more and more dictate what opportunities for dignity and wellbeing your life will have.

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Supporting a the Fight for 15 and a federal $15/hr wages is just a start, along with reigniting unionization through Employee Free Choice Act legislation. Seeing as Trump has already signaled his opposition to such important policies, it is clear he doesn’t stand with working people. In that, he is the same as his predecessors.

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Andrew Smolski is a writer and sociologist.

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