What is the Real Solution to Wage Stagnation?

Lawrence Mishel in the New York Times argues that the solution to wage stagnation – tax cuts – is not effective.

“What has hurt workers’ paychecks is not what the government takes out, but what their employers no longer put in — a dynamic that tax cuts cannot eliminate.”

“As wages continue to stagnate, it is impossible to continuously cut taxes and still pay for things like education and social programs for the growing population of older Americans.”

“The challenge is to ensure that a typical worker’s wages grow along with profits and productivity. There is no silver bullet, but the key is to make raising wages the central focus of economic policy making and to reverse decades of decisions that have undercut wage growth.”

“We need to start with monetary policy. In the next few years, the most important decisions being made about wages are those of the Federal Reserve Board as it determines the scale and pace at which it raises interest rates — and thereby slows job growth. Before raising rates, it is essential we achieve a robust recovery, with roughly 3.5 to 4 percent annual wage growth. This will ensure that wage growth matches productivity growth and that everyone can benefit from the rebounding economy.”

Mishel also recommends raising the minimum wage and protecting and expanding workers’ right to unionize and bargain collectively.

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