[Marxism] Principled liberal columnist on stagnant wages: Made in the USA

robert montgomery ilyenkova at gmail.com
Sat Apr 1 16:36:36 MST 2006

Stagnant wages? Made in USA

By Robert Kuttner  |  April 1, 2006

AS CONGRESS GRAPPLES with immigration policy, most experts agree that
wide-open immigration slightly depresses wages, especially among
unskilled workers. But the main reason for static wages has more do
with policies made in the United States.

Immigrants, coming from destitution at home, will work for less than
American wages. And, if they are here illegally, they can't defend
themselves against subminimum wages and working conditions otherwise
against the law.

Some of this is supply and demand -- more workers competing for the
same supply of jobs. But as former labor secretary Robert Reich has
noted, if labor laws were enforced, immigrants would be less likely to
depress wages. Moreover, the supply of jobs is not static. As
immigrants enter the stream of commerce, they generate economic
activities and jobs.

The Republican Party is now split between business groups who want
cheap workers and jingoists who are just plain anti-immigrant. The
nativist wing of the GOP plays both to the national security and
economic fears of ordinary Americans.

The attacks of 9/11 did happen (though the attackers were not
Mexican.) Wages of ordinary workers are in fact depressed (though
immigrants are not the main cause.) Both sets of fears make it harder
for Congress to legislate sensible policy.

It is a small miracle that four Republican senators on the Judiciary
Committee broke ranks and voted for the McCain-Kennedy bill, which
would toughen border enforcement and penalties for employers who
employed undocumented workers, in exchange for a small ''guest worker"
program as well as an earned path to permanent citizenship. Some
Republicans support this because the House bill (no path to
citizenship and a Berlin-style 700-mile wall along America's southern
border) would reverse whatever recent gains the Republicans have made
among Hispanic voters.

However, it is worth leaving the immigration debate to explore the
deeper causes of stagnant living standards that make so many Americans
fearful of immigrants. In the current recovery, for the first time
since the government has kept such statistics, median household income
has lagged behind inflation in a recovery for five straight years.

Census data show median household income fell 3.8 percent or $1,700,
from 1999 to 2004, according to economist Jared Bernstein of the
Economic Policy Institute (on whose board I serve.) And this drop
occurred during a period when average productivity rose three percent
per year.

Moreover, as economist Jeff Madrick has observed in his book ''Why
Economies Grow," , the reality is worse because prices of commodities
that make us middle class are rising much faster than inflation
generally: housing, college education, health care, and also child
care. These very rapid price increases are offset by falling costs of
consumer electronics, basic food, and clothing, creating misleadingly
low inflation measures.

It's great that shirts are cheaper than a decade ago, and that we all
have cell phones. But that doesn't exactly substitute for a house, an
affordable college education, or health care.

According to economist Bernstein, whose study covers the years
1991-2002, households in the middle fifth of the economy increased
their incomes (not adjusted for inflation) by 41 percent. Inflation
during that period, as measured by the government's Consumer Price
Index, went up 33 percent. That implies real living standards rose by
a not very impressive 8 percent during more than a decade.

But hold on. During the same period, housing, healthcare, education,
and child care went up 46 percent, or more than incomes. We cannot
afford the big things we need and comfort ourselves with gadgets. The
cheaper laptop, plasma TV, and GPS screen in your car make it appear
statistically that living standards are not falling as much as they

The emblem of the new economy might be a 35-year-old, listening to an
iPod, living in a house much smaller than the one he grew up in.

To use a favorite word of my grandmother's, call it the Tchotchke
Economy (a Tchotchke is a small trinket): Plenty of nifty, ever
cheaper electronic stuff -- and ever more costly housing, education,
healthcare. An iPod is swell, but it doesn't exactly make you middle

Why does this describe America in 2006? Don't blame it on immigrants.
Blame it on the people running the government, who have made sure that
the lion's share of the productivity gains go to the richest 1 percent
of Americans. With different tax, labor, health, and housing policies,
native-born workers and immigrants alike could get a fairer share of
our productive economy -- and still have the nifty iPods.

Robert Kuttner is co-editor of The American Prospect. His column
appears regularly in the Globe.

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