The issues of stagnant wages and wealth inequity will dominate the discussion before next year’s presidential election — and unleash some unusual political dynamics, predicts a leading labor economist.
“It will be one of the main topics in the presidential election next year,” said , who has closely studied the issue.
Mishel is president of the Economic Policy Institute in Washington, D.C., a liberal think tank. But he criticized Democrats and Republicans alike at the Pathways From Poverty breakfast, sponsored by the Colorado Center on Law & Policy, on Friday at the History Colorado Center.
Since 1973, worker productivity has risen 73 percent, according to an EPI analysis. Higher productivity should result in higher wages, Mishel said, but that link is broken, a reflection of deliberate policy decisions by both parties over several administrations.
Median worker wages, adjusted for inflation, are up only 9 percent over the same period, with most of that coming in the late 1990s. Millennials are the most educated generation in U.S. history, yet they earn less than previous generations and struggle to find jobs in their fields.
Republicans have gained political traction on the issue, but “you can’t get there by cutting taxes and increasing growth,” Mishel said.
That’s because more growth will only create more wealth in the top income tiers. The GOP message to climb the ladder fails to acknowledge that most people will populate the bottom or middle rungs and need a wage that allows them to hang on, Mishel said.
Democrats haven’t addressed wage stagnation either, Mishel said. The Obama administration has instead focused on the falling unemployment rate
. The omission has cost the party political capital and provided an opening for those on each end of the political spectrum.
In a strange case of coming full circle, Tea Party populists and left-leaning progressives are both gaining ground by arguing for the frustrated masses.
“People are feeling ornery, and it can go in different directions,” Mishel said. “There is opportunity and danger.”
Yet the economy and its ability to generate prosperity aren’t broken, as some argue, Mishel said. Wealth is being created.
“The problem is how to get that wealth to the vast majority,” he said.
Mishel said what the country needs is a “high-pressure economy” that gives workers a stronger negotiating hand. To get there, monetary policy and fiscal policy need to support a sustained, low unemployment rate until there’s more balance between labor supply and demand.
The Federal Reserve doesn’t need to raise interest rates soon, Mishel said, adding that the central bank relies too heavily on the unemployment rate, currently at 5.1 percent, to measure strains in the labor market.
His equation: The Fed should wait until workers’ wages rise at a rate that matches inflation plus gains in worker productivity.
“Higher rates will slow down job growth,” he said. “Why shouldn’t wages grow faster than inflation every year?”
Some other steps that will empower workers include restoring collective bargaining rights, higher minimum wages, changes in overtime pay rules and a crackdown on the misclassification of employees as contractors, Mishel said.
Aldo Svaldi: 303-954-1410, asvaldi@denverpost.com or @aldosvaldi
