Libertarianism & Wage Growth

American workers face a logjam.  Employment is at almost full capacity.  Everyone at this point can find a job if they want one.  But wages aren’t going up.  And no one seems able to figure out how to make that happen.

Sure, the federal government could order an increase. “Give everyone a raise!!” as it were.  But then employers look for ways to hire less workers.  Employee payrolls make up the largest percentage of most company’s expenditures.  If you raise what that costs then you motivate companies even more to reduce that amount.

Forcing companies to pay more or hire more is doomed to failure.  You force companies to improve how they treat workers in one way they find a way to change things in another.  This just makes life harder for workers in other ways.

And there is evidence that the present employment situation helps workers in ways other than wages.  Because unemployment numbers were never the whole story.  Citing one unemployment rate was always phony.  When you hear the rate is “3.9%” that never really meant “3.9% of eligible workers are unable to find a job”.

There always was this much larger number of people who “dropped out of the workforce”.  This catch-all category includes people who had to stop looking for work because of temporary disabilities or family emergencies but also people who just “gave up” looking for no reason other than finding a job was just too difficult.

And that number is decreasing.  What also has been decreasing is the number of people opting for Social Security Disability rather than working.  Ideally, that number should never change based on job availability because you expect that people seeking disability only go after it if they really can’t work (regardless of how available jobs are).  But the reality is the number fluctuates a great deal when it becomes easier to find a job.

Increasing the availability of jobs decreases these less-publicized numbers and reflects that people who had given up (at least temporarily) finding a job now think they can find one.  It increases the motivation of people to work rather than finding other ways of supporting themselves.

But you still don’t readily increase wages. Those are still stagnant.  Employers are still stuck using money to pay workers more.  Decreasing their tax burden increased what companies bring in but they seem to be using the money for things other than wages (at least right now).

So, what’s the holdup?  For one, it may be that number of people who had “given up”.  Companies aren’t motivated to increase wages because they are still getting people to take jobs at the rate they presently pay.  This doesn’t impact the unemployment rate much because those potential workers were never part of that rate.  And the other number was never publicized much anyway.

And you do see employers making comments that wages are going up for one group, skilled workers.  Sandra Cockrell, global leader of the CFO Program at Deloitte Touche Tomatso Ltd, was quoted on Fox Business (June 27, 2018) addressing this directly: “ There will be wage growth for skilled labor”.

So, turning “unskilled workers” into “skilled workers” is key.  And it also may be the hold up.  Because whose responsibility is it to turn someone “unskilled” into someone “skilled”?

Traditionally, the answer has been “colleges”.  Community colleges in particular are targeted.  But college systems are so slow to change and have such antiquated systems that this has not been very effective.  If workers need trained on the newest machines, and employers need those trained workers, they can’t wait for months or years for someone to complete a certificate or degree program.

It’s the need to turned “unskilled” into “skilled” labor that rams into barriers created by a “one size fits all” training and employment system.  Systems in place for providing training don’t do it fast enough.  Or do it in a way that the cost equals the benefit.

Why don’t employers offer it?  One reason is because employers don’t want to train someone on equipment who can then use that training to go seek employment with a competitor.  Training is expensive and if you pay someone a salary along with training and then lose that person soon after training this ends up being a total loss.

Some workers want that training.  Even to the point they are willing to accept lower wages (or longer hours, less benefits) in exchange for it.  They recognize training could improve their wages down the road, possibly with a different company.

Some workers don’t want the training.  They want the salary.  Preparing for advancement or a higher salaried job later on doesn’t matter that much to them.  They’ll do the work they are trained for and want to be paid adequately now.

Union rules and many employment contracts stand in the way of offering these two different workers different contracts.  There may be agreement that one wants a different type of employment than the other.  And it may even be clear that the company would have a reason to pay the first employee less since it would be hard to keep secret they would move on after training if a company offered more.

Libertarian views of employee rights emphasize that both employees and employers should be allowed to chose the situations that fit them best.  Whether it is “right to work” laws, or regulation changes taking away barriers to flexible employment agreements, the emphasis is on each individual being able to chose the employment situation that is best for them.

Libertarians have often faced criticism for being on the side of employers.  Stressing total freedom is equated by many with having total freedom to pay workers minimal pay for maximum work.  What’s often missing is the emphasis on employees being able to choose what best meets their needs.  If employees want to prepare for being “skilled”, and making higher wages later, they may be willing to trade making lower wages now.

In our current environment, this seems the best way to crash through the logjam American workers face.

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