Clinton Speech Confirms That Presidential Campaigns Will Focus on Wage Stagnation

Hillary Clinton appropriately defines her economic policy goal as raising “incomes for hardworking Americans so they can afford a middle-class life” rather than “hitting some arbitrary growth target untethered to people’s lives and livelihoods.” The object of economic policy, in other words, is not growth or redistribution but higher living standards for the vast majority! Bravo. Equally important is that one of her three pillars of growth—fair growth—focuses on ending the wage stagnation that has limited median incomes for the past generation. America “needs a raise” and we need to reward “actually building and selling things.” As Clinton said, “If you work hard, you ought to be paid fairly.” So, if there was any doubt that addressing wage stagnation would be the central economic policy issue debated in the upcoming Presidential election then Hillary Clinton’s economic vision speech ended it.

Clinton’s speech sets the foundation for the emerging debate on wages by asserting that: (1) wage stagnation is the result of policy choices (it should be added, “on behalf of those with the most income, wealth and power”); and (2) ending wage stagnation is the “core economic challenge” to boosting middle class incomes and lifting more households into the middle class. Let the debate begin. We look forward to hearing from other candidates not only how they plan to obtain growth, but also how such growth will translate to higher pay for the vast majority. That generally hasn’t happened since 1979.

This is, of course, exactly the debate we hoped for when the Economic Policy Institute launched its Raising America’s Pay initiative in June 2014, and it is also how we framed the debate in our initial paper (“Raising America’s Pay: Why It’s Our Central Economic Policy Challenge”) and in our Raising America’s Pay policy agenda. In fact, making wage growth the central economic issue has been a key conclusion of every State of Working America published since its inception in 1988. Thanks are due to the fast-food and Walmart workers and their allies for establishing that wage growth for the vast majority is the immediate and central economic policy issue. Let the debate begin among the Democrats, among the Republicans, and then between the parties in the general election.

The Clinton speech is noteworthy for what is included as well as what is excluded. It was a positive sign that there was no focus on skill and education upgrading to solve our wage problems (on the other hand, education and skill upgrading was discussed as providing upward mobility of today’s youth). Similarly, it was good to see that a dead-end policy solution such as middle-class tax cuts were not offered to offset wage stagnation, though Clinton did suggest middle class families “deserve tax relief.” Rather, the focus was on improving labor standards by setting a higher minimum wage (a $12 wage in 2020 would lift wages for the bottom fourth), ending wage theft, stopping misclassification, and widening overtime eligibility for salaried workers that the president has proposed (that would aid roughly 13.5 million workers). It was critically important that Clinton stressed the importance of rebuilding collective bargaining given that the erosion of such bargaining has been the single largest factor eroding pay for union and nonunion workers in the middle class. And we know that Clinton proposes to be aggressive in providing undocumented workers a path to citizenship, something that will also raise wages for those workers but also for those in similar fields of work.

It is terrific that Clinton specifically talked about more growth to get to full employment to “give people choices about where to work” and so “employers have to offer higher wages and better benefits in order to compete with each other to hire new workers and keep productive ones.” This is an important topic too frequently left aside in current economic policy discussions. I can’t say I’m persuaded that some of the things Clinton mentions are the important drivers of getting us to full employment in a year or two: for example, business tax reform, eliminating red tape, or immigration reform are items which, at best, could be on a long-term growth agenda. A burst of public investment, which she mentions, is the more likely tool to get us to full employment.

Finally, it’s noteworthy that Clinton is proposing to steer Wall Street activity toward more productive purposes and to have financial actors punished for their crimes. That’s certainly warranted and long past due. I would have liked to see policies which shrunk the financial sector and restrained their pay, along with efforts to restrain executive pay. We won’t be able to raise the middle if the bulk of the income is grabbed by the top.


  • Peggy Wolf

    Hello Mr. Mishel. I’m writing from Seattle, WA. You say above that we need to improve labor standards by setting a higher minimum wage. I absolutely agree. Then you mention that a $12 wage in 2020 would “lift wages for the bottom fourth.” Of course, considering the current federal minimum wage of $7.25, $12 sounds like a picnic! I have to wonder though, what your goals are, and what your notion of dignity, fairness and justice are, to put forth an amount such as $12 for an hour of labor. Even for today in 2015, that’s not going to produce an income that meets even the barest basic needs for even a single person in any city of any considerable size in the U.S. And you are mentioning it as a wage for not now, but 5 years from now? Sir, what do you think your life would be like trying to exist on $12/hour of full time work? Why did you mention this amount?

    Do you agree with me that pay for full-time work should, at a minimum, cover basic costs of living? If you don’t agree, please explain your position. And in your explanation, please address how it might be possible for people working full time but not earning enough to cover basic costs of living can possibly live a dignified life that is not destined to be mired in ever-mounting financial problems that are totally avoidable for people with at least enough income to cover basic costs of living.

    What seems sensible to me if we’re genuinely concerned with workers earning at minimum a wage that covers basic costs of living, is to set that minimum based on a determination of those costs in the varying economies across the country, and to adjust it in direct proportion to changes that occur in those costs. You did not mention any criteria for arriving at $12 minimum wage, other than that it would lift wages for the bottom fourth. What a terrible terrible statement about poverty, income disparities, and the value wealthy people tend to place on minimizing labor costs to maximize profits to themselves and other shareholders, if $12/hour pay would actually increase the bottom fourth of workers.

    Criteria for setting a minimum wage need to be identified, if the amount suggested is to bear any relationship to the real cost of living, don’t you agree? A 2014 study by the Alliance for a Just Society (AJS), prepared in
    collaboration with the State of Washington and Washington Community Action Network (Analysis of Department of Labor data, based on Henry, B.
    & Fredericksen, A. (2014). Families out of balance: How a living wage helps working families move from debt to stability. Alliance for a Just Society. https://jobgap2013.files.wordpress.com/2014/08/2014-08-job-gap_families-out-of-balance_final.pdf), defines a “living wage” as:

    “a wage that allows families to meet their basic needs without public assistance and that provides them some ability to deal with emergencies and plan ahead. It is not a poverty wage. Living wages are calculated on the basis of family budgets for several household types. Family budgets include basic necessities, such as food, housing, utilities, transportation, health care, child care, clothing and other personal items, savings, and state and federal taxes. This assumes full-time work on a year-round basis.”

    You’ll notice that there is no mention of debt cost in their definition, so even this uncommonly realistic calculation still falls short, considering the enormity of indebtedness that pervades, especially among working class and middle or formerly middle class people.

    The AJS study used the above debt-omitting criteria to calculate the minimum living wage for King County, which includes Seattle, at $17.37/hour. Today, not 5 years from now. Isn’t this where any genuine conversation about economic justice must begin?

    You have deep knowledge about economics. I have slim to none. I really hope you will find the time to respond to my note.

    Thanks,
    Peggy

  • If EPI cares about raising US wages, its time to stop lending any credibility to the HRC campaign. And although we do indeed need a much higher minimum wage, approaching the issue by statute will be the least effective way because it won’t actually increase the wealth in the country or reverse the de-industrialization the Free Trade policy has brought. A much better way to raise wages would be to implement a Balanced Trade policy that limits our imports to the same value as our exports. Diverting our annual $720 billion merchandise trade deficits into that much more demand for US-made goods would directly create over 6 million new US manufacturing jobs and indirectly create millions more new US jobs through the multiplier effect. By contrast, just raising the nominal wage will do little as much of that raise will leak out of the country through trade deficits as the money is spent on more imports. Finally, if EPI really wants to see wages raised (and manufacturing brought home), they’d stop legitimizing HRC and instead write about Bernie Sanders, who not only supports a higher min wage but who adamantly opposes the TPP and other Free Trade treaties that are destroying our economy.