by Robert Reich

I keep hearing that the only way we're going to get jobs back is if more Americans accept lower wages. By this view, a large number of Americans have become uncompetitive in the global economy. That means permanently high unemployment -- unless or until American incomes sink to a level that makes us more competitive.

Baloney. This just substitutes one problem -- unemployment -- for another: lower pay.

It's no great accomplishment to create lots of jobs by getting poorer. We could cut unemployment by half tomorrow if we forced everyone who needs a job to work for $2 a day. That's the pay in many developing nations, including China.

The Commerce Department just reported that U.S. incomes rose half a percent in August, the biggest jump since last September. But the figure includes extra income generated by extending unemployment benefits. In reality, pay hardly increased at all.

That's nothing to celebrate. Incomes plunged into such a deep hole last year that a tiny increase still keeps us in the hole.

Since the start of the Great Recession, millions of working Americans have had to settle for lower wages in order to keep their jobs. (Here at the University of California, the wage cuts are called "furloughs.")

Or they've lost higher paying jobs and can only find work that pays less.

Or they've lost their benefits. Or their co-pays, deductibles and premiums have soared. And their employer no longer matches their 401(k) contributions.

Two-tier wage contracts are the newest vogue in labor relations. Older workers stay at their previous wage; new hires get lower wages and smaller benefits.

Even a wage freeze becomes a lower wage over time, as inflation eats into it. For three decades America's median wage has barely budged, adjusted for inflation.

Get it? The goal isn't just more jobs. It's more jobs that pay enough to improve our living standards.

Some say we can create more jobs by encouraging the dollar to drop even further. Watch your wallets. This is just another version of creating jobs by getting poorer.

Washington is actively pursuing a weak dollar as a jobs policy. (The dollar just plunged to a six-month low against the euro.)

The Fed is keeping long-term interest rates so low global investors are heading elsewhere for high returns, which bids the dollar down. Every time another Fed official hints the Fed will start printing even more money ("quantitative easing" in Fed speak) the dollar takes another dive.

But using a weak dollar to create American jobs won't help. Imports are around 18 percent of the U.S. economy, so a dropping dollar is exactly like an extra tax on 18 percent of what we buy.

The real problem isn't that Americans have become uncompetitive. Some Americans are doing extraordinarily well. In fact, new census figures show top income earners in the U.S. are doing better than ever. Top executives in big businesses and on Wall Street are taking home more money than they know what to do with.

The problem is those at the top haven't been willing to invest in the competitiveness of the rest. Instead of seeing ordinary workers as assets to be developed, they view them as costs to be cut. Instead of paying taxes to support first-class public education, too many top earners shelter their incomes and lobby for tax cuts.

The answer to our real jobs problem isn't more wage cuts. It's better jobs and better wages. To make that happen, the minority of Americans who are succeeding in this new global economy should help the majority who are falling behind.

 

Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of the book Aftershock: The Next Economy and America's Future.

Creating More Jobs By Getting Poorer Is No Solution