Failing freshman economics

Mostly fact: Americans have not seen substantive wage increases in years. Mostly fiction: The Economic Policy Institute’s report, “A Decade of Flat Wages,” released Aug. 21.

Greg Kaufmann’s “This Week in Poverty” for The Nation praised the report, which is not surprising since it’s a thinly veiled fluff piece for socialism. The study found that in the past 10 years, wages have remained stagnant for the bottom 70 percent of the population. That fact, the researchers argue, is the greatest problem facing the economy, since productivity has increased 75 percent since 1979, with the typical family’s inflation-adjusted income fairly stationary.

But the relationship between productivity and wages is complicated. Technological advances are a big factor in increasing productivity, but some poorly paid service workers are doing the same work in virtually the same way as their predecessors did. Kaufmann argues that the key to wage improvement is “confronting power in the workplace,” since the wage problem is “all part of the same phenomena of employers having the upper hand.” One of the key ways to jumpstart wage increases and create a “spillover effect” to get “better wages for everybody,” he and others argue, is through “aggressively increasing the minimum wage.”

The left argues the minimum wage has not kept pace with inflation in recent decades because many corporations are greedy. Increasing the minimum wage can only be positive, because businesses somehow have unlimited money to pay employees. But that argument ignores the fact that wage increases get passed on to consumers, damaging the increased buying power.

The problem is that when government aspires to help the poor, it almost always backfires. Look at the Affordable Care Act’s mandate that employers in 2015 must provide insurance to those who work 30 hours per week. Businesses from restaurants to colleges to retail outlets are already cutting employee hours because they don’t have the money to pay for extra insurance. If this happens under Obamacare, what might happen with a minimum wage increase? How much higher will unemployment go?

And this says nothing about the facts the study scattered throughout the lies. Income inequality, wage stagnation, and corporate greed are real issues. An increasing lack of integrity in the workplace leads to a lack of integrity in the economy. We don’t have to accept it. But it doesn’t mean capitalism has failed. It simply shows what has always been true: Anything can be used for both good and evil. Fiscal policy can’t change the human heart.