Thursday, January 15, 2015

Low Wage Jobs Are Bad for the Country

Living in the Future Tense #04 January, 2015

When First Is Last
Edward Renner

For 5,000 years, humans lived in the past tense: “Yesterday was the same as tomorrow. “ For the next 500 years people lived in the present tense: “Today can be whatever we want it to be.” But now, for the next 50 years we must start living in the future tense: “Tomorrow’s social, economic and political constraints must become today’s reality.”

My wife just walked through the door declaring “I may never again shop at T J Maxx!”

She had just seen the store’s advertisement for clerks and supervisors at $7.93/hour.

The large number of low wage jobs is one reason why the World Bank, in its business Environment Ranking 2014, ranked the US fourth out of the 185 nations of the world in which it is best to do business.

Some of the other criterion are permitting indefinite out-sourcing of permanent jobs, not requiring paid vacation time nor giving notice or severance pay for redundancy dismissal, to list a few examples of what makes a country good to do business in.

Other countries that are similar to the US, but are less easy to do business in, have government regulations that provide workers with higher levels of economic security and benefits.  One such comparative set of nations are the members of the Organization for Economic Cooperation and Development (OECD), which account for 85% of the world’s economy.

A report by the OECD, Employment Outlook 2014, sheds some light on what it means to be one of the best countries in which to do business, and whether that is something the US should want to be.

Source: OECD Employment Outlook 2014, Table N, page 288.
Data for Norway 2009, France 2008, the Netherlands, 2005
Of all of the OECD countries, the US has the largest percentage (25.3%)of its workforce in a low-wage job (less than two-thirds the median wage) and pays its low-wage workers the least amount of money (46.7% of the median wage).

Source: OECD Employment Outlook 2014, Table N, page 288
Computed from OECD data on 1st to 5th decile earnings ratios
It is important to understand that this data is compiled by experts from the member countries and are the agreed upon benchmark for these comparisons. They are not “just statistics,” but an occasion for civic discussions about the proper balance between the ease of doing business and the social price of the US becoming a low-wage economy – a country with a shrinking middle class and a large gap between the rich at the top and all the others at the bottom.

Should the US strive for first place -- to be more like Singapore and Hong Kong, which topped the World Bank ranking – or rather to be more like the European Union countries with whom we share a democratic political process?
One reason why the US is in last place among the OECD nations is that we have allowed corporate money to corrupt the political process toward favoring business over individual wellbeing. As voters we have accepted their purely theoretical message that little government regulation and low taxes are best for the country.

In contrast, the actual reality is the exact opposite.

Historically, lack of regulations has led to corporate excess. Theodore Roosevelt in the early 1900’s introduced anti-trust legislation as the corrective action to end abusive labor practices by the large industrial monopolies. The regulations of Franklin Roosevelt’s New Deal in the 1930’s corrected the unsanitary conditions in the meat packing and food industry, established industrial safety standards, and constrained the financial sector from the speculations responsible for the great recession.

In this Century we have experience the cumulative negative results of de-regulating the progressive legislation of the Roosevelt eras. First there was Enron, then the mortage bubble of 2008, and now there are more financial troubles on the horizon, such as the pending student loan defaults.

Likewise with taxes. Sufficient tax rates are essential for general well-being. People need to be healthy. Public parks, community centers, art and recreation make life livable for everyone. Schools have to prepare students for success. A living wage is the basis for equality of opportunity, social stability and personal happiness.

Over the decade preceding the OEDC report (2002 to 2012) the average measure of inequality in the member nations declined from a score of 3.44 to 3.38. In contrast, the magnitude of inequality for the US actually increased from 4.66 to 5.22, the highest of all OECD nations. While the rest of the developed world held steady through the great recession, it became an opportunity in the US for the wealthy to increase their ability to restrict government regulation and to increase their share of the income.

The prescription for swinging the balance back from corporate excess to greater individual well-being is to move toward greater similarity with the OECD countries which share our democratic political processes: A steeper income tax on the very wealthy, a living wage for low-wage workers, more public entitlements such as universal healthcare, and sufficient government regulations to insure that workers are not treated as disposable components of a global economy.

What is difficult to understand is why this pending end of the American Dream – once the envy of the world -- could be possible in a country with freedom of the press, democratically elected leaders and a political philosophy of equality of opportunity.

The essential role for government is same today as it was in 2008, 1929 and 1908. Theodore Roosevelt had it right, an essential role of government is to protect individuals against the abuses of corporate power.

Edward Renner has been a Professor of Psychology at the University of Pennsylvania and the University of Illinois in the US, and at Dalhousie University in Canada. He is now retired and teaches one course, Forums for a Future, as an Adjunct Professor in the Honors College at the University of South Florida. He may be reached at, and blogs at on the modern human challenge of how to live sustainably and peacefully on a crowded planet in the 21st Century.

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