Last week, GM and the United Auto Workers union came to an agreement
that would allow a Michigan car plant to produce a sub-compact car as
long as the plant's employees agreed to, on average, a 20 percent
reduction in wages. The move was highlighted as a reasonable compromise by
The Washington Post's Steven Pearlstein, who pondered
whether this type of wage-cutting would be the most realistic way of
saving jobs. Wage cutting, he argued, would at least allow workers to
take jobs "at the globally competitive, market-clearing wage and hope to
build back up from there." Naturally, other pundits had their own ideas
about the best way to rebuild American industry:
- Wage Cuts May Be the Only Way to Get America to Work The Washington Post's Steven Pearlstein
concludes that the GM-UAW deal is a microcosm of American industry:
"There are lots of reasons why American companies like GM have lost
market share....but one is that in too many industries, our labor costs
are now too high to be globally competitive. Reducing wages and benefits
in those industries would not only help to create and save jobs, but
would also force a further reduction in consumption and living standards
that is necessary to bring the U.S. economy back into balance."
- Nominal Wage Cuts Aren't An 'Attractive' Option ThinkProgress's Matthew Yglesias
explains: "If you force nominal wage cuts on an indebted population,
you get an unbalanced deflation where existing debt obligations come to
consume a larger and larger share of income. Alternatively, if you
reduce real compensation via currency devaluation or higher inflation
you reduce income and debt alike allowing us to dig out of the balance
sheet hole more quickly."
- There Are Other Creative 'Wage Structures' The Atlantic's Derek Thompson
notes some strategies that haven't really been tried to get the economy
rolling again: "We haven't tried 'job-sharing,' the German plan where
government and employers split the check for workers to keep more people
in their old jobs even when demand for their product falls. We also
haven't really tried direct hiring....If work is cheap, and out-of-work
construction workers are plentiful, and we're paying them already to be
unemployed, why not continue to pay them ... to work!"
- The Lower Wage Earners Don't Have To Be the Ones With Wages Cut Dean Baker
at Seeking Alpha takes issue with Pearlstein's "implication" that the
"wages of less-educated workers more generally must fall." Actually it
was government intervention that helped shield the salaries of the
"investment bankers, corporate executives, and newspaper columnists"
that the Washington Post columnist mentions. Baker cites the bank
bail-out, the lenient rules of corporate governance and laws that shield
highly-educated professionals from international competition as
examples of the government intervention to help these high earners. "By
contrast," he argues. "Trade policy was deliberately designed to put
U.S. manufacturing workers in direct competition with the lowest paid
workers in the world."
- Our Most Enduring Economic Problem was highlighted by Pearlstein, argues Mother Jones' Kevin Drum.
The Washington Post columnist argues that America needs to "grab a
bigger share of global markets" and the the way to do that is through
exports. Drum doesn't see that happening unless the dollar continues to
fall "a lot" and it makes "U.S. exports to the rest of the world cheaper
and everyone else's export to us more expensive."
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