Addressing the Problem of Stagnant Wages

The weighty paper with the above title was written by Frank Levy and Tom Kochan and is available on the EPRN Employment Policy Research Network website. It is essential reading!!! The great thing about the paper is its thoroughness, showing how many things political and economic have contributed to the problem of wage stagnation, and how many things would have to be righted to get the situation back to where wages are keeping up with productivity, the way they did in the three decades after World War II, but have failed to do since the 1970s

A point, which is overlooked by many of us, and, in the welter of detail in the paper, may not stick in a reader's mind: there really are two different classes of workers in America. One is the internationally competitive class of manufacturing workers, engineers, high-tech workers and others. They are (at least partly) holding their own, and are often earning well above the approximately $10 dollar an hour level that could be a politically feasible candidate for a new national minimum wage (the current level being $7.25). With the education and training programs that Levy and Kochan emphasize, a reduction in payroll taxes, and perhaps a gradual decline in the dollar, it seems possible that this class's pay could keep up with productivity and even recoup some of the losses of recent decades.

The other class is relatively low-skilled service sector workers. Despite the fact that it is engaged in a sector that is not for the most part an internationally competitive sector, this class has clearly suffered from wage stagnation. What it needs, it seems, is simply higher wages without necessarily additional education, training, etc. Its wages should catch up with and keep up with national productivity trends. For these workers, a reasonable minimum or living wage is crucial.

This is tricky terrain, and comments would really be appreciated. Clearly, the whole issue of low wages is a key part of the political-economic debate this year, and it is certain to remain at the center of economic debates for years to come.