Saturday, March 12, 2016

Not Trade but Wages

3/12/2016—Notice how Bernie Sanders and Donald Trump sound the same on free trade? What in the world has happened to the Democratic Party? Where has all this protectionism come from?

I blame the economic leadership of the Party in large part. Finally, today in the PG, Paul Krugman had a modest defense of free trade. It basically came down to this—that America should not renege on prior deals. That is not much of a defense.

The point should not be jobs per se but wages—though the two are related. At a 4.9% unemployment rate—practically full employment, it is hard to argue that the problem right now is too few jobs. The problem is wage stagnation. People who attribute wage stagnation to free trade are overlooking how small a portion of GDP trade makes up. Wages have not stagnated because free trade gives employers leverage to move abroad.

What has happened is that business is keeping a higher percentage of earnings for itself and shareholders than it used to. Wages are not getting the same percentage of the pie as was true in the past. This, not trade, is what needs to be remedied.

The remedy is to push up wages. The simplest way to do this is to raise the federal minimum wage. The slogan should be, America, you deserve a raise. The target should be any candidate for the House who opposes increasing the minimum wage. Once implemented, wages will go up.

Beyond that, the only way I know to put upward pressure on wages is to make it easier to unionize. That effort will face the strong pro-business bias of the US Supreme Court. It is unbelievable that some Justices—Alito, for example—equate union bargaining with associational rights under the First Amendment. That is bizarre. For wxample, there are people who oppose the minimum wage. That does not make the minimum was a free speech issue. Once the political activity of unions is removed, as the Court did years ago, there is no free speech issue in requiring fees for matters of economic representation.

In any event, the point is that it is not trade that is the issue. The issue is wages. Here, I bet Bernie agrees with Hillary and not Donald.

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