How to Create More Jobs By Lowering Wages: Texas and America

Perry and Romney can duke it out over who created the most jobs, but governors have as much influence over job growth in their states as roosters do over sunrises.

States don’t have their own monetary policies so they can’t lower interest rates to spur job growth. They can’t spur demand through fiscal policies because state budgets are small, and 49 out of 50 are barred by their constitutions from running deficits.

States can cut corporate taxes and regulations, and dole out corporate welfare, in efforts to improve the states’ “business climate.” But studies show these strategies have little or no effect on where companies locate. Location decisions are driven by much larger factors — where customers are, transportation links, and energy costs.

If governors try hard enough, though, they can create lots of lousy jobs. They can drive out unions, attract low-wage immigrants, and turn a blind eye to businesses that fail to protect worker health and safety.

Rick Perry seems to have done exactly this. While Texas leads the nation in job growth, a majority of Texas’s workforce is paid hourly wages rather than salaries. And the median hourly wage there was $11.20, compared to the national median of $12.50 an hour.

Texas has also been specializing in minimum-wage jobs. From 2007 to 2010, the number of minimum wage workers there rose from 221,000 to 550,000 – that’s an increase of nearly 150 percent. And 9.5 percent of Texas workers earn the minimum wage or below – compared to about 6 percent for the rest of the nation, according to the Bureau of Labor Statistics. The state also has the lowest percentage of workers without health insurance. Texas schools rank 44th in the nation in per-pupil spending.

The Perry model of creating more jobs through low wages seems to be catching on around America.

According to a report out today from the Commerce Department, the median income of U.S. households fell 2.3 percent last year – to the lowest level in fifteen years (adjusted for inflation). That’s the third straight year of declining household incomes. Part of this is loss of jobs. Part is loss of earnings.

More and more Americans are retaining their jobs by settling for lower wages and benefits, or going without cost-of-living increases. Or they’ve lost a higher-paying job and have taken one that pays less. Or they’ve joined the great army of contingent workers, self-employed “consultants,” temps, and contract workers – without healthcare benefits, without pensions, without job security, without decent wages.

It’s no great feat to create lots of lousy jobs. A few years ago Michele Bachmann remarked that if the minimum wage were repealed “we could potentially virtually wipe out unemployment completely because we would be able to offer jobs at whatever level.”

I keep on hearing conservative economists say Americans have priced themselves out of the global high-tech labor market. That’s baloney. The productivity of American workers continues to soar. The problem is fewer and fewer Americans are sharing the gains. The ratio of corporate profits to wages is the highest it’s been since before the Great Depression.

Besides, how can lower incomes possibly be an answer to America’s economic problem? Lower incomes mean less overall demand for goods and services — which translates into fewer jobs and lower wages.

The Perry (and Bachmann) model of job growth condemns Americans to lower and lower living standards. That’s not anything to crow about.

About Robert Reich 545 Articles

Robert Reich is the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.

He has served as labor secretary in the Clinton administration, as an assistant to the solicitor general in the Ford administration and as head of the Federal Trade Commission's policy planning staff during the Carter administration.

He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

In 2003, Mr. Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

Mr. Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

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