Social Europe

politics, economy and employment & labour

  • Projects
    • Corporate Taxation in a Globalised Era
    • US Election 2020
    • The Transformation of Work
    • The Coronavirus Crisis and the Welfare State
    • Just Transition
    • Artificial intelligence, work and society
    • What is inequality?
    • Europe 2025
    • The Crisis Of Globalisation
  • Audiovisual
    • Audio Podcast
    • Video Podcasts
    • Social Europe Talk Videos
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Shop
  • Membership
  • Ads
  • Newsletter

Trump: Reaganomics Redux

by George Tyler on 22nd November 2016 @georgertyler

Share on TwitterShare on FacebookShare on LinkedIn
George Tyler

George Tyler

It’s wages, stupid!

Analysts are pondering why millions of the same voters who favored President Obama in 2008 and (less enthusiastically) in 2012 pivoted to favor his antithesis, Donald Trump, in 2016. Economic frustration centered on stagnant wages is mostly the answer, reflected in a generalized desire for “change” expressed by 39 percent of voters in exit polling.

American corporate executive suites were provided political and philosophical support to divert cash flow to profits from wages beginning in the 1980s by the Reagan administration, which also demonized trade unions. This executive suite transformation, symbolized by an embrace of job offshoring and Randian rational selfishness, is the genesis of the ensuing decades of wage stagnation. Wages are inching up for the moment as American labor markets episodically tighten. But the Bureau of Labor Statistics (BLS) reports that the median weekly wage of a full-time American worker in the all-encompassing nonfarm business sector in 2016 was a bare 5 percent ($17) higher than in 1979, adjusted for inflation. In Germany, by contrast, real wages are 30 percent above 1985 levels. In fact, the average 2.5 percent real wage gains reported by the Statistische Bundesamt (Federal Statistics Office) for German workers in 2015 alone was one-half the cumulative rise in median real American weekly wages since 1979.

Globalization, technology change and a handful of other exogenous factors are typically blamed for this stagnation. Yet, experience in other rich democracies during the past generation belies that thesis. Real salaries abroad have risen steadily enough for decades so that wages and benefits in the capstone manufacturing sectors in 13 other rich democracies have soared well above America. Compensation in 11 of them is more than $10 per hour higher than in the US, according to the Statistische Bundesamt and the Conference Board. That is because new jobs being created in America (unlike in other rich democracies) over the course of the business cycle in recent decades have consistently paid less than the old ones they replaced. More than 40 percent of the 8.5 million jobs lost in 2008 and 2009, for instance, had median wages above $20 an hour. But only 30 percent of the new jobs created through February 2014 were comparable.   The consequence is documented by the OECD, which has concluded that the US has the largest share of low-wages jobs of any rich democracy. That explains the Federal Reserve finding that 22 percent of Americans work two or more jobs.

Other rich democracies like the Low Countries or Germany are more engaged in international trade than the US and have no better productivity records of late than America. Yet, wages have steadily inched up in Northern Europe for the past generation, because the quality of their democracies is higher. Middle class hopes of rising prosperity are satisfied by politicians who demand both codetermination in the governance of larger domestic corporations and insist that smaller employers provide steady if modest real wage gains annually. The outcome is steadily rising real wages apace with productivity gains, no job offshoring, greater workforce participation than in the US and more security for life’s challenges via quality and affordable health care, education, child care and retirement. It is why their households suffer fewer pathologies such as addiction or suicides than the economically beset and shrinking American middle class. Indeed, as documented by OECD data, America has come to most resemble Turkey or Uruguay on important economic measures such as income disparities or the small size of its middle class.

The election outcome is not a panacea for middle- and working-class Americans seeking higher wages. Trumponics will mimic Reaganomics, with the Republican Party agenda of higher profits, tax cuts for the most cosseted, wage suppression, indifference to budget deficits and deregulation de rigueur. President Reagan nearly tripled America’s national debt, for instance, and Trump may well match that. Federal anti-poverty health care and food programs will likely devolve to become state-administered grants, worsening the plight of America’s poorest. And a new Supreme Court justice or two will ensure that body remains in the hands of steadfast economic Darwinians.

Join our growing community newsletter!

"Social Europe publishes thought-provoking articles on the big political and economic issues of our time analysed from a European viewpoint. Indispensable reading!"

Polly Toynbee

Columnist for The Guardian

Thank you very much for your interest! Now please check your email to confirm your subscription.

There was an error submitting your subscription. Please try again.

Powered by ConvertKit

Donald Trump campaigned to drain the swamp of pay-to-play Washington politics. And Trump campaigners like former Republican Senator Trent Lott – a powerful lobbyist – are eager to help: “He is going to need some people to help guide him through the swamp – and how do you get in and how you get out? We are prepared to help do that.”

The one inescapable, absolutely ineluctable reality is that wage stagnation can only be ended by reforms to American corporate governance. Token proposals (domestic content regulations, wage subsidies) may be introduced. But Republicans will assuredly reject the necessary systemic reorientation of American executive suites that is viewed with great hostility by their affluent donor class.

This easily predicted stasis is an opportunity for Democrats. The election results obviously require them to advocate for a new American wage bargain more alluring than their tepid agenda now centered on minimum wages, paid family leave, speedier unionization elections, overtime pay, Independent Contractor reforms and the like. It requires a centerpiece able to capture the imagination of America’s middle and working classes.

That centerpiece should be co-determination – reforming corporate boards of directors to make them amenable to sharing productivity gains with both shareholders and employees. Prime Minister Theresa May will unveil a co-determination proposal shortly for British enterprises and the American Democratic Party should do no less. As evidenced by Germany and many of its neighbors, co-determination has proven over decades to be the globe’s most powerful and dynamic technique for enabling the middle class to realize a portion of the gains from growth without endangering international economic competitiveness.


We need your help! Please join our mission to improve public policy debates.


As you may know, Social Europe is an independent publisher. We aren't backed by a large publishing house or big advertising partners. For the longevity of Social Europe we depend on our loyal readers - we depend on you. You can support us by becoming a Social Europe member for less than 5 Euro per month.

Thank you very much for your support!

Become a Social Europe Member

That success makes it the prescription of choice for a Democratic Party eager to be recast as genuine enablers of the middle and working classes, a role they have bungled since Ronald Reagan.

Share on TwitterShare on FacebookShare on LinkedIn
Home ・ Trump: Reaganomics Redux

Filed Under: Economy

About George Tyler

George Tyler began his career working in the United States Congress as an economic adviser to Senators Hubert Humphrey of Minnesota and Lloyd Bentsen of Texas and as senior economist on the Congressional Joint Economic Committee. Appointed by President Clinton as a deputy Treasury assistant secretary in 1993, George worked closely with international financial institutions and in 1995 became a senior official at the World Bank. He is the author of What Went Wrong: How the 1% Hijacked the American Middle Class ... And What Other Nations Got Right.

Partner Ads

Most Popular Posts

Thomas Piketty,capital Capital and ideology: interview with Thomas Piketty Thomas Piketty
sovereignty Brexit and the misunderstanding of sovereignty Peter Verovšek
China,cold war The first global event in the history of humankind Branko Milanovic
centre-left, Democratic Party The Biden victory and the future of the centre-left EJ Dionne Jr
Covid 19 vaccine Designing vaccines for people, not profits Mariana Mazzucato, Henry Lishi Li and Els Torreele

Most Recent Posts

Uber,drivers,gig UK gig drivers recognised as workers—what next? Jill Toh
women workers,services Covid-19: a tale of two service sectors John Hurley
European Pillar of Social Rights,social pillar EU credibility as a people’s union rests on the social pillar Liina Carr
vaccine nationalism,Big Pharma Vaccine nationalism won’t defeat the pandemic Sharan Burrow
Can we change the climate on climate change? Karin Pettersson

Other Social Europe Publications

US election 2020
Corporate taxation in a globalised era
The transformation of work
The coronavirus crisis and the welfare state
Whither Social Rights in (Post-)Brexit Europe?

Foundation for European Progressive Studies Advertisement

FEPS Progressive Yearbook

Twenty-twenty has been an extraordinary year. The Covid-19 pandemic and the multidimensional crisis that it triggered have boosted existing trends and put forward new challenges. But they have also created unexpected opportunities to set a new course of action for the European Union and—hopefully—make a remarkable leap forward in European integration.

The second edition of the Progressive Yearbook, the yearly publication of the Foundation for European Progressive studies, revolves around the exceptional events of 2020 and looks at the social, economic and political impact they will have in 2021. It is a unique publication, which aims to be an instrument for the progressive family to reflect on the recent past and look ahead to our next future.


CLICK HERE

Social Europe Publishing book

With a pandemic raging, for those countries most affected by Brexit the end of the transition could not come at a worse time. Yet, might the UK's withdrawal be a blessing in disguise? With its biggest veto player gone, might the European Pillar of Social Rights take centre stage? This book brings together leading experts in European politics and policy to examine social citizenship rights across the European continent in the wake of Brexit. Will member states see an enhanced social Europe or a race to the bottom?

'This book correctly emphasises the need to place the future of social rights in Europe front and centre in the post-Brexit debate, to move on from the economistic bias that has obscured our vision of a progressive social Europe.' Michael D Higgins, president of Ireland


MORE INFO

Hans Böckler Stiftung Advertisement

Renewing labour relations in the German meat industry: an end to 'organised irresponsibility'?

Over the course of 2020, repeated outbreaks of Covid-19 in a number of large German meat-processing plants led to renewed public concern about the longstanding labour abuses in this industry. New legislation providing for enhanced inspection on health and safety, together with a ban on contract work and limitations on the use of temporary agency employees, holds out the prospect of a profound change in employment practices and labour relations in the meat industry. Changes in the law are not sufficient, on their own, to ensure decent working conditions, however. There is also a need to re-establish the previously high level of collective-bargaining coverage in the industry, underpinned by an industry-wide collective agreement extended by law to cover the entire sector.


FREE DOWNLOAD

ETUI advertisement

ETUI/ETUC (online) conference Towards a new socio-ecological contract 3-5 February 2021

The need to effectively tackle global warming puts under pressure the existing industrial relations models in Europe. A viable world of labour requires a new sustainability paradigm: economic, social and environmental.

The required paradigm shift implies large-scale economic and societal change and serious deliberation. All workers need to be actively involved and nobody should be left behind. Massive societal coalitions will have to be built for a shared vision to emerge and for a just transition, with fairly distributed costs, to be supported. But this is also an opportunity to redefine our societal goals and how they relate to the current focus on (green) growth.


REPLAY ALL SESSIONS

To access the videos, click on the chosen day then click on the ‘video’ button of your chosen session (plenary or panel). It will bring you immediately to the corresponding video. To access the available presentations, click on the chosen day then click on the ‘information’ button. Check the links to the available presentations.

Eurofound advertisement

Industrial relations: developments 2015-2019

Eurofound has monitored and analysed developments in industrial relations systems at EU level and in EU member states for over 40 years. This new flagship report provides an overview of developments in industrial relations and social dialogue in the years immediately prior to the Covid-19 outbreak. Findings are placed in the context of the key developments in EU policy affecting employment, working conditions and social policy, and linked to the work done by social partners—as well as public authorities—at European and national levels.


CLICK FOR MORE INFO

About Social Europe

Our Mission

Article Submission

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Find Social Europe Content

Search Social Europe

Project Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

.EU Web Awards