[Robert Reich] Creating jobs by lowering wages

Rick Perry and Mitt 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.

Perry seems to have done exactly this. While Texas leads the nation in job growth, a majority of Texas’ workforce is paid hourly wages rather than salaries. And the median hourly wage there is $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 highest 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 recent report from the Commerce Department, the median income of U.S. households fell 2.3 percent last year ― to the lowest level in 15 years (adjusted for inflation). That’s the third straight year of declining household incomes. Part of this is due to loss of jobs. Part is due to declining 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 taken jobs that used to pay far more (such as unionized auto jobs that now pay about $14 an hour to new workers, roughly half what new auto workers used to earn).

Or they’ve joined the great army of contingent workers, self-employed “consultants,” temps and contract workers ― without health-care 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.”

She’s right. We could wipe out unemployment entirely if employers paid five cents an hour. Hey, why not slave labor?

I keep 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 that 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 even fewer jobs and even lower wages.

We need more jobs, surely. But they need to be good jobs.

The Perry (and Bachmann) model of job growth condemns Americans to lower and lower living standards. We’re already on the way. And that’s nothing to crow about.

By Robert Reich

Robert Reich, former U.S. secretary of labor, is professor of public policy at the University of California at Berkeley and the author of “Aftershock: The Next Economy and America’s Future.” He blogs at www.robertreich.org. ― Ed.

(Tribune Media Services)