From the New York Times:
"On Friday, the Bureau of Labor Statistics reported that hourly earnings of production workers - nonmanagement workers ranging from nurses and teachers to hamburger flippers and assembly-line workers - fell 1.1 percent in June, after accounting for inflation. The June drop, the steepest decline since the depths of recession in mid-1991, came after a 0.8 percent fall in real hourly earnings in May"
This is particularly relevant to me with respect to work I'm doing on tax policy for a Minnesota think tank. Because our mission is to try and better marry the concepts of economic justice (read, people) and growth (read, business) (hence the name of the group
Growth & Justice) we are very interested in WHERE tax policy might best be adjusted, i.e. at the business level or at the individual level.
Much of the history of business incentives has seen tax breaks aimed at capital (mostly machines, real estate, and other business inputs EXCEPT labor). It can probably be shown that reducing the cost of business helps business create jobs...this has been the rationale for business tax cuts. It is notable, however (confirmed by this article), that business won't necessarily create GOOD jobs, or ones that pay a living wage (one that is sufficient, at minimum, to pay basic healthcare costs in addition to housing and food). WalMart is in the news recently for creating lots of really BAD jobs. Not only do they not pay a living wage, but to avoid requirements to pay healthcare as part of the employment package, WalMart hires people on a part-time basis.
There seems ample evidence that business will continue to act like business...maximizing the bottom line. (I'm not sure if I mean this in a factual way, or with a harsh judgement about business' failure to take up their share of the social contract that everyone should have a basic lifestyle, including healthcare....Paul Krugman, in an editorial I noted previously, exonerated business from any responsibility beyond making profits because, in his words, "they are business". An editorial letter writer objected to the idea that business should be so-relieved of its responsibility to this social issue)...but, I digress.
Whether you believe that business should take up part of this social contract or not, clearly today they are not incented to, either through law or social mandate. Couple this with the statements recently by Alan Greenspan which recognize, as does this article, that retail spending is the ONLY thing that is keeping this economy afloat right now and you are faced with a very obvious policy platform: business will not create jobs unless someone is there to buy their stuff; therefore, rather than making business rich by "reducing" their cost of business, put public tax incentives into the hands of consumers, and business will be along for the ride BECAUSE THAT'S WHAT THEY DO....they make money.
On the ground, this smacks of liberal tax and spend mentality. BUT, even the conservatives will admit that consumer spending is driving the economy. I would argue strongly that conservative and liberal interests are actually aligned. Targeting tax relief and tax law changes to put more incremental dollars in the hands of average and low-income consumers will create the demand business needs to invest in new jobs and new capital. This sort of tax policy (reflecting a more generous social policy) IS consistent with business goals and, implicitly, with the long-term goals of those that own business, overwhelmingly conservative.
I would argue that the marginal propensity to spend, i.e. that portion of each additional dollar that gets spent rather than saved, is substantially higher among the middle and low-income population, because they MUST spend that money on necessities. Wealthy people put it in their savings account or stock portfolio and maybe, just maybe, a few years from now that better capitalized business MIGHT create a few more jobs which MIGHT pay a living wage.....it MIGHT.
If somebody is banging on their door, trying to purchase their "stuff", they WILL.....I guarantee it. That's what business does.