Worker Wages and Who is Really Winning

By Jeffrey Snider

Amazon made a huge splash when it announced it was raising wages. On the surface, it appeared to confirm all those stories about a massive, nationwide labor shortage. In addition, it positioned Amazon in the “fight for fifteen”, a political topic which raises more questions than provides answers.

It was the rare occasion where populists on both sides applauded the move, though for very different reasons. Amazon has been a favorite target of President Trump, the wage hike forcing Economic Advisor Larry Kudlow to agree with Senator Bernie Sanders. “Good for them. I’m in favor of higher wages,” Kudlow said.

The Socialist Sanders would take it further, hyping the change as, “…it could well be, and I think it will be, a shot heard around the world.”

It would appear that the new pay levels are the retail giant’s way of breaking with everyone else. These anecdotes about the labor market almost always involve “creative” ways in which companies are working around presumed tightness in the labor market. They need not be so indirect, meaning that if they really are having problems securing new workers they need only pay them.

But, they refuse to do so as all the data continues to demonstrate wage restraint, historical repression. In truth, companies aren’t paying more for workers (as well as refraining from obtaining more workers) because, quite simply, they can’t.

Amazon’s stunt actually provides further proof along these lines. In a so-called booming economy, the company will instead “pay for” its wage hikes by eliminating monthly bonuses and stock awards. According to several media outlets, some workers may end up making less money.

Warehouse workers for the e-commerce giant in the U.S. were eligible in the past for monthly bonuses that could total hundreds of dollars per month as well as stock awards, said two people familiar with Amazon’s pay policies. The company informed those employees Wednesday that it’s eliminating both of those compensation categories to help pay for the raises, the people said.

In response to the allegations this could amount to a pay decrease after all was said and done, Amazon released a statement disputing the calculations.

“We can confirm that all hourly Operations and Customer Service employees will see an increase in their total compensation as a result of this announcement. In addition, because it’s no longer incentive-based, the compensation will be more immediate and predictable.”

Many aren’t convinced. Even if it does turn out to be more in the end, it may not be much more and therefore nothing like the huge raise that seemed to have sparked some mild euphoria.

The bigger question is why Amazon would need to “pay” for this anyway. The economy is booming, supposedly, and the opportunity alone should be enough as it had always been in the past. There were no grandiose corporate announcements about wage rates before the last few years, why now?

The answer is obvious, as is why this one company would turn out to be as constrained on costs. The economy just isn’t what everyone says, especially those in the Trump Administration who used to be skeptical about the unemployment rate.

But it is this vast difference that is causing enormous pressures outside of strictly small “e” economics. Young people in particular see Amazon this week and think Sanders; companies aren’t voluntarily giving up wage gains, they have to be cajoled if not forced out of “evil” profits almost certainly coming at the expense of workers who have gotten little or nothing.

That parts true, workers have very clearly (if you actually look) been on the receiving end of this lost decade. But companies aren’t really doing much better. No one is, and so capitalism just doesn’t come off well for the often purposeful misconceptions.

It’s really no surprise, then, that in a recent survey of millennials conducted by Mara/Blu and BuzzFeedNews (FWIW) the number of young adults describing themselves as socialist has jumped. Twenty-eight percent of Democrats would call themselves a Democrat/Socialist while 11% said they were just socialist. Only 17% of D’s indicated they would never identify with socialism (though, it needs to be pointed out, the number of Republicans who claimed to be either Democrat/Socialist or socialist was greater than Independents; is that a problem with the survey, or really bad news for any chance at a small government, classically liberal political party?)

The primary issue really isn’t politics, though, it’s Economics. The economy is recovered and booming, yet only in the sense of Jay Powell in the media. Millennials in particular have had to live with a very different reality than the carefully crafted, unscrutinized picture of low levels of positive GDP growth.

It makes for a good political point to claim the US economy hasn’t experienced recession in ten years. It would be truthful, however, to add that while this is true that may only because it never came out of that last one.

It’s hard to blame young adults when they can’t but wonder if this is the good times, maybe something radically different is sure to be much better. Workers are getting nothing out of this boom, maybe government is the answer. They might not be so quick, however, if they were told there is no boom.

This is the reality of living in a non-linear world, but where it is so often judged linearly. GDP is positive, but there is a massive difference between 2% and 4%; or even a 4% or 5% quarter but only once or twice every four years or so. In non-linear terms, the economy is clearly falling further and further behind, where companies really can’t afford to pay workers that much more.

Populism wins by default. And not just in the United States.

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Gary

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