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Where are the good jobs?

Rick McGahey: We won't see higher wages without two important policy changes

Rick McGahey | 4/6/2015, 8 a.m.
The American economy has added an average of 261,000 jobs every month for the past 12 months, with March's jobs ...
Fast food workers strike in New York City on Thursday, August 29, 2013, demanding a minimum of $15 an hour. Fast food workers in 50 cities across the U.S. are walking off the job Thursday as they protest for higher wages. CNN

— This stagnation even hits college graduates. Last December, the U.S. Census Bureau posted a chart with the startling title "Better Educated But Poorer," showing that many more young adults have a college degree than in 1980, but they are earning less in real dollars.

We won't see higher wages without two policy changes: more government stimulus to create jobs, and changes in labor market rules to rebalance power between business and workers.

To create jobs the United States should be investing in infrastructure, financed by borrowing at the current virtually zero inflation-adjusted interest rate. Our bridges, roads, ports, railroads, water and power systems, and airports all need repair.

The United States also needs fair rules in the labor market: higher minimum wages, tighter labor market regulations, and encouragement for unions. President Obama has called for increasing the federal minimum wage, but many states and cities aren't waiting for Washington, and their actions are paying off. Over half of American minimum-wage workers live in states with minimum wages above the federal level.

Walmart recently announced a wage increase to $9 per hour, but this is essentially in compliance with the higher state minimum wage laws. And although McDonald's will give a $1 per hour increase to workers in company-owned stores, that's only about 10% of all the chain's workers, most of whom work in franchises not covered by the raise.

Workers need a voice so they can negotiate a fair bargain with business. Only 7.4% of American private sector workers are represented by a union, and it is no coincidence that the decline in unionization is linked to the stagnation of real wages. The deep decline in traditional unionization is leading some activists to explore new models, but some type of stronger shared voice for workers has to be part of solving the low-wage problem.

These ideas aren't going to pass in Washington now, given the partisan deadlock between Congress and the President. State and city efforts to improve wages and jobs can only go so far. Without national policy changes, we face a bleak future of inadequate job growth and low wages. America can do better.

Rick McGahey teaches economics and public policy at the Milano School of International Affairs, Management and Urban Policy at The New School. He served as executive director of the Congressional Joint Economic Committee and as assistant secretary for policy at the Department of Labor in the Clinton administration. The opinions expressed in this commentary are solely those of the author.