Bill Owens: The Wealth Gap - Solutions
There has been much chatter out of Washington about the wealth gap with both Democrats and Republicans promoting wildly different perspectives, but not offering much in the way of solutions.
There is little micro nor macro economic logic that supports the theory that holding down wages strengthens the economy or increase GDP. We know that GDP in the United States is seventy percent (70%) driven by consumer spending, thus a simple syllogism arises; as you drive down wages for the vast majority of the population; spending declines; as spending declines so do GDP and profit.
Walmart recently announced, with much fanfare, that it was raising the minimum wages of its employees. Did Walmart heed the advice given in the Wall Street Journal several months ago to follow the philosophy of Henry Ford and provide workers a wage sufficient with which to buy his cars? This suggestion was made by the author, somewhat tongue in cheek, after Walmart complained about stagnant sales. Target and TJM have also announced wage increases above the minimum wage, did they read the same letter?
Michael Saltman wrote in the March 26, 2015 Wall Street Journal that raising the minimum wage by law has nothing but negative outcomes. I guess he chose to ignore the impact on spending GDP and profits.
The economy is recovering, the national unemployment rate has dropped to 5.5%, and the number of people applying for unemployment benefits is declining. The New York State unemployment rate is 5.2% outside of New York City, and there are five million unfilled jobs in the U.S. In the Capital Region, the North Country, and the Hudson Valley, there are over 20,000 job openings. (NYS DOL – Jobs Express).
Meanwhile, the state’s Medicaid program including the Delivery System Reform Incentive Payment (DSRIP) program will likely create even more job openings for healthcare workers. The DSRIP applicants in the Capital Region are looking toward 1,000 new jobs; the Adirondack Region about 850 jobs; and in central New York, 275 jobs over the next five years. There will be several thousand additional workers who will be retrained and redeployed. DSRIP will call for a significant increase in Primary Care Physicians, Mental Health Professionals, technicians and support staff at every skill level.
In order for business and employees to forge a mutually beneficial solution, there must be acknowledgement of self-interest, and occupancy of common ground. The business owner wants success which translates into greater profits. The employee wants higher wages to have a better life for him/herself and family. Thus from both a macro and a micro economic perspective it makes no sense to decrease the wages of the workers who are most likely to spend their dollars on food, clothing, shelter, transportation and other necessities as those expenditures will drive both the local and national economy, and ultimately result in continued or greater profits, which will then have a trickledown effect benefitting all.
Current work force job openings and future job openings will increase according to published studies, for those with a high school diploma by 9.3%, for those having some college or an Associate’s Degree, an increase of over 20%, while those jobs requiring a Bachelor’s Degree will increase 10.1% while those with less than high school education will see only a 5.7% gain. The need for training and education will continue, and educational institutions at all levels must respond by offering quality programs which reinforce existing strengths, and address deficiencies which are barriers to successfully competing within local, national, and global economies.
Clearly demand for labor drives up wages and when combined with self-interest this is our best bet yet to shrink a wealth gap that could have significant negative consequences for GDP if it continues.
If these jobs are filled by our children and neighbors, their success will in turn enhance the standing of the high schools and colleges which prepared them.
Former congressman Bill Owens represented New York's North Country from 2009 until retiring from the House in 2015. The Democrat is now a strategic advisor in the Washington Office of McKenna, Long and Aldridge, and a partner in the Plattsburgh firm of Stafford, Owens, Piller, Murnane, Kelleher and Trombly.
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