Promoting freedom, innovation, and growth

Connect with IPI

Receive news, research, and updates

August 27, 2013

The Recent Decline in Wages Is a Result of Obama's Economic Policies

 

The Department of Labor just announced that average hourly wages for non-government, non-supervisory jobs, adjusted for inflation, have declined 0.9 percent since the end of the recession in June 2009.
 
That means hourly private sector workers have been losing spending power since, well, President Obama’s economic policies were put in place, despite—or more likely “because of”—all the president has done to boost the economy.
 
Commentators suggest several reasons—“excuses” in some cases—for the stagnant wage growth, such as globalization or a lack of more federal spending (Obama’s standard excuse), and the like.
 
While economists have complained of stagnant wage growth for several years, there are reasons for the recent decline, and they are ALL a result of the president’s economic policies.
 
First, U.S. businesses are still sitting on trillions of dollars they are reluctant to invest. Unlike the president, businesses know there are economic costs to government mandates and regulations. And they know that Obama has been the most pro-regulation president in history, with the possible exception of FDR.
 
Second, employee benefits, and especially health insurance, have been rising. Since benefits are part of the total compensation package, when benefits rise quickly, wages won’t. While this trend of benefits offsetting wage increases predates Obama, business owners know the cost of benefits are going to rise even faster when ObamaCare kicks in next year.
 
Third is taxes. Obama has imposed more new taxes—21 in ObamaCare alone—than any U.S. president in history. And now he wants to “reform” the corporate income tax, by which he means taking even more money from businesses. And that reform includes new penalties for companies that invest and hire overseas.
 
Given the unknown future grasp of the taxman, regulations and imposed benefits, companies are reluctant to expand, invest and hire, as we pointed out here previously. So businesses will sit on those excessive funds in case they need them, which, incidentally, is exactly what families do when they are facing a number of unknown possible future costs. They err on the side of financial caution.
 
And because there is no evidence that Obama has learned anything about economics from his first five years in office, we should expect the stagnant-wage trend to continue, at least for the next three years.


 

  • TaxBytes-New

Copyright Institute for Policy Innovation 2017. All Rights Reserved Privacy Policy Contact IPI.

e-resources e-resources