Corporations Are Suppressing Wages—There’s a Fix for That

Yves here. What is depressing about the debate over the need to increase wages is that so many have been brainwashed into parroting the claim that small businesses can’t afford it. If a small business can’t survive without paying abusively low wages, maybe it should not exist. And the people who benefit are not the business owners as much as the patrons who are getting services on the unduly cheap.

One of my otherwise very right wing friends regularly puts the Clintonistas she lunches with on tilt by sincerely maintaining that they need to give up on their right to cheap berries. Berries are hand picked and should be expensive. The right winger says berries ought to cost $10 a pint and she’d pay that and just have them less often. Her liberal friends reflexively reject that they might have to have less of a diet item that their foodie gurus recommend highly.

And that’s before getting to the fact that big corps and fast food franchisees love to use those oh so precarious small businesses to justify their pay stinginess.

By Sonali Kolhatkar, the founder, host and executive producer of “Rising Up With Sonali,” a television and radio show that airs on Free Speech TV and Pacifica stations. She is a writing fellow for the Economy for All project at the Independent Media Institute. Produced by Economy for All, a project of the Independent Media Institute

Amid all the good news about successful labor organizing and job growth in the United States is the stark reality that wages continue to remain inexcusably low even as inflation rises. A new government report by numerous agencies including the U.S. Treasury Department came to the stark conclusion that corporate power is suppressing wages.

Two weeks later, the international aid organization Oxfam America released a report consistent with this finding, that millions of American workers continue to earn less than $15 an hour. People of color and particularly women of color are disproportionately impacted—as is always the case.

But, pro-corporate coverage paints a rosy picture about the U.S. economy—one that requires no intervention because things are apparently humming along just fine on their own.

The government report, barely noted in the media, was the result of a collaboration between the Treasury Department, the Department of Justice, the Department of Labor, and the Federal Trade Commission. It concluded that wages in the U.S. are 20 percent lower than they should be and that this state of affairs is the direct result of corporations wielding their power over the labor market.

Yet, conservative think tanks like the Competitive Enterprise Institute (CEI) continue to insist that wages are “naturally rising far beyond… [the federal minimum wage] due to basic supply and demand,” and therefore government intervention to raise the floor would be a bad idea. CEI cites how Target is already paying workers between $15 and $24 an hour. It offers no solution for how underpaid workers can afford to live if inflation continues to rise. Indeed, the only problem that the organization seems to care about is how rising wages could contribute to inflation.

But the Treasury Department’s report points out that corporate power is unnaturally suppressing wages in myriad ways including the offshoring of labor to nations where wages are even lower, the imposition of so-called “noncompete” contracts that undermine workers’ ability to switch jobs within their field, and the misclassification of workers that prevents them from exercising labor rights such as joining a union.

There is nothing “natural” about that.

A decade ago, the Fight for Fifteen movement, which was born in Chicago’s fast-food industry, demanded at least $15 an hour in wages. Ten years after the campaign was launched, most states still do not require employers to pay $15 an hour. While Washington, D.C., now has a $15.20-an-hour minimum wage, it remains an exception. Large states like California and New York are inching upward in the right direction, and a total of 30 states now require minimum wages to be higher than the federal minimum wage. But that is an extremely low standard.

The federal government’s minimum wage ought to be a national shame, remaining unchanged since 2009 at an embarrassingly paltry $7.25 an hour. This is the longest that the government has gone without raising the federal minimum wage since the New Deal.

According to Oxfam America’s new report, “The Crisis of Low Wages in the US,” “more than 31.9 percent of the US labor force, or 51.9 million workers, currently make less than $15 per hour, and many are stuck at the federal minimum wage.”

Dr. Kaitlyn Henderson, a senior research adviser with Oxfam America’s U.S. Domestic Policy Program, who authored the report, told me in an interview that “it is shocking, especially considering that this is the highest [that] inflation has been in four decades.”

Even those making $15 an hour earn barely enough to get by. The supposedly high upper limit “breaks down to $31,200 a year—before taxes,” explained Henderson. This means they “have a harder time keeping a roof over their head and food on the table. This is not enough for an individual to live [on], much less a working family.”

If this crisis is not apparent to the public, we can thank institutions like CEI that spread nonsense about wages “naturally” rising, and the corporate media’s near-exclusive focus on the number of jobs over the quality of jobs and pay. Media outlets routinely obscure the catastrophe of low wages each month when the Labor Department’s jobs report generates stories that focus on employment numbers and little else.

For example, the New York Times on March 4 covered the February 2022 report signaling “a flood of new jobs and new workers last month,” which to the paper meant that “the pandemic’s vise grip on the economy may be loosening.” The story featured quotes from pro-corporate economists such as Morgan Stanley’s Robert Rosener who said, “We’ve continually been surprised by the resilience of the U.S. labor market.”

This upbeat tone continued throughout the story, even when discussing wages: “The labor force grew, unemployment fell, and average hourly earnings were virtually unchanged from January, although they are up significantly over the past year, particularly for workers in low-wage industries.”

Anyone reading the New York Times or CEI’s reports would come away feeling optimistic about the state of the economy and adopt a hands-off approach. But Oxfam America’s report, which covers wages through December 2021, arrives at a very different conclusion where nearly a third of workers are scraping by on meager wages. “In the United States, the value we attribute to shareholders is somehow greater than the value we attribute to the workers who make our society function,” writes Henderson in the report.

Another major blind spot in pro-corporate economic coverage is how income inequality is delineated along racial lines. According to Henderson, “low-wage workers are disproportionately women, people of color, and women of color especially.” Henderson referred to the “occupational segregation” that Black and Latino workers are subjected to.

“When you’re thinking about it through an intersectional lens, where you’re considering race and gender, the pay gap increases substantially,” Henderson told me. So, women of color, who are overrepresented in industries like child care, are among the hardest hit. It should not surprise us then that, as per Henderson, “Child care is one of the lowest-paid professions in the United States,” and this “reflects the value system we have in this country.”

The Center on Budget and Policy Priorities (CBPP) suggested that while elite figures and institutions were celebrating Women’s History Month in March, one way to put their money where their mouths are is to support the women who work in child care and home health care. CBPP’s Diana Azevedo-McCaffrey wrote that the women of color who dominate these industries and are grossly underpaid to do so are “performing the labor that underpins the nation’s economy and maintains families’ health and well-being.”

CBPP backs myriad basic federal policies to fix this problem, including paid leave and federal funding for child care and home health care. Similarly, Oxfam America backs straightforward solutions such as federal funding boosts as well as the passage of the Raise the Wage Act, which would gradually raise the federal minimum wage from $7.25 an hour to $15 an hour—hardly a big ask 10 years after the Fight for Fifteen movement, and already inadequate to meet working people’s needs.

The problem of low wages in the U.S. ought to shock us, in spite of the pro-corporate optimism about the economy and the media’s refusal to amplify the problem. The solutions are obvious, easy, and hardly radical.

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  1. ArkansasAngie

    Well … speaking as a small business owner. I’m glad I exist. And yes money is tight. We don’t get all the perks of being big guys from the government.

    1. Appleseed

      Another small biz owner here. We worked hard to pay our staff well and it paid off. Where we got clobbered was insurance expenses. We owners felt obliged to offer our crew of six full-timers healthcare and it was the single highest monthly outlay for the business. Eventually, staff took other jobs with better benefits and the biz transitioned by downsizing. So it goes.

      1. jefemt

        Single-payor de-coupled from employment would unleash a lot of entrepreneurial energy.

        Maybe in another nation state, in another time, in another life, on another world.

        As to small business… some days I think sole proprietorship is the only answer… no possibility for exploitation.
        All dynamics are self contained, self directed, self centered and self benefitting.

        No blue sky to sell at the end of the road, but why should I expect someone else to fund my retirement?

        Small minded provincial thinking from an outlier

        1. ambrit

          The ‘Elites’ of today have forgotten why the Olde Guarde Democrat Party of the 1930’s instituted the Social Security Act in the first place; rising signs and actions that the “lower classes” were about to break out into chaos. See the Bonus Army, which was just the tip of the iceberg of social disruption at that time.
          Desperately poor and hungry people are prime resources for revolutions of all sorts.
          What today’s ‘Elites’ forget is that, in proper revolutions, the pre-existing elites often get massacred. So, maintaining society at a reasonable and fair level, inclusively, is simple self preservation. Another commentor here recently observed that today’s ‘Elites’ have all of the hallmarks of a death cult. The shame of it is that a lot of otherwise innocent people will die along with those ‘Elites.’
          Stay safe. Be vigilent.

        2. Laura in So Cal

          One our old friends retired and relocated to another state after selling a thriving business that employed 6 people for much less than it was worth. He found that his new home didn’t have the services he had been providing available so he started a new business doing the same kind of work. He says he’ll keep it small and run it as a sole proprietorship. Even in his new less regulated state, he says having employees is just too much hassle. He does have one regular independent contractor…his wife who keeps his books and does his taxes. She has her own sole proprietorship doing bookkeeping.

          1. Yves Smith Post author

            There is a ton of regulation with employees beyond a trivial number. I am lucky that the people who work on the site are legitimately contractors….

      2. rhodium

        In a labor market like this, if you can’t charge your customers more but your employees are fleeing to better paying jobs, then getting squeezed out is just the natural outcome. An economist would say that the demand was not enough to justify the supply and this is the nature of price as a rationing mechanism.

        What’s mind boggling to me is how much of GDP and budgets keeps getting sucked up by healthcare. All costs far enough down the line ultimately get paid out as someone’s income. Thinking of it that way, is the cost of this myriad of people living in these gigantic mansions along golf courses justified? Just from what I’ve seen, supply and demand seems to apply less and less as you get closer to the top, at which point it’s more likely to be someone’s particularly silly notions of meritocracy, nepotism, or favoritism that are paying them.

  2. MDA

    Why do we perpetuate the paradigm that basic needs are met through employment? The only reason we talk about minimum wage, health insurance and paid leave is because we expect people to survive on employment income. Universal basic income and free public healthcare could render those topics moot. Expecting employers to be generous with commodity labor, and not game or co-opt attempts at regulation, is unrealistic in the extreme.

    Today, elected politicians positively drool over opportunities to sacrifice the planet for jobs (as well as low price gas people need to get to work). Without jobs their constituents will be bitter, resentful and inclined to vote for change, but that’s only because we conceptualize jobs as the way we make ends meet. In my experience, most jobs add no real value (as well as many entire industries).

    Give everyone basic income and free public healthcare, and let employment income be gravy on top. No minimum wage, just what employers need to pay to attract workers. People are productive by nature, so plenty of people will happily work for extra income. If people don’t want to work they shouldn’t have to, and the planet will appreciate them using fewer resources.

    1. ambrit

      Fine as far as that goes, but the trend of ‘events’ in the West supports the view that today’s socio-economic systems are facilitating a Jackpot scenario. In other words, don’t supply basic services for the “excess” population, simply kill the “excess” population off.
      I have met plenty of people to whom the above formulation is perfectly acceptable; people in positions of power and authority.

  3. lyman alpha blob

    Just ran across this posted yesterday by Mikel which is apropos to this discussion. Apparently (cr)Applebees’ director Wayne Pankratz wants to use rising gas prices and inflation as an excuse to cut wages –

    And more here –

    I always wonder how these sociopaths mange to get where they are. As you can see from the response to the memo, there are always enough sycophants willing to tongue the boss’ footwear to prop these [family blog]ers up.

    1. JBird4049

      Aside from the propaganda and bribery? They are also all in their bubbles with all the other sociopaths and the servants too cowed to say anything. Actually, that is true with much of the wacky fanaticism in this country be it the Woke or the Business Roundtable and Chamber of Commerce types. When the country, with less wealth disparity, more decentralized power, and more community organizations like the church, the union, and social clubs, people were less isolated, therefore less extreme.

  4. Jung

    I never understood the appeal of the petty bourgeoisie. Looking at it now I guess the idea is that in some sense they can present themselves as “like you”, or “like a better version of you”. In reality their interests align more with others businesses, than with workers of course. I’d wager that’s why they’re so often used as a crowbar to sabotage the interests of the working people.

    One unfortunate thing about the decline of labor relations in this country is that you can hardly address one issue with addressing all of them. For example increasing the minimum wage might accelerate out-sourcing of industry, or in-sourcing of labor denied rights, or replacing wage work with precarious contract work, or relying on subsidies taken from middle and lower class taxes, etc. These are battles on the enemies terms.

    In my opinion they main concern shouldn’t be this or that fight, but making a body that can win the war.

  5. Objective Ace

    Excellent article, just thought I’d add that if we valued fairly compensated employees and affordable fruits and vegetables we could still structure our society accordingly. Have the government subsidize compensation (national Healthcare would be a great start) and/or specific industries we want to nudge people to purchase from. Your clintonistas don’t need to give up their berries! Just tax the .01 percenters a little more – make them give up their 5th and 6th vacation homes and have less money to spend on lobbyists

  6. Not Bob

    Thanks for the excellent article. While it is informative and makes many good points I believe it misses the mark badly in term of addressing the root causes to solve the underlying problem. (Spoiler alert, I don’t have a solution either.)

    Items in no particular order, from the perspective of a white male who has lived in cities under 60k population most of his life. (Born poor, solid middle class now.)

    My parents had no business connections to help me get me first jobs. I worked for small businesses, or government does few years, from age 14 until around age 30. My first jobs and through much of college involved working at small businesses where I earned minimum wage but had some free time at work. At a video rental store, for those of you old enough to remember those, we had a rush of customers from around 4:30 until 7:00 Sunday through Thursday with weekends being busier all day. I loved the weekday shifts because I was able to study a lot in a quite place. I made connections with customers and the business owner was very supportive of writing letters of reference when needed and giving me shifts off doing times when I needed to study more.

    Different business environments
    When I managed a rural franchise store there were jobs that I had that paid minimum wage to start but the pace of the work was relaxed. When a Walmart opened up nearby they paid more than many of the local businesses. We offered a slower pace, lower stress, and a friendlier atmosphere for customers. Unfortunately, from my perspective, we had trouble hiring people when WalMart paid better. We increased our starting wage but of course that meant that we had to increase wages to existing employees as well. That reduced the profitability to the owner, which is not much for most small businesses, and made it difficult to pay my modest salary. As a result, I had to schedule leaner. I also had to make some difficult decisions regarding employees who were dear to me. If a long time employee who was paid about as much as I made on an hourly basis was not able to be productive enough to justify the expense I had to figure out a way to deal with that. (I worked about 60 hours a week so I made more total pay.)

    The true minimum wage is always zero. If you increase the difficulty of businesses being able to generate a fair profit then fewer business will be able to succeed and fewer jobs will be available. My experience had always been that it is easiest to find a job when you have a job.

    Libertarian principles
    I know this audience is well educated so I will leave it at if two individuals want to form a contract why should the government interfere? (Yves article does a nice job of addressing this at a macro level. But at a micro level, if I need someone to sit in my business during slow times to wait on an occasional customer and a student or retiree would be glad to do it for a trivial amount when should we be provided from coming to a mutually beneficial agreement?

    Low wages are a major problem in some cases and need to be addressed. But in other cases low wages are beneficial. Currently, none of the local non governmental companies I am aware of are paying below $15 an hour and they are still struggling to find employees. A minimum wage is not needed where I am at this point in time. But, there are areas where unemployment is still high and low wages are a significant problem. Plus, who knows how wages in my area will do over a longer period of time if a major employer leaves the area.

    The problem is real and perhaps a minimum wage is a part of the solution. I also like the idea of a universal basic income but in light of the way the pandemic has been handled and continues to be handled I have severe reservations about giving the government that power. If you look to Canada and see how they froze bank accounts with no due process or conviction for an offense as minor as a small donation to the truckers convoy you have to have concerns. Once the government had the ability to deprive people who they disagree with of their income then we risk losing all of our liberties.

    1. JBird4049

      Much of the country has been reduced to a third world or global south economy that is focused on rent extraction and cheap labor with an active hostility to those industries that are both productive and well paying as well as friendly to unions. Restated, the economy is hollow, the wealth and purchasing power is in a fairly small class who prevent recreating the old highly productive, profitable, and well paying economy we use to have. Most people can’t buy and so businesses can’t sell.

      Moreover, while smaller businesses have a hard time paying higher wages, just how are people going to survive the continuing decline of real wages of the past thirty plus years? Yes, the economy is rigged so that large businesses can profitably destroy what is left of the small and medium businesses while continuing to squeeze employees, but the main reason our economy is falling apart is that nobody has enough money to live, forget about buying extraneous stuff like clothes.

      So, while my older relatives would work picking fruit or make a decent living in the union canneries or warehouses, and some would also be in manufacturing. with the younger ones happily getting degrees debt free for other well paying careers, people can’t do that anymore. Then there are the building trades which my high school classmates could do. Even when we seriously poor, getting jobs that paid just enough for food, clothes, and shelter was not difficult. I am jealous for how relatively easy it was for my family. Perhaps, I should say of the opportunities they had during the boom of the 1950s and 60s. (Of course, they did lose it all in the Great Depression earlier).

      However, California does not have that. Not anymore. We increasingly live in one of those South American, African, and Asian economies that I studied in college: very small number of extremely wealthy families who own everything including the government and the police, the small number of the middle class who serve the ruling class, and then the very large, poor working class. Almost everything is imported in exchange for whatever can be extracted from the economy usually agricultural or mining. Having manufacturing is often not wanted. The ruling elites, who owned all the large businesses and corporations, created this, and use anything including death squads, also control the corrupt government at all levels. They are often directly responsible for creating and maintaining the corruption and incompetence of the government because it is politically and economically beneficial for them and their families.

      This is happening in the United States. It continues to happen. That is why the CDC is a joke, Biden is president, and the JPMorgan Chase is more important than entire states. The wealthy, the people in charge, want it that way.

      The United States is not quite there. Just give the process another decade and I believe we will have all those insurrections, uprisings, rebellions, and coups that the Global South often has had; if positive change does not come peacefully, violent changes, unpredictable changes will. Paying people enough for both food and housing at the same time would be a good beginning. Too many people are homeless and hungry. Then there is the pandemic. Can anyone point to anything beyond more of same? Aside from paying people even less? Suggesting Libertarianism is just an excuse to do nothing and it was already tried in Victorian England. And yes, rooting out the corruption and the incompetence it created is a part of this.

      People need hope, just like they needed in the bad times of the Great Depression or when poor, which is what my parents and grandparents got. It pushed back the despair and the rage. If they don’t feel hope, they tend to get violent and extreme. It does not even have to be successful. It just has to be an honest effort for even FDR’s efforts sometimes failed, but the attempts kept the chaos back.

  7. Dave in Austin

    Yves is our Goddess of the Obvious when she says:

    “What is depressing about the debate over the need to increase wages is that so many have been brainwashed into parroting the claim that small businesses can’t afford it. If a small business can’t survive without paying abusively low wages, maybe it should not exist. And the people who benefit are not the business owners as much as the patrons who are getting services on the unduly cheap.

    One of my otherwise very right wing friends regularly puts the Clintonistas she lunches with on tilt by sincerely maintaining that they need to give up on their right to cheap berries. Berries are hand picked and should be expensive. The right winger says berries ought to cost $10 a pint and she’d pay that and just have them less often. Her liberal friends reflexively reject that they might have to have less of a diet item that their foodie gurus recommend highly.”

    And therein lies the rub. Yves is a bit surprised that a person on the right would come-out against cheap berries. But the ideological right is not necessarily pro-business; a lot of it is nationalist, lower-middle class, small town and likely to send the kids out the backyard berry patch to do a bit of work before dinner. Of course that means no year-round berries. But these folks aren’t part of the “fly-in-the-French-soft-cheese” crowd.

    The rubber really hits the road when you tell the struggling, dual-income, college-educated folks that those lovely little tomatoes will cost $2.50/lb. But my Mexican-American neighbors in the country, whose parents worked in the fields, will be smiling. The new class of fieldworkers will be 20 year-old Americans saving money for college and the chambermaids on Nantucket will be Colombian immigrant kids from New Bedford- no Irish work visas need apply. A lot of engineering students will get rich designing automatic berry-picking machines.

    Getting spanked by the invisible hand is never pretty.

    1. Palaver

      The only people who think automating berry picking is financially feasible are those who never picked berries or never tried building an automaton. Labor is steadily growing wise to idle threats of automation.

      Money is better spent raising living standards and increasing efficiency. Reducing parasitic rents on our economy should be a national policy goal not class warfare. Too many overpaid execs are really just invasive landlords.

  8. phoenix_rising

    While a corporation can set the nominal wage, it is the market that sets the real wage, and it is the real wage that matters. Forcing corporations to increase nominal wages leads to price increases, which leave real wages unchanged. The only way to increase real wages is by increases in productivity.

    1. carbpow

      According to the Economic Policy Institute from 1979-2020 productivity increased 61.8% while hourly pay increased 17.5%. Increases in productivity do not seem to result in wage increases

      1. Jeff

        Other than factory jobs made more efficient through automation, how does a sales rep or a barista or a retail worker get more efficient?

        I have the strangest feeling I’m going to get crucified for asking this.

        1. phoenix_rising


          While it’s true that improvements in productivity occur only in certain sectors of an economy, all members in that economy share in the wage gains. This is due to the “Baumol Effect”.

          Baumol’s cost disease, also known as the Baumol effect, is the rise of wages in jobs that have experienced little or no increase in labor productivity, in response to rising salaries in other jobs that have experienced higher productivity growth. The phenomenon was described by William J. Baumol and William G. Bowen in the 1960s and is an example of cross elasticity of demand.

          The rise of wages in jobs without productivity gains derives from the requirement to compete for workers with jobs that have experienced productivity gains and so can naturally pay higher salaries, just as classical economics predicts. For instance, if the retail sector pays its managers 19th-century-style wages, retail managers may decide to quit to get jobs in the automobile sector, where wages are higher because of higher labor productivity. Thus, retail managers’ salaries increase not due to labor productivity increases in the retail sector but due to productivity and corresponding wage increases in other industries. These higher labor costs in the retail sector, despite little increase in productivity, are an example of Baumol’s cost disease. —Wikipedia

        2. Alena Shahadat

          “how does a sales rep or a barista or a retail worker get more efficient?” Or a driver? Drive faster with less fuel? Or on a bicycle?

      2. phoenix_rising


        Economists use median wages instead of average wages because while both the median and average skew to the right, the average skews more than the medium. However, because of the “superstar effect” enabled by digital technology, a few workers are capturing the lion’s share of the increased wages due to productivity.

        What you have then is a redistribution within the labor share which does not show up in the wage data which is using median wages.

        Also, more pay is now in benefits instead of wages, so you have to look at the total compensation package and not just the hourly pay.

  9. Sound of the Suburbs

    Introducing the equation.
    The dynamics of the capitalist system have become a bit of a mystery and the equation can really help out.

    Disposable income = wages – (taxes + the cost of living)
    What does the equation do?
    The equation puts the rentiers back into the picture, who had been removed by the early neoclassical economists.
    Employees want more disposable income
    Employers want to maximise profit by keeping wages as low as possible
    The rentiers gains push up the cost of living.
    Governments push up taxes to gain more revenue

    I’ve let the CBI (Confederation of British Industry) have a quick peek at the equation.
    Disposable income = wages – (taxes + the cost of living)
    Two seconds later …..
    They realise the UK’s high housing costs push up wages and are actually paid by the UK’s employers reducing profit.
    Employees do get their money from wages, so employers are actually paying through wages.

    How does free trade actually work?
    Why is it so much cheaper to get things made elsewhere?

    The early neoclassical economists took the rentiers out of economics.
    Hiding rentier activity in the economy does have some surprising consequences.

    The interests of the rentiers and capitalists are opposed with free trade.
    This nearly split the Tory Party in the 19th century over the Repeal of the Corn Laws.
    The rentiers gains push up the cost of living.
    The landowners wanted to get a high price for their crops, so they could make more money.
    The capitalists want a low cost of living as they have to pay that in wages.
    The capitalists wanted cheap bread, as that was the staple food of the working class, and they would be paying for it through wages.

    Of course, that’s why it’s so expensive to get anything done in the West.
    It’s our high cost of living.
    Disposable income = wages – (taxes + the cost of living)
    Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
    High housing costs have to be paid in wages, reducing profit.

    The playing field was tilted against the West with free trade due to our high cost of living
    The early neoclassical economists had removed the rentiers from economics so we didn’t realise.
    That’s why it’s so much cheaper to get things made elsewhere.
    You can pay wages elsewhere that people couldn’t live on in the West.

    1. Sound of the Suburbs

      What was classical economics like?

      There were three groups in the capitalist system in Ricardo’s world (and there still are).
      Workers / Employees
      Capitalists / Employers
      Rentiers / Landowners / Landlords / other skimmers, who are just skimming out of the system, not contributing to its success

      The unproductive group exists at the top of society, not the bottom.
      Later on we did bolt on a benefit system to help others that were struggling lower down the scale.

      Identifying the unproductive group at the top of society didn’t go down too well.
      They needed a new economics to hide the discoveries of the classical economists, neoclassical economics.

      Hiding rentier activity in the economy does have some surprising consequences.
      We got Ricardo’s Law of Comparative Advantage.
      What went missing?

      Ricardo was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
      “The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist
      What does our man on free trade, Ricardo, mean?

      Disposable income = wages – (taxes + the cost of living)
      Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
      Employees get less disposable income after the landlords rent has gone.
      Employers have to cover the landlord’s rents in wages reducing profit.
      Ricardo is just talking about housing costs, employees all rented in those days.
      Low housing costs work best for employers and employees.

      Who pays?
      It’s the right question, but we keep getting the wrong answer with neoclassical economics.
      Employees get their money from wages and it is employers that are paying, via wages, reducing profit.

  10. Palaver

    For the average worker, capitalism is fashioning the chains of your own servitude. After which time it becomes unbearable, those chains become very strong rope for hanging.

    I’m not surprised by human greed and cruelty. What surprises me is how much Americans can tolerate. Just when I think the masses have had enough humiliation, they regress into the mass psychosis of identity politics and partisanship. It’s likely why “liberal” intellectuals still serve the boorish elite. The masses may not be worth saving. Corral them like sheep into mass movements and they jump the fence, resisting the pressure to organize internally. I only hope this a feature limited to particular generations and that their children retain the dignity to demand economic freedoms. Their great grandparents certainly would have. We’ve yet to see that spirit reborn.

  11. dk

    Healthy profit margins (driven down by large well funded companies) are the missing piece of the equation for viable small business that pays its labor well.

    Narrow margins have become so normalized that they’ve become overlooked.

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