Wage raises stalled nationwide in 2017, creating a midterm problem for President Donald Trump as he tries to raise voters’ wages and also pass an amnesty that will flood the economy with cheap imported workers.
Several agency and private-sector reports this week show a slight rise or a slight drop in Americans’ wages during 2017, denying the president any immediate political advantage from better-paid voters who could help the GOP win the 2018 November election.
The reports also suggest low unemployment may nudge up wages later in the year, which would give Trump and his GOP allies a potential election advantage — if the bipartisan push for a ‘dreamer’ amnesty does not result in a mass inflow of wage-cutting, cheap foreign workers.
Trump and his supporters have highlighted the political importance of wage growth. In his January 3o State of the Union speech, Trump said:
Since the election, we have created 2.4 million new jobs, including 200,000 new jobs in manufacturing alone. After years of wage stagnation, we are finally seeing rising wages.
The next morning, a White House press release noted that “real hourly wages for Americans with a high school diploma or lower have declined since 1979.”
“The most important statistical indicator for Mr. Trump will be wages for middle-income workers,” said Stephen Moore at the Heritage Foundation, who wrote January 29 in the New York Times:
They’ve been flat in real terms for 15 years, which more than anything explains the populist rebellion in 2016. So far, wages and salaries haven’t bumped up much, but we are betting that the tax cut will bring increased investment and a supertight job market with intense competition for workers leading to higher pay. This is already starting to happen at Walmart and other companies, and in fast-growing cities like Nashville and San Francisco.
If those wages go up, Mr. Trump may not get credit from the news media or Democrats, but it’s a good bet he will get re-elected.
Sen. Tom Cotton used his Twitter account on February 1 to highlight the connection between amnesty and voters’ wages:
Tight labor markets = higher wages for working-class Americans. A key reason to get immigration levels under control. https://t.co/SJW0p8LQxD
— Tom Cotton (@TomCottonAR) February 1, 2018
Trump’s problem is that GOP business interests — such as the Koch brothers and the U.S. Chamber of Commerce — have joined hands with Democrats to push for a huge amnesty that will inevitably loosen the labor market and drop pressure for wage growth. If those groups can win an amnesty from a President whose populist campaign was anti-amnesty, employers will know that they have the political power to import more foreign workers whenever the economy runs short of workers and Americans’ wages begin to rise.
The conflict between business’ demand for mass immigration and voters’ demand for higher wages showed itself in Trump’s State of the Union speech when he lamented wages cuts caused by immigration — yet he also repeated his call for a quick amnesty for at least 1.8 million illegal workers. He declared:
For decades, open borders have allowed drugs and gangs to pour into our most vulnerable communities. They’ve allowed millions of low-wage workers to compete for jobs and wages against the poorest Americans …
The first pillar of our [amnesty and immigration] framework generously offers a path to citizenship for 1.8 million illegal immigrants who were brought here by their parents at a young age — that covers almost three times more people than the previous administration covered.
Pressure for wages will rise before November if the push for amnesty fails amid continued economic growth.
The new studies show little or no wage growth during 2017, despite record-low unemployment that has generated scattered wage-raises for employees — prominently, those at Walmart and Starbucks — plus one-time bonuses for employees at many other companies.
On January 31, the Labor Department reported that the wages and benefits given to employees had only risen 0.5 percent, after inflation is discounted, from December 2016 to December 2017. That is an improvement from 2015’s terrible score of 0.2 percent but a drop from 2015’s poor score of 1.3 percent.
The last decent increases occurred in 2008 when wages rose 2.5 percent just before property bubble burst, and in 2008, when wages rose 2.5 percent just as the infotech bubble burst.
Glassdoor, a job-tracking firm reported January 30 that inflation nudged wages into a slow reverse in many cities across the nation:
On average, most metro areas experienced positive real wage growth over the three year period of our analysis. However, that trend took a significant downturn in 2017, with real wages — a worker’s remaining pay after subtracting the rate of inflation — falling in every metro we examined. That’s despite today’s 17-year-low unemployment rate and an economic expansion that’s the third longest on record since the 1850s. …
It’s a surprising trend that economists will be watching closely in the coming months. What’s ahead? We expect this trend to reverse, with either stronger wage gains or softening inflation rates as we continue into 2018, bringing real wage gains back into positive territory for most of the country…. We expect inflation reverse course and wage growth catch up as the economy continues its upward path in 2018.
Many news reports exaggerated the estimated wage growth by not discounting the impact of inflation on wages. The Wall Street Journal use the inflation-plus-wage-growth number as it noted the slow wage growth, reporting January 31:
Employment cost growth is “faster than it had been, but it’s still shy of what you would expect if we were at or near full employment,” said Richard Moody, chief economist at Regions Financial Corporation. “If we were really at full employment, you’d be seeing growth in the 3% to 3.5% range.”
One reason for the muted wage growth is that companies are quietly imposing more healthcare costs on workers, Moody said:
“Firms have been passing a bigger portion of health care costs onto workers in the form of higher premium costs,” Mr. Moody said. “In some ways it’s shifting the burden of costs.”
Economists quoted by various media outlets suggested that after-inflation wage level will nudge up during the year as companies compete for workers. Reuters reported January 31:
“Today’s report is quite consistent with our view of gradually firming wage growth, which we expect to reach a sustainable pace around 2.5-3.0 percent in 2018,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York.
The National Association for Business Economics reported that a 48-point margin of employers expect to raise rather than lower wages in the next few months:
The [outlook] or wages and salaries rose from 37 in October to 48 in the January survey—the highest index reading since the January 2000 survey, and the third highest since NABE began analyzing the data in April 1982. Wage increases are likely to be even more widespread over the next three months, as the NRI for expected wage costs increased from 46 in the October survey to 58 in January—the highest level since this question was added to the survey in April 2014.
The current lack of wage growth means that GOP leaders can only tout the major benefits from lower taxes during an elections season when left-wing rage at Trump is likely to motivate record Democratic turnout.
A failure on amnesty talks, however, may provide the GOP with a critical political windfall in the months before the November election.
Four million Americans turn 18 each year and begin looking for good jobs in the free market.
But the federal government inflates the supply of new labor by annually accepting roughly 1.1 million new legal immigrants (including roughly 750,000 working-age migrants), by providing work-permits to roughly 3 million resident foreigners, and by doing little to block the employment of roughly 8 million illegal immigrants.
The Washington-imposed economic policy of economic growth via mass-immigration floods the market with foreign labor, spikes profits and Wall Street values by cutting salaries for manual and skilled labor offered by blue-collar and white-collar employees. It also drives up real estate prices, widens wealth-gaps, reduces high-tech investment, increases state and local tax burdens, hurts kids’ schools and college education, pushes Americans away from high-tech careers, and sidelines at least 5 million marginalized Americans and their families, including many who are now struggling with opioid addictions.
The cheap-labor policy has also reduced investment and job creation in many interior states because the coastal cities have a surplus of imported labor. For example, almost 27 percent of zip codes in Missouri had fewer jobs or businesses in 2015 than in 2000, according to a new report by the Economic Innovation Group. In Kansas, almost 29 percent of zip codes had fewer jobs and businesses in 2015 compared to 2000, which was a two-decade period of massive cheap-labor immigration.
Because of the successful cheap-labor strategy, wages for men have remained flat since 1973, and a large percentage of the nation’s annual income has shifted from employees to investors.