National Consumers League

Wage stagnation may threaten democracy itself

Why have wages stagnated so badly in the US compared to Australia and Canada? The report notes that while US wages have stagnated and not gone up, since 2000, Canadian wages have risen 10 percent and wages in Australia by 30 percent. A group of eminent economists has taken on that question and developed a detailed analysis—to be issued imminently—of this vexing problem in a project underwritten by the Center for American Progress. 

Their report includes this statement: “Today, the ability of free market democracies to deliver widely shared increases in prosperity is in question as never before. This is an economic problem that threatens to become a problem for the political systems of these nations and for the idea of democracy itself.”

These statements were not written by followers of Karl Marx or Frederick Engels (Engels, by the way, was a socialist whose work was translated first by Florence Kelley, NCL’s indomitable first leader). The report’s authors include Rockefeller Foundation President Judith Rodin and former White House economic adviser Larry Summers.

What does the report recommend? Among other things, helping to ensure that more people attend and finish college, more intervention in the free market on behalf of the poor and working class. For example, Canada and Australia have more generous childcare and family leave, they impose higher taxes on the affluent, and they impose stronger regulations on banks and financial institutions. But of greatest impact is that workers have more power and there is higher union concentration.

Some believe this report will be an important document for Democratic and Republican candidates as we go into the 2016 presidential campaign. Its premise is that democracy and freedom are threatened when not everyone shares in prosperity and when income disparities get so out of whack that the top 5 percent earn as much as the bottom 95 percent. If Australian and Canadian citizens can enjoy a 10-30 percent increase in wages, certainly the richest country in the world can afford to share our affluence across the economic spectrum. The health of our democracy depends on it.