Low Wages Do Not Fit the Bill

Pathetically few members of Congress or thinkers in America’s “think tanks” gave serious thought to coping with the economic impact of the Cold War’s end, especially on workers--until it ended.

Even our intelligence agencies gave no notice that the economy of the Soviet Union was about to collapse. Almost none of our leaders believed that our enemy was going out of business, that its remnants would become our hungry friends.

Now it looks as though all of them have suddenly come up with ideas for dealing with a less dangerous world. Politicians are offering proposals ranging from reductions in our enormous military spending to some Democrats’ suggestions for puny tax cuts for middle-income families to President Bush’s demand for more tax breaks for the wealthy.

Not much is likely to happen as long as we continue to rely primarily on “free-market forces” to save the day.

But some ideas have surfaced in recent weeks that make sense and are getting at least some attention in Washington.

One of the most constructive plans has been offered by the little-known Coalition for Democratic Values, which wants to create a national Economic Policy Council of bipartisan government and private-sector leaders to set long- and short-range economic goals for the country.

Former Secretary of Labor Ray Marshall, a coalition leader, notes that since the late 1970s, most American businesses have tried to rely on reducing wages of workers to compete in the world market. That, he says, isn’t sensible.

Until the early 1980s, after President Reagan took office, wages and benefits of U.S. factory workers were among the highest in the world. Their productivity was--and still is--close to the top.

Today, however, 12 other industrialized countries pay factory workers substantially more than U.S. employers.

Only British and Japanese workers earn less than Americans, and the differences are small.

The coalition understands that this country can best compete internationally by improving the quality of our products.

And that means better-trained workers earning higher wages.

The coalition shies away from phrases such as industrial policy that call for national economic planning, because they inflame ardent free enterprisers.

It does offer many suggestions that will soon be turned into proposed legislation.

The coalition wants to help fund its ideas by cutting the military budget by $150 billion, which is about what we are spending to defend Europe and Japan against a nonexistent Soviet Union.

Much more money for training and retraining workers would come from requiring employers to put up 1% of their payroll and by setting up a fourth income tax bracket of 35% as a “millionaire’s surtax.”

Even more innovative is the suggestion that employers should pay fines and otherwise support an “adjustment” fund to pay the social and economic costs that communities suffer when companies move operations to low-wage nations.

Companies now pay nothing to defray the costs to this country when they move operations abroad for cheap labor.

“Making firms responsible for all (such) costs would force companies to take long-time perspectives . . . and create disincentives to low-wage strategies,” the coalition correctly observes.

It also points out that during the Reagan and Bush administrations, much of the cost of such things as mass transportation, public works and education was shifted from the federal to state and local governments.

To help them, the coalition believes that they should get $100 billion in additional federal revenue over the next five years to invest in their crumbling infrastructure.

That could stimulate the economy, since many state and local governments already have ready-to-go projects such as schools, roads and bridges that have been put on hold because of their own fiscal crises, the coalition notes.

It also wants an initial $50 billion in the first year of the program to pay for expanded job training, public education and universal health care.

The coalition proposals--there are many others--have the support of Democratic Sens. Paul Simon of Illinois and Howard Metzenbaum of Ohio and other liberals in Congress.

They are similar but more extensive than ideas coming from Sens. Edward Kennedy (D-Mass.), Paul Sarbanes (D-Md.) and Jim Sasser (D-Tenn.).

Marty Morgenstern, head of the UC Berkeley Institute of Industrial Relations, says this country must give better training and education to non-college-bound youngsters to prepare them for trades and ease the school-to-work transition.

Like the leaders of the coalition, Morgenstern argues that we should concentrate more on educating workers for jobs--most of which do not require a college education--so that we can move to a high-skill economy instead of one that relies on low-paid, unskilled or semi-skilled labor to compete in world markets.

And more must be done to help those who want a college education.

Most federal loans to students are just expensive guarantees to private banks.

They must be replaced by a simpler, cheaper program of direct government loans, with repayment based on the individual’s income after graduation, the coalition maintains.

Maybe the rhetoric of the presidential election will add momentum to these and other ideas to help all of us live more comfortably in a world without the Soviet Union as a potential mortal enemy.

But don’t bet the house on it.

Harry Bernstein’s column appears on alternate Tuesdays.