Sunday, September 03, 2006

Coyote Blog: Another Thought on Wages

In keeping with the Labor Day theme, this post from Coyote Blog has some keen insight:
The NY Times is working to help the left coalesce its strategy for the upcoming elections, and it is pushing the notion that Wal-Mart represents everything that is wrong with the economy and that the Wal-Mart effect (supposedly holding down wages to augment profits) has caused real wages and middle class earnings to stagnate.

I have been addressing some of this piecemeal, but it also occurred to me that something is different over the last two decades that radically effects average wages - that is, immigration. This is not the "immigration drags down other people's wages" argument, something that most economists have debunked. But since immigrants, legal or not, are new in the labor force, have fewer skills, and don't always have good English skills, their wages are lower. My guess is that these lower immigrant wages bring down the average, and are one reason for apparent stagnation of wages.

The solution to this would be to do a time-series study - don't look at the average, but look at the same people and see what happened to their wages. My sense is that most everyone in the pool is experiencing improving wages, but the fact that new people are entering the pool at the bottom of the wage ladder keeps the average wages for the whole pool flat.


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