In the U.S., publically held companies have legally enforceable fiduciary duties to their shareholders. The duty of care involves, among other things, being reasonably informed of things impacting the company business and avoiding negligent waste. When companies in the U.S. get bona fide deals to cut waste (aka wages) from countries like Mexico and China, this law forces CEO’s to either work with the deal or get stockholders’ approvals to give up increased dividends.
With CEO’s mostly compensated from stock prices, and widely dispersed stockholders indifferent to local jobs, the lower wage deal usually wins. This is our new reality. What used to be made in the U.S. can now be made anywhere, leaving U.S. companies with a world of options to cut waste and U.S. workers helpless to defend themselves. What used to be third world economies that bought from the U.S. are now emerging or modern economies that produce most everything we use to make.
In 50 years, India and China, nearly half the world’s population, have moved from agrarian, third-world to high tech economies that not only make most anything we make in the U.S. but also have the biggest markets to sell to. Why pay U.S. workers more for something they can make themselves for themselves?
With very few special things left to sell, we have little to justify higher than world average wages. Tinkering with NAFTA or other trade deals will not offer a solution. Closing our trade to others to force up wages here is self-defeating. With Americans buying more from the world than from ourselves, whatever price increase we try could be matched by the world, and net to zero. Nor will the new tax plan help.
With a global labor market, our U.S. tax rates cannot push up U.S. wages. We need leaders who are figuring out the future, not repeating the past. We need solutions to handle the harder times, not promises to bring back the glory years.
Randy R. Irvin