We can save capitalism in Pa. by raising workers’ pay | Opinion

August 28, 2019 8:48 am

By Stephen Herzenberg

In the past few weeks, leading American business leaders appear to have experienced a sudden and surprising bout of conscience.

On Aug. 19, the Business Roundtable, which represents the largest U.S. corporations, issued a statement signed by 181 CEOs that embraced the idea that corporations have obligations to employees, the community, and customers, as well as shareholders. What a novel idea.

On Aug.20, Allstate CEO Tom Wilson, the chair of the executive committee of the U.S. Chamber published an op-ed titled “Save Capitalism by Paying People More.” Wilson notes that “most Americans are struggling” and adds that “…a 2007 survey…showed 40%…do not have $400 for an emergency.” Who knew? Oh yes, most ordinary Americans did.

The State of Working Pennsylvania,” an annual pre-Labor Day check up on the state’s economy published by Pennsylvania’s Keystone Research Center documents the accuracy of Wilson’s observations in our state.

To be sure, the new report does have a bit of good news. In 2018, for the first time since 2001, Pennsylvania workers enjoyed wage gains of about 3% on average across the board.

Yet, in the good old days, workers used to receive real wage increases of 3 percent every year not once every 20 years. And despite what is now the longest economic expansion in U.S. history— and state unemployment below 4 percent for the first time in nearly a half century— the typical Pennsylvanian’s wage increases during the last decade average about half a percentage point per year.

Economic realities for African-Americans in Pennsylvania are grimmer.

Black unemployment, at 8.4 percent remains more than twice the rate of whites. And it ranks fourth highest among states. Further, African-American wages were still declining in 2018 and are a stunning 10 percent less in inflation-adjusted terms than 40 years ago.

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Allstate’s Wilson says that “Being broke while working is not an American value.” Let’s hope that’s still true.

Wilson also notes a drawback of skewed economic growth for businesses—workers are customers too. If they don’t make higher wages—or robots take their jobs—workers won’t buy more Ford motor cars or other consumer goods and services.

Individual enlightened companies, such as Allstate, can take steps on their own to grow more high-paying jobs. But the broader solution requires different policies than we’ve had since 1980.

It’s those policies that rig the economy against ordinary Americans—a falling minimum wage, attacks on unions, tax cuts for rich people and corporations, and so on.

Part of business leaders’ new anxiety about an economy for the 1 percent reflects a fear of political reaction.

Wilson notes that “… less than half of young Americans support capitalism …”

The recession that many now predict could quickly wipe out the little progress some working families have begun to make. How will low-paid gig workers and other millennials, the unemployed, and near retirees without pensions and with vanishing 401(k)s react then?

Business leaders locally have some immediate opportunities to help save Pennsylvania capitalism by raising workers’ pay. They could support an increase in the Pennsylvania minimum wage, which would particularly benefit African-American workers and women.

They could support Gov. Tom Wolf’s proposal to restore overtime pay for nearly half a million less-well-paid Pennsylvania salaried workers.

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These workers are supposed to get overtime under U.S. and Pennsylvania law. But employers are so used to cheating them that businesses now think they can avoid overtime simply by labeling workers “salaried.”

Third, business leaders could endorse Wolf’s proposal to raise Pennsylvania’s minimum teacher salary to $45,000, helping to attract and retain great teachers to educate the workforce of the future.

Pennsylvania business leaders could also follow one last piece of Wilson’s advice.

“Businesses prosper,” he says, “by…creating specific goals and executing plans. This must now be applied to creating higher-paying jobs.”

Pennsylvania business leaders should come together with the other stakeholders they’ve suddenly remembered exist—including labor—to develop a plan to raise Pennsylvania workers’ pay and then to execute that strategy.

After 40 or more years of business leadership focused single-mindedly on profits, it will take a sustained team effort to create a kinder, gentler capitalism that we can all embrace.

Stephen Herzenberg is an economist and the executive director of the Keystone Research Center, a left-leaning think-tank in Harrisburg. His work appears frequently on the Capital-Star’s Commentary Page. 

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