One idea for igniting the economy

| Monday, September 5, 2011
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Finally, after years of sluggish employment and income growth, President Barack Obama will deliver a major jobs address Thursday to Congress (if House Speaker John Boehner doesn't change his mind and refuse to let the president speak). Obama's speech comes just days after the Labor Department announced that employers created no jobs in August.

Here is an idea Obama will not propose: employers should give everyone a raise. A regular reader of my columns on recently emailed me with the suggestion that employers give all their workers a 5 percent raise to stimulate the economy.

Sure it sounds crazy and naive, but let's think about this for a second.

Businesses aren't hiring mostly because of slack demand in the economy. Putting more money in consumers' pockets would boost their spending power.

But wouldn't handing workers a raise without a jump in productivity just fuel inflation? Not necessarily. Some economists say most workers have not shared in productivity gains in recent years. So giving them a raise now would essentially amount to a delayed productivity payment.

And many employers could afford to boost workers' wages. Corporate profits are at record levels and account for their biggest share of gross domestic product in 60 years.

My economist friends no doubt could drill numerous holes in the argument for boosting workers' wages. But I think they also would agree we need an extraordinary plan to turbocharge the economy.

1 comment:

Anonymous said...

I think this is a very interesting job. My workplace (a local government) has had pay cuts (averaging somewhere between 3 and 6% depending on who you are and how you count them) for the past 18 months. And no raises in the future, either. You can bet that people are pinching their pennies. So a 5% raise would put people back where they were in 2009. That would be a lot better than nothing!

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