Affordability yes. . . but don't forget wages

MS NOW  - Affordability – or the lack of it – is dominating the public discourse. “Affordability, affordability, affordability: Democrats’ new winning formula,” proclaims Politico. “Trump tries to seize ‘affordability’ message,” reports The New York Times. Election results in New Jersey, Virginia, New York and elsewhere showed that voters are responding to candidates who speak directly to the cost of living.

Today’s affordability debate, however, focuses almost entirely on prices, as if the only way to make life affordable is to make things cheaper. But that approach misses the bigger picture. Affordability depends on both prices and wages. The roots of today’s affordability crisis actually lie not in recent price spikes, but in the long-term suppression of workers’ pay. 

If pay for typical workers had kept pace with productivity over the past 45 years, their paychecks today would be roughly 40% larger.

For more than four decades, employers have been actively suppressing the wages of working people, so that corporate managers and owners can claim an ever-larger share of the income generated by what workers produce. Government policies facilitated these efforts. Policymakers allowed labor standards such as the minimum wage to erode (and reduced enforcement of the standards we do have), blocked adequate protections for workers’ right to organize and promoted macroeconomic policy that allowed unemployment to remain too high for long periods, undermining workers’ leverage.

One way to see this shift is by comparing the growth in workers’ pay to the growth in productivity, which measures how much income is generated on average in an hour of work. If pay for typical workers had kept pace with productivity over the past 45 years, their paychecks today would be roughly 40% larger. That wage shortfall is what is really driving America’s affordability crisis – and reversing it must be central to any serious affordability agenda. 

Policymakers who only look at prices and ignore paychecks are missing a huge set of affordability policy levers. Stronger labor law, which helps workers’ ability to unionize and bargain collectively, is affordability policy. A higher minimum wage is affordability policy. Macroeconomic policy that keeps unemployment low and protects workers’ bargaining power is affordability policy. A durable social safety net that keeps families from falling into poverty when they lose a job or get sick is affordability policy.