I doubt that Stephen Harper reads anything that Robert Reich writes. But, as a trained economist, the prime minister might take a look at Reich's latest blogpost. Reich writes that the most recent American job numbers signal that the American economy has stalled:
Most of the job gains in April were in lower-wage industries – retail stores, restaurants, and temporary-help. That means average wages continue to drop, adjusted for inflation – continuing their long-term decline. Most of the new jobs that have been added to the U.S. economy during this recovery have paid less than the jobs that were lost during the downturn.What does all this mean? Together with other recent data showing slower economic growth during the first quarter of this year, it’s safe to say the economy has stalled.
The reason that things have flatlined, writes Reich, is income inequality:
Widening inequality is the underlying culprit here. As long as almost all the gains from economic growth continue to go to the top, the vast middle class doesn’t have the purchasing power to boost the economy on its own. And rich Americans spend a much smaller portion of their incomes than does the vast middle class. Their marginal satisfaction from additional spending falls off. The second yacht isn’t nearly as much fun as the first.
Reich's argument is bolstered by recent data on executive pay:
Income inequality between CEOs and workers has consequently exploded, with CEOs last year earning 209.4 times more than workers, compared to just 26.5 times more in 1978 -- meaning CEOs are taking home a larger percentage of company gains.
That trend comes despite workers nearly doubling their productivity during the same time period, when compensation barely rose. Worker productivity spiked 93 percent between 1978 and 2011 on a per-hour basis, and 85 percent on a per-person basis, according to the Federal Reserve Bank of St. Louis.
Which brings us back to Mr. Harper. Just as the American economy is tanking, he is applying the austerity solution. And part of that solution will be to pay foreign workers 15% less than the prevailing wage, thus lowering all Canadian wages.
The Harper budget is being sold as a blueprint for economic prosperity. So much of what comes out of Stephen Harper's mouth is simply Orwellian double talk. But, even more to the point, this prime minister will be remembered for doing exactly the wrong thing at the wrong time.
