It’s natural to think that some other solution may exist with the power to attack wage stagnation more effectively than RAMP will. The following assessments of nine leading approaches to address wage stagnation are not meant to argue against implementing any particular approach (which might or might not be justifiable on other grounds). It is rather to suggest the limitations each of them has, by themselves or in combination, to overcome wage stagnation and why a different approach such as RAMP is required.

(1) Business tax cuts and reducing the federal regulatory burden.  Some in the policy world argue that cutting the costs borne by businesses would help solve wage stagnation and the spread of lower-paying jobs, both by leaving more gains for businesses to direct to workers’ wages and profits and by fostering growth that lifts wages even more. Yet, for many years, nearly all gains that businesses have reaped have ultimately flowed to high-paid employees and profits, going only marginally to everyday working Americans. During the past half century, corporate taxes have been reduced by 60%. Despite those deep corporate tax cuts, wages have remained stagnant for everyday workers.  Even the huge tax cuts enacted in 2017 coupled with the 3% GDP growth that followed in 2018 spurred a paltry 0.6% real rise in rank-and-file wages.  The average real wage increase for rank-and file-workers during the entire first three years under Trump (which also contained much deregulation) was 0.9% per year— the real increase during Obama’s final term averaged 1.3% annually. So, these policies have given little boost to workers’ wages, not to mention that the wage performance would be worse still since 2016 had many states and localities not raised their own minimum wages.   If the connection between business growth and rising wages remains severed, reducing business taxes and regulatory burdens can only marginally benefit the bottom 90% of workers (B90 workers). Those policies cannot and will not end wage stagnation unless separate action, such as RAMP, is taken to ensure that gains reaped by businesses are spread in some reasonably proportionate way. For the same reason, policies to grow the economy have had little sustained effect in lifting everyday real wages for everyday workers.

(2) Revising global trade deals. Another perspective is that wage stagnation and lower-paying jobs have resulted from increased global competition and trade deals that have suppressed worker pay and failed to protect American workers properly. This means that the United States needs to revise current global trade deals and implement better ones. It is true that America’s foreign trade balance reversed from strongly positive to negative during the early 1970s, continuing deeply in the red thereafter. But, suppose that we were able to achieve better trade deals that improved our workers’ competitive position and evened the playing field, eliminating fully two-thirds of America’s foreign trade deficit without instigating any trade wars. Suppose, too, that as much as three-fifths of the restored compensation and profits went back to ordinary workers (a highly unlikely outcome). Even accomplishing all of that would lift compensation to the bottom 90% of workers by about $150 billion annually, or less than 20% of the net wage increase that RAMP is projected to deliver. 

(a) Boost the federal minimum wage. Alternatively, we could implement a major increase in the federal minimum wage (say to $12 or $15/hour over a period of five or six years). That would deliver a hefty pay increase for some workers and lift the minimum wage to a living wage in most locales around the nation. However, about three of every four of 120 million non-management workers would get no more than either a marginal benefit or no benefit at all, not even from lifting the minimum wage to $15 per hour. Most importantly, once at $15 per hour, the minimum wage hike would become like a one-time wage boost for the workers who do benefit.  Even if connected thereafter to the rise in the median wage, as some propose, the new minimum wage will barely increase in real terms after the initial boost if the median wage continues to rise as slowly as it has in the past. That is, it will not defeat wage stagnation even for those who benefit from the minimum wage hike let alone for workers who don’t.  By the tenth year, it would lift the average real wage of the bottom 90% of workers by about 3%, or about one-seventh as much as RAMP’s projected performance. Something else, such as RAMP, is required to create wages that continue to rise in a sustained way, even for workers affected by the minimum wage.

   (b) Make the level of corporate taxes dependent upon whether companies pay their workers at least a specified basic wage, such as a living wage plus health benefits. This proposal has limitations that are similar to those described for lifting the minimum wage. Such a policy would deliver a significant raise in pay for no more than approximately the bottom one-third of workers and the initiative will again deliver mostly a one-time static real wage increase as long as the real median wage continues to rise slowly.

(4) Expanding the Earned Income Tax Credit (EITC). Improving the returns from employment could also occur through an expansion of the EITC, a federally funded subsidy added to a worker’s wage income. An expansion would be an obvious benefit for workers, as would be giving recipients the ability to get EITC advances, helping them avoid having to depend on the treacherous payday industry.  However, expanding the EITC is a much more expensive approach than RAMP.  An expansion of the EITC, equaling the size of the wage increase projected through RAMP, would cost about $4.7 trillion cumulatively in tax revenues over 10 years, more than seven times the approximate $630 billion spent on the EITC over 10 years. That expense compares to a net fiscal benefit from implementing RAMP that we estimate to be about $500 billion over 10 years. Equally important, RAMP ensures that businesses keep delivering wage increases to workers commensurate with growth, thereby overcoming wage stagnation. By contrast, the EITC does not produce any income increases over time beyond what the initial tax subsidy delivers. To the contrary, there’s the danger that employers would free ride by substituting all or part of an expanded EITC subsidy for wage increases that they would otherwise have given. On top of that, the EITC subsidy itself will actually reduce or eliminate any wage increase from employers if the EITC recipient’s income is within the range where the EITC subsidy begins to diminish. For workers receiving the EITC with household incomes above about $45,000 up to the income where the EITC subsidy become zero, in fact, the reduction in the subsidy would eliminate much of an average real wage increase.  Because the EITC is not able to deliver continuous increased returns from work, it is unable overcome wage stagnation, not to mention that it is exponentially more costly than RAMP and can actually rob workers of employer-generated income increases they might otherwise have gotten.

(5) (a) Implementing a major infrastructure program is a quite different approach. Such a program would certainly generate new jobs, but those added jobs would be confined mostly to the period of the enlarged program. Even during that period, the number of jobs created (assuming a $1.5 trillion program carried out over six years that created 5 million jobs averaging three-to-four years) will help only about 1/20th of all workers experiencing persistent wage stagnation. Because of tightening labor markets, the additional jobs might also have the effect of bringing about marginal wage increases for other workers continuing for the period of the program. But, anything beyond marginal an upward wage effect, if it appears that they will put upward pressure on prices, might well be limited by the Fed. In any case, the effect on wages will not continue much beyond the duration of the program. The indirect investment effects that improving the infrastructure may have on wages are impossible to estimate accurately.

(b) A federal jobs program guaranteeing $15/hour jobs to all who seek them is a more recent proposal to create jobs for any worker needing employment. Its effect on wages, likely similar to a $15/hour minimum wage (described in [3a] above), would be unable to overcome wage stagnation for the same reasons outlined there. The proposal contains no mechanism to generate rising real wages over time, whether to those workers with guaranteed jobs let alone to workers without such jobs. In addition, the fiscal cost to government could be substantial, in the many hundreds of billions of dollars a year compared to a net federal budget benefit under RAMP. There are also numerous thorny issues of implementation, including providing jobs for workers without the skills or training needed and, presuming there is a true job guarantee to all, how to treat workers who slack off or are unreliable.

(6) Make education and training beyond high school more affordable and accessible. The strong relationship between pay on the one hand and education and skill development on the other lies behind this initiative. There is no doubt that gaining education and training credentials beyond high school would be extremely helpful for most individuals who graduate, reason enough to justify increased access to them. But it won’t be transformative in overcoming wage stagnation for most workers. A 25% rise in projected graduation levels for both community college programs and 4-year college degrees would be an ambitious achievement for the nation.  But, even if it were reached, it would assist about 8 million additional workers by the tenth year— certainly worth doing, but also fewer than one in ten workers experiencing wage stagnation. Such an investment would deliver an estimated overall aggregate added increase of about 3% in average real pay for the bottom 90% of workers by the end of a decade—less than one-seventh the net increase that RAMP would deliver. In addition, as is so for many of the other initiatives, it will again be mostly a static, one-time boost for those assisted. That’s because, even for jobs held by college graduates, median real pay has been fairly stagnant over the past 40+ years. It may be surprising, but growth in median real pay for college graduates has fallen nearly as far behind productivity growth as has been the case for non-college workers.

(7) Strengthening Labor Rights and Collective Bargaining. The weakened ability of workers to bargain collectively has long been accepted as a cause of slower real wage increases in the United States. Since World War II, wage growth has been strongest when unions were strongest. Strengthening unions and collective bargaining would bring wage increases. Very importantly, unions can also help workers control how workers’ gains are distributed (whether to wages or benefits, and to which benefits), influence hours and conditions, and enforce both workplace and workforce safety and quality standards.  On the other hand, no one can predict how long it will take for American labor law to be revised and for unions to regain their former effectiveness given the political and practical enforcement difficulties created by the unusually strong opposition of American businesses to unions. Very likely a great many years considering that fewer than 7 percent of private sector employees now belong to a union. Not to mention that unions and powerful collective bargaining systems provide no certain cure for wage stagnation. Recent results from systems with stronger unions are uneven. Despite Germany having co-determination as well as a significantly greater proportion of union membership than in the United States, its real wage growth from 1995-2015 was stagnant, at 0.5% per year, little different than in the United States. Germany’s union coverage at the time was as high as America’s has ever been. The same is true in Canada where, despite much higher union membership than in the United States, workers’ wages over those decades remained relatively stagnant. There’s also been a significant disparity between real wage gains and gains in workers’ productivity in Canada, Ireland, and the Netherlands, notwithstanding relatively high levels of unionization in each.

(8) Strengthen anti-trust enforcement rules and attack the monopsony position of superstar firms.  Increased concentration of businesses in the economy has strengthened employer bargaining power over workers in the labor market. Research by David Autor and others indicates that rising economic concentration explains 14% to 33% of the decline in the overall labor share since the mid-1990s, or about 7-to-16% of the overall problem of wage stagnation that B90 workers have experienced (since the shift of compensation upward to the top 10% of employees within the labor share itself constitutes about half of wage stagnation).  Strengthened anti-trust enforcement is surely needed and warranted, and the monopsony position of superstar firms should be attacked. But it would take quite a few years of renewed enforcement to influence wages significantly, if effective anti-trust action is politically possible at all. In addition, the effect would be confined to addressing the limited share of wage stagnation caused by industry concentration. By contrast, RAMP’s requirement that companies keep their CRs stable would induce monopsonist companies to share their gains proportionately with their workers or face RAMP’s financial consequences. Apart from this, RAMP would also affect the whole sweep of the problem of stalled wages arising not only from concentration but also from many other sources, and its influence in lifting workers’ wages could begin quickly.   

(9) Direct Income Grants: Two examples of such proposals are Senator Kamala Harris’s “LIFT the Middle-Class Act” and Andrew Yang’s “Freedom Dividend.” The former would provide up to $6,000 a year to households with income up to $100,000 ($3,000 for single filers) in the form of a refundable tax credit. It would not replace other tax credits and other benefits.  The latter would provide every adult American $1,000 per month without regard to the individual’s other income or employment. Direct-grant programs are very expensive. In the less expensive of these two examples, the cost would amount to nearly $3 trillion over ten years.  RAMP, by contrast, would deliver double the income increase to an average working family by the 10th year that this ‘less expensive’ program would, and would do so without a single penny of net cost to the federal budget.  In addition, outright grants of income would likely spur inflation, and some businesses might also take advantage of them to reduce wage hikes they otherwise would have given. On the plus side, sizeable grants of income would give individuals a foundation to be more selective in the jobs they take and stay in, though they are also likely to depress work effort.

(10) Combining Alternatives.  Suppose we were to combine several of the alternatives into a broad-based platform. How would their combined results compare to those of RAMP?  Three alternative proposals are to raise the minimum wage (proposal 3a), create a major infrastructure program (proposal 5a), and implement more affordable access to community college and four-year college education (proposal 6). This was the heart of a Democratic initiative named “A Better Deal.” Add to them a tripling of the EITC (proposal 4) and a program that succeeds over ten years in eliminating the downward effects of firms’ oligopolist market power on wages (proposal 8). The five combined proposals would bring some significant gains in compensation in the first couple of years as the proposals are staged in, about the same as would occur under RAMP. More importantly, the wage gains of the five programs soon begin to diminish, in three or four years, after the infrastructure program has reached its peak. Thereafter, the five alternatives together have the power to boost wages for most workers no more than marginally because the proposals contain nothing like stabilizing the CR to enable them to keep lifting most wages.  As a result, the five programs deliver far smaller wage growth than RAMP after the first few years even when they are all added together. Following the eighth year, in the absence of RAMP, the net growth from the five proposals combined would come to about 0.6% per year, meaning that the problem of overall wage stagnation would not be solved.

Table 1 compares the individual alternatives to RAMP according to a series of criteria. The bottom of the table, following the graph above, also shows the total pay raise each program delivers to the bottom 90% of workers in its 10th year, or at the program’s height, relative to what RAMP is projected to achieve.