Over the last year, both populists and progressives have urged greater government control of the economy, including the imposition of a formal industrial policy. Both groups argue that an influx of foreign workers and goods made more cheaply overseas stagnate wages at home and result in fewer jobs for Americans.
They’re wrong. Middle class and lower-income workers have done very well over the last few decades, even as trade and immigration increased.
These economic policies that the far left and far right support for boosting wages are doomed to fail, just as they have in the past. Such policies, for instance, prolonged the Great Depression.
A recent article on Alt-M, part of George Selgin’s series on the New Deal, provides a stark reminder of the perils of “progressive” labor policies aimed at boosting wages. One of the most disappointing aspects of the (ephemeral) March 1933 to May 1937 recovery, it notes, was “the persistence of high unemployment.” Even though wages rose sharply during that period and people were spending more money, businesses still were not hiring. More than 20 percent of the labor force remained out of work.
Much of the blame lies with the “codes of fair competition” that were established by the National Industrial Recovery Act (NIRA). The labor codes, particularly, aimed to boost wages and impose standards for overtime pay via regulatory fiat. “Like many people,” the article notes, “FDR believed that higher wage rates would translate into an overall increase in workers’ ‘purchasing power,’ which, by enabling them to spend more, would in turn