It’s been a year or so since the Republicans got their big tax breaks for business owners. Since that time, wages have risen by 2.8% while inflation has risen 2.9%. MAGA? In any case, I was listening to the radio this morning where two economists were debating the tax breaks. One economist pointed to the aforementioned wage data and the record amount of stock buy backs and soaring CEO salaries. The other economist took the following stand: eventually in another year or two, business investment in production will increase worker productivity and that will raise wages.
In other words, the rich get their money up front and the working class will get theirs, eventually, we promise. In fairness this is little different from the notion that higher levels of education will lift the entire working class to economic levels closer to the ownership class, but I digress.
If I were in the studio where this economist was pointing to increased productivity leading to increased wages, I would simply present the following scenario and ask again, why would higher productivity of workers lead to higher wages?
Imagine I am the owner of a logging company. I pay each lumberjack $10 per hour and each lumberjack is expected to harvest one tree per day, using the ax, hand saw, and splitting maul that I supply him with. After Trump is elected, I get a tax break and with this added cash, I supply the lumberjack with a gas powered chain saw and log splitter, technological improvements that boost the productivity of the lumberjack to where the new quota is ten trees per day.
Why would I choose to pay the lumberjack more than the $10 per hour I was paying? If anything, harvesting a tree with an ax, hand saw and splitting maul takes far more skill and strength than with the new equipment. That being the case, I can probably find less skilled people in the village to take the job of the skilled lumberjack and increase my profits even more.