The Left's Big Economic Mistake

A blog about business and economics.
March 8 2013 3:26 PM

Want Higher Wages? Dream of Cheaper Stuff  

159165403
Discount stickers are placed on windows at a store during winter sales, on January 9, 2013, in Nice, southeastern France.

Photo by VALERY HACHE/AFP/Getty Images

Without appropriate peg, here's my big hazy generalization about what the left gets wrong about the economy. The left is rightly concerned about the real wages and incomes of ordinary working people. But the left fallaciously analogizes from a bargaining dynamic at a single firm to the entire economy.

The way a given worker or class of workers improves his real wages is by persuading his boss to give him a nominal raise that outpaces the growth in the cost of living. But the way the economy as a whole works is that my income is your cost of living. If Slate doubled my salary, I'd be thrilled. But if everyone's boss doubled everyone's salary starting on Monday, we'd just have one-off inflation. As it happens, a little inflation would do the macroeconomy some good at the moment. But the point still holds that while "you get a raise" is the way to raise your living standards, "everyone gets a raise" is not the way to raise everyone's living standards.

Advertisement

To raise real wages across the economy rather than for some favored group of insiders, what you need to do is make things cheaper. And that generally entails an accumulated series of events that make selected groups of people's nominal incomes lower. If everyone could be chauffered around cheaply by autonomous cars, then the people who currently earn a living driving cabs and buses and trucks will lose out. If computers take over routine diagnostic work, then doctors will lose out. If online courses that serve tens of thousands of students displace community colleges, then community college instructors will lose out. The Internet, as best as I can tell, has been a total disaster for the relative earnings of journalists. But by the same token, in a small way the widespread availability of free online content has raised the real wages of everyone else. Newspaper and magazine subscriptions just weren't ever a very large part of anyone's consumption bundles. But the way to raise real incomes across the board is for that same wave of technological change that's transformed the media to start transforming the health care, education sectors, and transportation sectors. Cheaper health care and college and better transportation is a raise for every janitor, short-order cook, yoga instructor, and nurse in America.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Medical Examiner

Here’s Where We Stand With Ebola

Even experienced international disaster responders are shocked at how bad it’s gotten.

It Is Very, Very Stupid to Compare Hope Solo to Ray Rice

The U.S. Is So, So Far Behind Europe on Clean Energy

Even if You Don’t Like Batman, You Might Like Gotham

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059

Politics

Meet the New Bosses

How the Republicans would run the Senate.

A Woman Who Escaped the Extreme Babymaking Christian Fundamentalism of Quiverfull

How Moscow’s Anti-War March Revealed One of Russia’s Deepest Divides

  News & Politics
Politics
Sept. 22 2014 6:30 PM What Does It Mean to Be an American? Ted Cruz and Scott Brown think it’s about ideology. It’s really about culture.
  Business
Moneybox
Sept. 22 2014 5:38 PM Apple Won't Shut Down Beats Music After All (But Will Probably Rename It)
  Life
Outward
Sept. 22 2014 4:45 PM Why Can’t the Census Count Gay Couples Accurately?
  Double X
The XX Factor
Sept. 22 2014 7:43 PM Emma Watson Threatened With Nude Photo Leak for Speaking Out About Women's Equality
  Slate Plus
Slate Plus
Sept. 22 2014 1:52 PM Tell Us What You Think About Slate Plus Help us improve our new membership program.
  Arts
Brow Beat
Sept. 22 2014 9:17 PM Trent Reznor’s Gone Girl Soundtrack Sounds Like an Eerie, Innovative Success
  Technology
Future Tense
Sept. 22 2014 6:27 PM Should We All Be Learning How to Type in Virtual Reality?
  Health & Science
Medical Examiner
Sept. 22 2014 4:34 PM Here’s Where We Stand With Ebola Even experienced international disaster responders are shocked at how bad it’s gotten.
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.