Here's How You Know Wages Are Too Low

Moneybox
A blog about business and economics.
Nov. 18 2013 1:11 PM

Here's How You Know Wages Are Too Low

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Anti-Walmart campaigners in Miami.

Photo by Joe Raedle/Getty Images

Here's a shocking image brought to us by Scott Keyes. Walmart is organizing a food drive to deliver food to its own needy employees:

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Courtesy of Scott Keyes

I won't comment on the specific corporate politics here, but that's about as solid an indicator you could imagine of the economywide problem that economywide wages are too low. Look at it from Walmart's perspective? Suppose low-skilled workers in this country on the whole made somewhat more money. What would they do? Well as Walmart indicates with this sign, one thing they'd do is buy more groceries. And where would they buy the groceries? Well, many of them would buy them at Walmart—America's leading grocer.

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Of course any particular company can improve its own bottom line by cutting compensation to the bone. But corporate America as a whole has been so successful in squeezing the labor share of national income lower and lower that it's become a substantial constraint to businesses' ability to sell things to people. The cycle of low wages, low demand, weak hiring, weak bargaining power, and low wages just keeps grinding on.

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

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