How the US is Creating a Low Wage Workforce

My Budget 360

Over the last decade the U.S. has entered into a low wage economic trend impacting the overall economy. The result has been for many once middle class familiesto fall one or two rungs lower on the economic ladder. Many corporations have boosted their bottom line by using slack in the labor force to cut wages, slash benefits, and ultimately filter more profits away from workers. This is how you achieve a record level in the stock market yet wages have been stagnant for well over a generation adjusting for that pesky background “noise” of inflation.  

Another way that wages get depressed is by examining our foreign born workforce. There is data showing that foreign born workers earn 79.9 percent less than native born workers in the U.S. Even when we look at college education, we find that foreign born workers simply add more pressure on current workers giving companies an excuse to undercut wages and in many cases slash benefits. For example, this is very common in the tech sector where companies will bring in foreign born workers via H1-B visas and pay workers reduced wages and typically these workers received paired down benefit packages. This is simply another example of how we are entering a low wage workforce.

Low wage workforce and foreign born workforce

It is important to examine the global dynamics of our current workforce. The US is facing stiff competition from abroad and the world is in a race to offer products and goods for the cheapest prices possible. There is a long-term cost to importing cheap goods from countries that pay their workers incredibly low wages. In the end, as we are now seeing, the US is now suddenly becoming a low wage economy where we have a smaller portion of upper-income jobs, a smaller middle class, and a growing working poor segment of our economy.

There is data highlighting foreign born US workers are paid a good amount less than native born workers:

foreign born earnings

Source: BLS

A few things of interest in the chart: Education seems to level out the pay scale however many foreign born workers with college degrees usually get benefits packages that are significantly weaker from native born workers. Also, the above data includes undocumented immigrant workers and it should be rather obvious that this group is the largest and the one that is under paid by the largest margin. There is a reason for this massive undercutting of wages and many Americans continue to believe that the financial system is out to support them but in the end, it is an insatiable appetite for cheap goods and employees that keeps the system running. Politics aside, employers are happy to pay much lower wages if they can get someone to take these jobs.

Low wage capitalism is not designed to support a healthy and vibrant middle class. It is designed with one thing in mind and that is to cut prices and wages to the bone. This is why inequality in our nation is at the highest levels we have seen since the Great Depression:

income inequality us

When you have a large portion of your economy built on low wage work, you simply do not provide access for wealth accumulation for the vast majority of families. We are even making it harder for regular households to purchase homes because banks are out purchasing investment properties and crowding out regular families. The chart above highlights income inequality in the US and the last time we had this level of inequality was nearly 100 years ago during the Roaring 20s.

Some might be fine with a US showing a shrinking middle class. Yet I’m sure most Americans families would like the opportunity to build their life in a country where the middle class is afforded some basic protections and where politicians are actually on the lookout for the interests of typical families and not lobbyist or those with the biggest bank accounts

The fact that foreign born workers make 79.9 percent less than native born workers should tell you that there is an appetite for cheap labor in this country. Someone is paying wages here so just remember the bottom line.

4 thoughts on “How the US is Creating a Low Wage Workforce

  1. Poison tongue POTUS speaks of the urgency for increased min wage as he forcefully brings in plane/bus loads of illegals for low paying jobs.

  2. There is major flaw in this plan. When people need every penny they earn just to live such as buy food or provide a roof over their head it hardly leaves room for shopping for other goods. As a result business close and the need for the good imported falls rapidly. Look at all the store closings… that leads to less goods purchased wholesale and less goods on shelves. This grows expidentially as more stores close and corporations loose eventually.

    If you will remember Ford paid his workers well so that they could buy his cars. He got it and it worked.

  3. Have you read about the labor shortage in Japan and the number of low wage workers they need? Older population there and retiring from the work force. 1.5 unemployment rate as well. I have red they will pay airfair and food, medical, and other resonable expenses to have low wage labor shipped in to Japan. They could use every healthy illegal we have come acrost the border. So why are we shipping them home? The unhealthy ones yes. But the healthy one we could let Air Nipon land in Texas and Nevada and let them feed and ship them elsewere for a small profit.

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