Four ways to give Americans a pay rise—without raising minimum wage

With US wages having barely risen in real terms since the early 1970s, the mood of many workers in the country can be summed up with a popular protest chant: “America needs a raise.”

But how can we achieve this? A new paper from Brookings/the Hamilton project has some thoughts. “Slow productivity growth and stagnant wages are complex puzzles, but are not insoluble,” write Roger Altman and Robert Rubin in the introduction. “Forty years of stagnation need not presage 40 more. If we are able to put in place a policy regime to reverse these long-term trends, we can restore Americans’ confidence in the economy and in the American Dream.”

It’s worth reading the full research, which is full of analysis on the country’s current woes and dozens of proposals for change. Here, we’ve picked out four policy ideas that the authors argue could boost earnings for Americans.

Get students moving

What happens if you’ve got great potential, but can’t get to where the buzz is? “Geographic mobility has been declining for a broad set of Americans,” writes Abigail Wozniak of the University of Notre Dame in her chapter of the paper, “potentially reflecting increasing challenges for workers in accessing places with more economic opportunity.”

According to her essay, the share of first-year college students going to school less than 50 miles from home has risen from 37.9% in 1990 to 56.2% last year. Meanwhile, fewer than 2% of “young, long-distance movers with some college education” move to a new county after their education to look for work.

Wozniak proposes two changes to the US system of student support to boost their geographic mobility.

First, she wants new versions of the Pell Grant federal subsidies paid to needy college students to be allocated to young people from counties without college access. She suggests an annual $2,500 supplement “to assist students in overcoming the substantial implied costs of distant college-going,” and then up to the same amount on top of this if students attend selective schools and complete four-year, rather than two-year, courses.

Second, Wozniak is calling for a one-year “grace period” for student loan recipients, in which they would not need to start paying back any money provided they could “demonstrate residence or employment in a local labour market other than that in which their college is located.” This should, Wozniak writes, “enable longer job searches by those who choose to relocate for work,” opening up new opportunities.

Empower workers with information

For Benjamin Harris of the Kellogg School of Management, it’s vital that workers in America have more information about what they should expect to be paid.

“In the US labour market, information on wages and compensation is decidedly asymmetric,” Harris writes. “Employees frequently do not know how their pay compares to comparable workers, either within or outside their firm, and are reluctant to seek this knowledge out of fear of retaliation, social norms, or general inertia.”

His strategy to address this has five pillars: he wants state laws to protect workers who discuss pay (many American employees are forbidden from doing so), large firms to be commanded to disclose pay trends such as gender gaps, a removal of a “safe harbour” in antitrust law that means companies don’t have to share details of pay, rules to better inform potential new hires about pay structures at a company, and new funds for the Department of Labor to look into better transparency policies.

Crack down on anti-competition clauses in contracts

Alan Krueger from Princeton University and Eric Posner from The University of Chicago Law School focus in on two controversial bits of workers’ contracts: non-compete caluses and no-poaching agreements.

The former stops people leaving a company for a job at a competitor, while the latter might be used, for example, to stop one franchisee of a company hiring employees from another franchise (such a clause, Krueger and Posner note, was included in MacDonald’s franchise contract until 2017.

“Non-compete agreements may be justified when employers heavily invest in training employees, or trust them with valuable information, including trade secrets,” the authors write, “but this is rarely the case with unskilled or low-skilled workers.”

“We propose that non-competes be uniformly unenforceable and banned if they govern a worker who earns less than the median wage in her state.” The authors also suggest a total ban on no-poaching agreements.

Use government’s purchasing power

A chapter by the Economic Policy Institute’s Heidi Shierholz focuses on “the erosion of labour standards, institutions, and norms.” She touches on the declining minimum wage, the breakdown of overtime protections, unpredictable scheduling practices and more.

Shierholz suggests a range of ways to address this, but one that caught our eye is a challenge to government: can public servants use their leverage in the form of procurement spend to encourage better practice among businesses?

“Every year the federal government spends hundreds of billions of dollars on contracts for everything from building interstate highways to serving concessions at national parks,” she writes, adding that among this are “billions of dollars in contracts to companies that harm workers financially and endanger their health and safety”.

She advocates bringing back Barack Obama’s Fair Pay Safe Workplaces rule, brought in in 2016 and reversed in 2017, which “helps ensure that all contractors comply with workplace laws, including health and safety standards, wage laws, and civil rights laws before they receive new contracts.”

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