Raising Wages: What’s Wrong With Ending Protection For Those On Top?

Eduardo Porter noted the rise in income inequality over the last three decades. He then suggests a few policies that could raise incomes for those at the middle and bottom, such as the wage insurance policy recently proposed by President Obama and the Earned Income Tax Credit. While these are reasonable proposals, it is also reasonable to suggest ending the protections that act to raise incomes for those at the top.

For example, we can use trade policy to provide more competition for doctors, dentists, lawyers and other highly paid professionals who occupy the top 1-2 percent of the wage distribution. There are plenty of very bright people in the developing world (and even West Europe) who would be happy to train to U.S. standards and work in the United States at a fraction of the wages of the people who currently hold these positions.

This would directly reduce inequality by eliminating the walls that now sustain the living standards of these highly educated workers. It would also raise the real wages of less-educated workers by reducing the cost of health care and the other services they provide. 

We can also use trade policy to reduce the length and strength of patent and copyright protection. This would reduce the cost of drugs and software, further raising the wages of ordinary workers. This would also reduce the income of those at the top, like Bill Gates and the executives in the pharmaceutical industry.

We can also stop using the Federal Reserve Board as a tool to keep down the wages of ordinary workers, which thereby boosts the wages of those at the top. This means not raising interest rates at the first hint of any real wage growth by those at the middle and bottom of the wage ladder.

There are many other policies that could be introduced that would raise the wages of ordinary workers by reducing the income of those at the top. It is remarkable that such policies rarely seem to appear on the national agenda. It is not surprising that this leaves many working class voters resentful.