OPINION:
As Pope Francis makes his way to adoring crowds this week, I’m reminded of a late-1970s character from “Saturday Night Live,” Father Guido Sarducci. Played by Don Novello, Sarducci was known as the rock critic for the Vatican newspaper.
As part of his comedic routine he promoted his “Five Minute University” (Google it for a laugh) where students could quickly learn the only lessons they would remember years after receiving a four-year degree. When it came to economics he taught a simple concept for students: “Supply and Demand.” If you could remember those two you would pass the final economics exam.
Today the good Father might add one more 15 second addition to the five minute course, “Productivity.”
While the public debate on inequality and wage growth is stuck on complaining, little time is focused on productivity which is the key to real wage growth. If employees can produce more in the same amount of time, they are more valuable, and their pay increases. To take one illustrative example: My firm used to regularly send employees to the Library of Congress to find a particular piece of information — a half-day ordeal. Today, the same information can be found with a five-minute Google search. The result is increased productivity. We can deliver the research in less time with fewer employees and therefore can afford to pay higher salaries.
Some researchers argue that the relationship between productivity and incomes has broken down; others offer a convincing rebuttal. I won’t rehash the wonky conversation about productivity measures and price indices. What’s important to note is how proponents for a higher minimum wage have skewed productivity numbers to fit their own narrative about affordable wage rates.
For instance, Massachusetts Sen. Elizabeth Warren has pointed to overall economic productivity gains to argue that the minimum wage should be increased. If the “minimum wage had kept up with increases in productivity,” she wrote in an ABC News op-ed last year, “it would be $22 an hour today.” But this argument ignores the fact that productivity gains have not been equally experienced among economic sectors. For instance, Bureau of Labor Statistics data show that the food service industry has seen minimal increases in productivity in recent decades.
That shouldn’t be surprising: There is a limit on how fast you can take a food order, clean a table, or cook a steak. And where possible broader productivity gains will only speed up the replacement of employees with more productive (and less costly) computerized alternatives. McDonald’s has already tested hundreds of ordering kiosks at its restaurants throughout the country this summer. Other quick service and full service restaurants, including Chili’s and Panera, are doing the same.
In other words, higher wages for some are paid for by consumer self-service and the automation of jobs of others.
Focusing on productivity is more important now than ever. The Census Bureau recently confirmed what Americans already know: Wages are stagnant. Its report found that real median household income for 2014 was $53,657, statistically identical to the 2013 median, and lower than the median in 2011 and 2012. In fact, this income is still 6.5 percent lower than the median household income in 2007.
In an attempt to distract Americans from its horrendous record of wage growth, the White House has — like Ms. Warren — conflated the issue with the minimum wage. Earlier this month, Vice President Joe Biden stood beside Gov. Andrew Cuomo in New York and endorsed a $15 state minimum wage, which he claims is “the single most rapid, important thing we can do to deal with wage inequity the higher the better.”
Yet such regulations sap productivity and depress wage growth. According to the Heritage Foundation, the Obama administration enacted 184 major regulations in its first six years, estimated to cost at least $80 billion annually. Mr. Cuomo and Mr. Biden obviously need that five-minute university education.
Significant wage growth can’t be legislated or ordained. Even if you’re from the Vatican.
• Rick Berman is president of Berman and Co., a Washington public affairs firm.
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