One reason wages are stagnant

Why have US real salaries been stagnant for over a decade?  As mentioned in the previous post, part of it is undoubtedly competition from a globalized labor force.  But offshoring is not easy.  This begs the question:  aside from cost, is there some other appeal in outsourcing, despite the quality and management challenges that come with it?

In answer, consider this partial list of things you can eliminate by offshoring:

  • Medical insurance
  • Worker’s comp insurance
  • Worker litigation risk
  • Weekly, monthly, quarterly and annual tax filings
  • Pension management

This is an interesting list, because it corresponds closely to the areas where US business costs and complexity have exploded in the past 20 years.  It suggests that stagnant wages and offshore competition may both result from rising costs that neither employer nor employee can control.

As partial support for this position, note that health care costs per worker have risen more in the past decade than wages rose during the Clinton years. Stated differently, if health care costs were capped, worker income might have increased significantly.  And this is just one of the unbounded, uncontrolled costs mentioned above.

It’s not just the money, but also the manager’s time and attention.  Complexity has a cost.  Eliminating the five things above, in favor of simply wiring funds, is tremendously simpler.

The US might enjoy surprising gains by applying drastic simplification and cost control to the above list.

2 Responses to “One reason wages are stagnant”

  1. Nostradoofus» Blog Archive » Trouble in Chimerica Says:

    [...] armchair futurology and stuff. « Yet another bubble Why wages are stagnant [...]

  2. endicott Says:

    Just got the annual renewal proposal from our medical insurance company (Blue Shield of California). Premium for the same coverage is up 60% from last year. That’s not a typo – 60% increase in one year!