January 8, 2015 | Commentary on Labor, Jobs and Labor Policy, Economy

Liberal policies suppress wages: Opposing view

Americans of all income levels would benefit from faster economic growth that raises wages. Unfortunately, wages are being held back by the very policies supported by those criticizing slow wage growth.

Liberals across the country supported the misnamed Affordable Care Act (aka Obamacare). The law's mandates have made health coverage more expensive for both individuals and businesses.

However, it has not made those businesses any more profitable, or their workers any more productive.

Economic theory predicts that when benefit costs rise, employers cut wages. Empirical research confirms this prediction. Ironically, some of the most rigorous evidence for offsetting wage cuts comes from Jonathan Gruber, the Obamacare architect who boasted the health law takes advantage of Americans' "stupidity."

As of Jan. 1, Obamacare requires employers to pay a stiff penalty for each full-time worker they do not offer expensive "qualifying" health coverage to. They owe no penalty for part-time employees without such coverage. This gives many businesses a strong incentive to cut hours below 30 a week — cutting their workers' take home pay in the process.

Fortunately, workers' living standards have jumped recently — for reasons most liberals oppose. New "fracking" technology now allows entrepreneurs to extract oil from previously inaccessible shale formations. And America has a lot of shale oil. As a result, domestic energy production has surged. North Dakota alone now produces 1.2 million barrels of oil a day.

Fracking has created tens of thousands of good jobs. It has also reduced global energy prices. Gas prices have fallen by more than $1.25 a gallon since July. These lower energy prices will boost household spending power by $900 a year.

All this has happened over the objections of a lot of those complaining about low wages. Many liberals want to curtail fracking. Gov. Andrew Cuomo just banned it in New York state. Major unions have called for moratoriums on fracking. Yet energy entrepreneurs have done far more to boost the middle class than the health care overhaul liberals championed.

 - James Sherk is a senior policy analyst at the Heritage Foundation, a conservative think tank in Washington, D.C.

About the Author

James Sherk Research Fellow, Labor Economics
Center for Data Analysis

Related Issues: Labor, Jobs and Labor Policy, Economy

Originally appeared in USA Today