It’s quite common to hear that Americans (and Canadians) are not much better off today than they were in the 1970s. This assertion is based on income levels in real terms among the lower and middle income segments of the public.
Opponents to this view cite innovation and technological breakthroughs as a counterpoint to this view. They say, in real terms, people eat more high value food, have more high value stuff, drive better cars, have much better telecommunications, better housing, etc.
But I heard an argument not that long ago that was even more interesting (it was on a podcast so I don’t have link to the research). One researcher in the U.S. looked the immigrant population by source and concluded the average person living in the United States today earns considerably more average income (in real terms) than they did in the 1970s compared to where the people were living in the 1970s.
It’s a subtle but interesting argument. If the millions of immigrants that have come to Canada and the U.S. are earning 2-3 times more on average (in real terms) than where they lived before that would mean a big increase in standard of living for the average American or Canadian – again compared to where they lived before.
I raise this because I am not sure how to see a real rise in the income level among millions of service industry jobs in North America. The real income level in many sectors of the economy has risen through innovation and productivity (for example, high value manufacturing) and through union action (particularly in the public sector) but the majority of folks in service industry jobs such as accommodation, food services, personal services, etc. are not unionized and there are limited ways to achieve significant productivity gains. For example, it takes a certain number of people to operate a hotel – there are limited technilogical breakthroughs to reduce time to do this.
Governments could force up the wages in these jobs via hiking the minimum wage but the very powerful small business lobby has deeply resisted this saying they are unable to pass these increased costs onto their customers.
Not as much in New Brunswick but in most parts of North America that have been growing these jobs have been filled with immigrant workers which has enabled the real wage rates to remain relatively low (but for many immigrants much higher than the alternative).
I don’t want to get too wonky but I agree with the economists that say the only real wage gains (system wide) come from productivity and innovation. Forcing up wages by union power or government action just shifts the costs onto the rest of the economy.
When I lived in Alberta I knew two brothers with the same skills and background – one worked for a union shop and made $30/hour as a janitor (in the early 1990s) and one worked as a janitor in a hotel and made $9.50/hour. If all the janitors made $30/hour and all the non-unionized workers made unionized wages without a corresponding productivity gain – that would just drive up prices to match the increase in wages. Instead of paying $7 for a combo at McDonalds you would pay $12.
I don’t want to get into a big debate about economic theory except to say that immigrant workers have been used to mitigate wage and ultimately price increases and that when we look at income data over decades this issue of ‘are we better off’ is better set in the context of better off compared to where we lived before rather than better off compared to the set of people that lived in this geography.