Washington Post columnist Steven Pearlstein wrote a piece yesterday (10/13/10) headlined "Wage Cuts Hurt, but They May Be the Only Way to Get Americans Back to Work." The point–in case you didn't catch the drift ofthe headline–is that workers are going to need to take pay cuts in order to get the U.S. economy back on track. U.S. workers simply make too much in comparison to international competitors.
Pearlstein cheers the move by some U.S. autoworkers to take a pay cut–the kind of "structural adjustments that are necessary if the U.S. economy is to find a new equilibrium." But taking a 20 percent pay cut sure isn't for everyone:
I'm sure many of you are reading this and thinking that if anyone is forced to take a pay cut to rebalance the economy, surely it ought to be overpaid investment bankers, corporate executives and newspaper columnists. That's how things would work in a socialist paradise, but not in market economies, which are much better at producing efficiency than fairness.
While it's good that Pearlstein anticipates the reaction of his readers, his argument is entirely unconvincing. Investment bankers operate in a "market economy"? Then why did Wall Street require a massive government intervention in order to avoid what we're often told could have been a total economic meltdown?
The idea that one would hold up the newspaper business as any sort of "market" model is questionable. (Certainly the Washington Post would not qualify as a business success at the moment.) But let's say that a paper like the Post operated on the principle that thoughtful opinion columnists should compete for space in the paper. Given that many people would give the Post a column for something close to free (the Internet is full of free opinion, some of it quite good), it's hard to see how Steven Pearlstein would have a job anymore–or at least one that pays very much. And that outcome wouldn't even depend on the creation of a "socialist paradise."
Dean Baker has more thoughts on Pearstein here, which as usual are worth reading.