Solidarity wage policy
A solidarity wage policy is a macroeconomic wage coordination policy to reflect labor productivity gains in wages. This differs from a living wage, which is a wage level considered to represent a dignified standard of living, often proposed as a guideline for minimum wage policy.
Description
The solidarity wage was proposed as part of the Rehn-Meidner model to incorporate productivity growth into wages. Rehn proposed this would press unproductive businesses to either invest in improving productivity or exit the market.[1] To address the structural change caused by productivity growth, Rehn prescribed policies to enhance worker mobility and economic security between jobs, rather than tying economic security to lifelong employment at the same employer.
The Rehn-Meidner model describes a solidarity wage as a policy of coordinating macroeconomic wage policy through collective bargaining; in countries with fragmented wage bargaining structures, other mechanisms of macroeconomic coordination of wage policy exist. This includes minimum wage policy, whereby "increases in the minimum wage laid down by the government constitute an important reference point for the development of the entire wage structure." [2] The coordination of macroeconomic wage policy reduces or, in the case of employers facing wage floors or multi-employer bargaining agreements, eliminates wage competition, and so prevents individual firms from paying lower wages to offset competitive disadvantages. Such disadvantages can only be addressed by investing in new productive capital when new technological innovation is available, or by introducing new innovations when none currently exist or are viable.
Comparison to a living wage
A solidarity wage is necessarily higher than a living wage in the long run, as it explicitly incorporates the full proportional increase in purchasing power per labor-hour worked rather than targeting a minimum standard of living, and so represents an increasing standard of living. It also represents the maximum perpetually-sustainable rate of wage increase: raising, for example, minimum wage faster than productivity raises the ratio of minimum wage to hourly output, and would eventually lead to a minimum wage set higher than the mean wage—a mathematical impossibility. A temporary increase in minimum wage faster than productivity compresses wages and can be used to set a desired portion of productive output, but this increase relative to productivity must not be indefinite and unbounded. A living wage targeting a given standard of living will retain the same buying power, falling behind any productivity growth.
In the United States, the minimum wage prior to 1970, during the golden age of capitalism, trended around 30 to 35 percent of the per-hour GDP. A national solidarity wage of 29 percent of the nominal per-hour GDP would reach $10 hourly in 1996, $15 hourly in 2005, $18 hourly in 2010 when the Fight for $15 movement began, and just over $22 hourly in 2019. Adjusting the 1996 value to 2019 by the R-CPI-U-RS inflation index produces $16.38 hourly, roughly 74 percent of the corresponding solidarity wage; while a 33 percent per-hour GDP solidarity wage would reach just over $25 hourly. Nominal GDP is used instead of real GDP because it is the GDP in relation to current prices, rather than adjusted to reflect prior prices. The per-hour GDP figures can only be known after the fact, so any solidarity minimum wage policy using this portion of labor productivity would set minimum wage to these levels in the following year or later.
References
- ↑ Erixon, Lennart (2010). "The Rehn-Meidner Model in Sweden: Its Rise, Challenges and Survival" (PDF). Journal of Economic Issues. 44 (3): 677–715. doi:10.2753/jei0021-3624440306. ISSN 0021-3624. Unknown parameter
|s2cid=ignored (help) - ↑ Schulten, Thorsten (2002). "A European Solidaristic Wage Policy?". European Journal of Industrial Relations. SAGE Publications. 8 (2): 173–196. doi:10.1177/095968010282004. ISSN 0959-6801. Unknown parameter
|s2cid=ignored (help)
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