Economists observing the American labor market are saddened especially by two sets of Federal policies which subject highly productive American labor to competitive disadvantage. One springs from monetary policy that generates huge trade deficits, that is, that causes imports to exceed exports by half a billion dollars a year. With interest rates at extreme lows, last seen in World War II, American capital eagerly goes abroad in search of market returns. And American consumers joyfully welcome the products made by American capital and know-how abroad.
The other set of policies continually raises the costs of labor. Both political parties never tire of adding new labor fringes which are welcome benefits to employees and smarting costs to employers. U.S. Congress recently added some $400 billion Medicare costs some of which will fall on employers. Medicare costs merely are a small fraction of total cost mandates which actually may double labor costs in many labor markets. Obviously, it is total costs, not just take-home pay, that affect the demand for labor.
Posted by Hans Sennholz