NCPA - National Center for Policy Analysis

How to Raise Wages

May 25, 2016

As wage growth staggers along at a low 2 percent, the cost of employment is steadily increasing, according to a new report by National Center for Policy Analysis senior fellow Pam Villarreal.

Villarreal outlines four ways to kick-start wage growth and slow the rise of employment costs:

  • Reform corporate taxes. Replacing the corporate tax entirely with a wage or consumption tax would boost wages by up to 12 percent.  It would also boost gross domestic product immediately by 6 percent.
  • Increase wage and benefit flexibility. Rather than relying on costly labor mandates, the government should consider policies that increase workplace flexibility. 
  • Offer flexible health plans. Forcing young workers to purchase "bells and whistles" health care policies are sapping them of the benefits of any wage increases.
  • Lessen regulatory burdens. According to the Small Business Administration, regulatory costs are nearly $11,000 per employee for firms with less than 20 employees.  This means more money going to compliance, less going to investment in capital and workers.

One thing that definitely won't fix slow wage growth? Raising the minimum wage. Instead, workers should focus on acquiring skills that qualify them for higher-paying jobs.


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