The formula is simple: When the economy accelerates, employers compete for employees and wages increase. I experienced this during my 17 years as CEO of a national quick-service restaurant chain. The stronger the economy, the harder it was to get good employees. Conversely, when growth is weak, as it was during most of the Obama presidency, employees compete for jobs and wages stagnate.
President Trump’s regulatory rollback is driving an economic surge few anticipated. Tax reform promises to accelerate that growth by encouraging business investment and eliminating the perverse incentives that drive companies, jobs and investments to other countries. The true test for these pro-growth policies is whether they result in a more participatory economy, in which workers’ incomes meaningfully increase over the long run. The early results are promising.
The left’s proposed solution to wage stagnation has been for government to mandate increased wages by more than doubling the minimum wage from $7.25 to $15 an hour. That causes employers to eliminate jobs and reduce hours to offset their increased costs. To increase wages without these unintended consequences, you need economic growth.
Protest signs in SeaTac, Washington, 2013.PHOTO: DAVID RYDER/REUTERS
Democrats once understood that. President Kennedy referred to economic growth as the “tide that lifts all boats.” Yet no Democrats voted for tax reform in December. House Minority Leader Nancy Pelosi warned of “Armageddon.” Sen. Bernie Sanders called it “a disaster.” Sen. Elizabeth Warren claimed Republicans were “just delivering one gut punch after another to hardworking people.”
That “gut punch” turned out to be bigger paychecks. After the GOP passed its tax bill, major U.S. employers including AT&T , Bank of America , Boeing , Wells Fargo , Fifth Third Bank, Comcast NBC Universal and Sinclair Broadcasting immediately committed to investing billions in growth, special bonuses or higher wages. Wells Fargo and Fifth Third are voluntarily increasing their base wages to $15 an hour.
Democrats criticized these commitments as publicity stunts designed to get favorable treatment from the Trump administration. But they miss the economywide significance of this investment. Businesses compete for the best employees. If you want the best, you pay the going rate. With regulatory relief, tax cuts and the increased business that comes from economic growth, employers now have the resources to bid up wages. Competition will spread those increases without the unintended consequences of a dramatic minimum-wage increase.
That competition kicked in almost immediately as more than 100 diverse businesses, including Wisconsin-based Associated Bank , North Carolina-based BB&T Corp oration, Pennsylvania-based PNC Financial Services Group , New Jersey-based OceanFirst Financial Corp. , Georgia-based Sun Trust Banks, Minnesota-based US Bank, the Bank of Hawaii , and South Carolina-based Nephron Pharmaceuticals announced pay hikes for workers within two weeks of the tax bill’s passage.
Both the competition for employees and the associated wage increases will continue—if government stays out of the way. Wage growth doesn’t come from government mandates. It comes from policies that get the economy moving. It’s just unfortunate that it took so long for us to elect political leaders who understood that.
Mr. Puzder is a former CEO of CKE Restaurants.
