Thursday, May 19, 2016

Confronting the Parasite Economy

Why low-wage work is bad for business—and all of us.

Nick Hanauer
May 16, 2016

There are two types of businesses in America today: those that pay their workers a living wage—the real economy—and those that don’t—the parasite economy. And all of us who live and work in the real economy should be royally pissed at the way the parasite economy is sucking us dry.

Here in the real economy, we solve the problems, build the things, and pay the wages that make America great. When politicians of both parties promise to attract “good jobs” to their districts or states, they’re talking about the kind of real-economy jobs that pay a decent middle-class wage—jobs that provide the income, benefits, and security necessary to participate robustly in the economy as a consumer and taxpayer. It is the real economy that drives both production and demand, and that fills our tax coffers with the money needed to educate our children, maintain our infrastructure, invest in research and development, fund our social safety net, and provide for the national defense.

But in the parasite economy—where companies large and small cling to low-wage business models out of ignorance or habit or simple greed—“good jobs,” and the economic dynamism they produce, are in short supply. This is the economy in which tens of millions of Americans work for poverty wages with few if any benefits, often in the face of abusive scheduling practices that make it impossible to plan their life from day to day, let alone month to month.

The difference between these two economies is stark. The real economy pays the wages that drive consumer demand, while the parasite economy erodes it. The real economy generates about $5 trillion a year in local, state, and federal tax revenue, while the parasite economy is subsidized by taxes. The real economy provides our children the education and opportunity necessary to grow into the next generation of innovators, entrepreneurs, and civic leaders, while the parasite economy traps them in a cycle of intergenerational poverty.

The real economy delivers on the promise of capitalism.

The parasite economy relentlessly undermines it.

If, as many on the right are wont to do, we divide our nation into one of “makers” and “takers,” it’s not the working poor who deserve our derision, but the low-wage businesses that exploit them. These are the real deadbeats of the parasite economy: companies with a business model predicated on a cheap supply of taxpayer-subsidized labor, growing fat on the vast wealth of consumer demand generated by the middle-class wages of the real economy, while leaving employees with little if any discretionary income of their own.

To be clear, I am not making a moral argument for the real economy (though there is surely a moral argument to be made), but rather a cold and calculated economic appeal based on self-interest properly understood. You see, I am an entrepreneur and venture capitalist invested mostly in technology companies that pay the sort of middle-class wages that enable our workers to fully participate in the economy as consumers of other companies’ products. That’s the way a market economy is supposed to work. We buy your products. You buy ours. But low-wage workers at parasite companies—mostly giant and profitable corporations like Walmart and McDonald’s—cannot afford to robustly consume our products, or most anybody else’s, in return. The parasite economy is simply bad for business.

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