The Past and Future of America's Social Contract

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http://www.theatlantic.com/business/archive/2013/12/the-past-and-future-of-americas-social-contract/282511/



The problem of low pay has dominated headlines this year thanks to striking fast food workers, tone-deaf employers, and a spate of successful campaigns to raise state and local minimum wages.

Behind the news cycle, however, there’s a deeper issue than what Walmart or McDonald’s pay their workers today. Americans are once again wrestling with what they fundamentally want from the social contract—the basic bargain most of us can expect from the economy throughout our lives.

A generation ago, the country’s social contract was premised on higher wages and reliable benefits, provided chiefly by employers. In recent decades, we’ve moved to a system where low wages are supposed to be made bearable by low consumer prices and a hodgepodge of government assistance programs. But as dissatisfaction with this arrangement has grown, it is time to look back at how we got here and imagine what the next stage of the social contract might be.

The story of the modern social contract can be divided into two parts, with the first beginning in the aftermath of the Great Depression. The New Deal era of the 1930s through the 1970s was largely defined by high and rising wages, which were pushed up by strong unions, limited global competition, low energy and commodity prices, and more stringent regulations on businesses. At the same time, the ability to automate and innovate in the dominant manufacturing sector made it possible to offer workers high pay while keeping prices on consumer goods low.