Saturday, February 16, 2013

More on the minimum wage

I've always been a strong proponent of a decent minimum wage. The previous post addressed that very topic, and the responses were so fine, I thought I would share them with a larger audience.

This comes from our friend Dan in Alabama:
San Francisco vs Alabama

San Francisco min wage: $10.55
Alabama min wage: $7.25

San Francisco unemployment rate: 6.5%
Alabama unemployment rate: 7.1%

San Francisco pays its workers at least 25% more and has less unemployment than Rock Hard Right Wing Alabama.

Sucks to be beat by a bunch of flaming Liberals don't it macho man!
Of course, life is more expensive in San Francisco. But that fact doesn't affect Dan's basic argument: According to Libertarian theology, unemployment should be much higher in the city by the Bay. Should be, but isn't.

Carolyn Kay sends the following, which originally appeared in ThinkProgress:
OOPS: GOP Rep. Inadvertently Makes The Case For Nearly Doubling The Minimum Wage

A stronger minimum wage, [Tennessee Rep. Marsha Blackburn (R) ] said, would negatively affect the ability of young workers to enter the workforce as teenagers, and would prevent them from learning responsibility like she did when she was a teenage retail employee making a seemingly-measly $2.15 an hour in Mississippi…

Making $2.15 an hour certainly does sound worse than today’s minimum wage, which federal law mandates must be at least $7.25 an hour. But what Blackburn didn’t realize is that she accidentally undermined her own argument, since the value of the dollar has changed immensely since her teenage years. Blackburn was born in 1952, so she likely took that retail job at some point between 1968 and 1970. And according to the Bureau of Labor Statistics’ inflation calculator, the $2.15 an hour Blackburn made then is worth somewhere between $12.72 and $14.18 an hour in today’s dollars, depending on which year she started.

At that time, the minimum wage was $1.60, equivalent to $10.56 in today’s terms. Today’s minimum wage is equivalent to just $1.10 an hour in 1968 dollars, meaning the teenage Blackburn managed to enter the workforce making almost double the wage she now says is keeping teenagers out of the workforce.
Youngsters may not understand that, back in the days when real wages (as measured in inflation-adjusted dollars) were higher, it was possible to get by on a part-time job.

A reader named romero sent the following:
From the post war period right up till 1975 wage increases for ordinary workers tracked US national productivity increases. Bureau of Labor Statistics figures show that from 1975 till the present productivity increased by a massive 154% while wages increased by a measly 13% in real terms. Workers are now working twice as hard for the same or even less pay than they were earning in 1975. So there is no question that the middle and working classes have been totally ripped off by employers and the wealthy. See here and here.

The current public debate on wage increases has focused on the benefits to the economy and that the impact on employer costs and unemployment numbers will be minimal. These secondary arguments fail to address the economic elephant in the room -- that workers have been systematically robbed for a generation of wage increases to which they are fully entitled and it's about time they started getting it. The cash is out there and they have been owed it for a long, long time. It's about wage justice, not affordability.
I've taken the liberty of reproducing the chart which shows the great disparity between rising productivity and stagnant wages. My first reaction was to say "What hath Reagan wrought?" -- but in truth, the gap began to widen under Carter, possibly Ford. Reagan, however, turned the crack into a canyon.

Paul Krugman has more to say today:
So what should you know? First, as John Schmitt (pdf) documents at length, there just isn’t any evidence that raising the minimum wage near current levels would reduce employment. And this is a really solid result, because there have been a *lot* of studies. We can argue about exactly why the simple Econ 101 story doesn’t seem to work, but it clearly doesn’t — which means that the supposed cost in terms of employment from seeking to raise low-wage workers’ earnings is a myth.

Second — and this is news to me — the usual notion that minimum wages and the Earned Income Tax Credit are competing ways to help low-wage workers is wrong. On the contrary, raising the minimum wage is a way to make the EITC work better, ensuring that its benefits go to workers rather than getting shared with employers.
On the other side of the aisle, Marco Rubio demonstrated a formidable talent for missing the obvious when he uttered these memorable words: “Minimum-wage laws have never worked in terms of helping the middle class attain more prosperity.”

Yes, and laws against horse theft have never worked in terms of helping us go the Moon. Pretty much by definition, a minimum wage job is not a middle class job. Now that election season has passed, perhaps it's time for us to stop pretending that middle class Americans are the only citizens who matter. In fact, if we define our terms with any rigor, most Americans do not belong to the middle class.

In this country, politicians speak of "the rich," "the middle class" and "the poor." And that's it. Those three categories are the only ones that enter our discourse. But everyone else in the world recognizes the existence of a thing called "the working class," a category which comes between the middle class and the impoverished. Not only are the "middlers" not in the majority -- the workers are more numerous -- they usually have a higher-than-average income, certainly higher than that of most workers.

This blog may soon have more to say on the subject of class. I re-read Paul Fussell a few months ago; the book must still be around here somewhere.
The big lie pushed by the employers and never questioned by the media is that there is no cash, that businesses are doing it tough, and that increasing wages will automatically result in increased job losses. Lie! A big fat lie that should be called out every time. This from David Macary at Counterpunch:

"Even with near-record unemployment, the Department of Commerce reported in November of 2010 that US companies just had their best quarter ever.

Repeat: THEIR BEST QUARTER EVER! Businesses recorded profits at an annual rate of $1.66 trillion in the third quarter of 2010, which is the highest rate (in non-inflation-adjusted figures) since the government began keeping records more than 60 years ago. (link)

So the next time they run their arguments about being too poor to pay ask them what they are doing with their record profits. Better yet, don't even let them get started. Ask them what they intend to do with the swimming pools full of cash provided to them by their workers."

Mr. Cannon, it also depends what percentage of the city makes minimum wage, no?

In San Francisco, I bet less than 10% make the minimum wage, in Alabama, I would guess its probably around 30%.
Romero, Consumer debt is the goop causes big business to hold onto their cash.

NOBODY talks about consumer debt levels, yet that is what businesses are looking at when they decide to not hire new workers.
Allesandro, I have no doubt that businesses look at general levels of consumer indebtedness when they make decisions about business expansion or hiring people. That's not the issue. What I'm talking about here is back a step from that.

According to the DOC, US businesses have made huge profits recently. Those profits have come essentially from the labors of their employees selling their employer's goods and services. As a principle of social justice right up until 1970-75 a certain percentage of any increased business earnings has been paid to the workers as wage increases commensurate with their work effort that has produced those extra profits. In a certain sense there was a real understanding that workers had an entitlement to share in those profits by way of wage increases, that it was their money too.

That principle has been expunged from public discourse since then. All profits are deemed to be the property of management, increased worker productivity being simply ignored.

So this is not about profitable businesses holding back from hiring new workers because they don't believe a cash-strapped public will buy their goods and services. This is about paying to current employees a wage increase from proven profits, a wage increase that they are morally entitled to because they helped earn those record profits.

It depends on one's mindset here. If you falsely accept that all profits -- especially increased ones due to increased worker productivity -- are inherently the property of the employer then you are accepting that: (1) no matter how much harder employees work they are only ever entitled to a fixed wage level(currently set at the 1975 level in real terms); and, (2) that workers are not allowed to pursue wage increases to match cost of living increases as measured by the CPI, in effect enforcing on workers a permanent decline in the purchasing power of their fixed income.

On the other hand, if you reject the above scenario as basically unjust and believe that the employee has an economic and moral claim on increased business earnings then they are entitled to a wage increase.

The added bonus is that if they get their wage increase then the economy hums. Otherwise those same greedy businesses, having bled the wage system dry, then go to the next stage and demand that governments sell off national assets to fund social services that should have been paid by business in the first instance as fair wages.

It has nothing to with investment uncertainty. The real question is who has a claim on the money coming out of a profitable business. The lie has been put for the last forty years that no matter how many more widgets a worker makes all profits are due to management and they get to keep them.

This is essentially a parasitical market model driving employees into poverty. Businesses add to their increased profitability by denying fair wage increases or allowing the purchasing power to deteriorate. This is touted as best practice and entrepreneurship but it is still a cheap fraud and a nasty con no different than stealing from an employee's wallet.
I've come to look at it like this:
Throw a pile of money on the floor and it just sits there. Until someone's labor turns that money into something useful that pile of money is, for all practical proposes, useless.
Hire all the managers and CEOs you like. Get all the Bankers behind you. Nothing gets done without labor.

Even the profits of high finance comes from someone's labor somewhere turning money into something worth more than money. Labor is what adds value to money.
In other words, money doesn't build anything, plant anything, feed anybody, clothe anybody, invent anything, or discover anything.

Labor was around long before the concept of money came along.
In the dim past people lived without money, but people have never been able to live without labor.

These days, for all practical proposes, it takes money and labor to make anything useful, and it is high time labor was respected as at least the equal of money.

As a principle of social justice right up until 1970-75 a certain percentage of any increased business earnings has been paid to the workers as wage increases commensurate with their work effort that has produced those extra profits. In a certain sense there was a real understanding that workers had an entitlement to share in those profits by way of wage increases, that it was their money too.

romero, I'm on your side on the minimum wage, but the above is not true, or you have the wrong explanation for why it was true.

There was nothing about social or economic justice, but pure power quotients, imo. Society didn't have a conscience that made this happen-- labor in an inflationary situation made it happen by collective bargaining and I guess the others 'drafting' along behind the labor movement's wage increase successes at least when the job market was tighter and workers in shorter supply (in lower UE times).

The change was in the power arrangements, especially with Reagan's gutting of the NRLB's role, stacking it with business shills and allowing permanent replacement workers to be hired, and the then-newer threat to outsource the jobs should the unions (or non-unionized workers) demand so much in the future.

This went hand in hand with the 10.8% UE peak year (over 11% a month or two iirc), which forced women to record levels of job market participation, further depressing wages by the gender gap in pay for work. White males with but a high school diploma saw their real wages decline by 30% under these assorted market and policy change pressures.

Allesandra, companies don't care about debt levels of their customers, but the willingness of those customers to spend. Yes, too great a debt burden reduces their willingness (and ability) to spend, but the American people have greatly de-leveraged their debt burden. Paradoxically, what the economy needs for the demand increase to move to fuller use of economic capacity is the willingness of the people to take on more debt. (They still aren't willing. And this alone could be blamed for the difference in this 'recovery' from others-- in all others, by this time, consumers were increasing their debt levels and using that to boost demand.)

I agree entirely XI and thanks for your comments and the details you provide. It is true that business has never given anything away and that unions had to fight for everything. I guess I'm suggesting that somewhere in that morass the parties could at least agree on the terms over which they were fighting. Today, the very idea of workers having a moral or legal entitlement to a part of increased profits never gets a look in in public debate. Yet if you put the idea in brazen terms then its hostility and moral bankruptcy immediately become apparent:

"Welcome to the company. We will increase your workload every year and always expect you to do more yet we will never pay you a penny more for that increased effort. Moreover, we intend to deny you CPI wage adjustments so the wage you are getting today will be buying you less in two years time. Happy about that? Then sign here..."

What I'm concerned about is that for workers even basic features of employment contract law have been hollowed out of basic contractual fairness that would be unacceptable in other commercial contracts. There's a huge empty hole in public consciousness on this point. Why is it ok to steal from employees?

But thanks again for your views.
Joe -

It's probably also worth mentioning that in San Francisco anyone earning less than 500% of the Federal Poverty Level ($54,480 a year for an individual; for a family of four, $111,720) has access to affordable health care through the Healthy San Francisco initiative. There are limitations, to be sure, and it doesn't cover any treatment received outside of the city, but for basic health care, including emergency and in-patient treatment, it's an impressive program. It's open to all residents of the city between the ages of 18 and 84 who have gone at least 90 days without other coverage -- regardless of immigration status, employment status, or pre-existing medical conditions.

Funding for Health SF was cobbled together from existing state and federal funds -- plus monies raised through something called the Health Care Security Ordinance, which compels employers with 20 or more employees to pay at least a minimum amount on health care (roughly $1.25 - $2.00 per hour, depending on company size), either through a traditional insurance plan or through the City Option, meaning payments to Health SF for employees who are SF residents and health care reimbursement accounts for the rest.

So that $10.55 figure for SF minimum wage is actually more like $11.85 - $12.45 for medium and large businesses.
The Economist:
"The problem is simply that the supply of people and robots available to do routine work is exploding. A proper response to this dynamic must either be a big change in relative skill supplies or relative productivities, or a move toward wage subsidies that are far larger and broader than have been considered in the past."

Hell freezing?
Would that be the same Marsha Blackburn whose first job out of college was coaching women to dress for corporate success?

Wingnut welfare is gravy.
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