Open thread Feb. 16. 2013 Dan Crawford | February 16, 2013 7:41 am Tags: open thread Comments (19) | Digg Facebook Twitter |
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HATE TO HOG BANDWIDTH (no I don’t — I hate to get blamed) but here is the first round of my smoke-and-mirrors attempt to get progressive economists to tell the real world (not argue arguments with non-progressive dupes which nobody witnesses — empty stadiums) what it needs to know. BIG PROBLEM TO GET PAST — THE ONLY PROBLEM — MALES ARE SO SLAVED TO PACK HUNTING COOPERATION THEY CANNOT, WILL NOT EVEN THINK ABOUT ANY PRACTICAL NEW PATH IF NOBODY ELSE IS ALREADY ON IT. If the mayor of Oakland were male I wouldn’t have bothered to try to get anything rolling.
Open letter to Oakland mayor Jean Quan:
The only legislation that can realistically end gun violence in Oakland – and Chicago – is a labor law: doubling the minimum wage to $30,000/yr. The Crips and the Bloods could not whip a decent paying Ronald McDonald.
Crackpot? More than doubling the federal minimum wage from $7.25/hr to $15/hr ($600/wk) would cause less than 4% direct inflation:
$3.87/hr (half/average raise) X 2080 hours (full work year) = $8,049/yr X 70 million workers (half the workforce — $15/hr is today’s median wage) = $563.4 billion. (3.5 million workers at the minimum wage would get a full $16,020 raise may be left out to simplify eighth-grade math.) Divide $563.4 billion by a $15.8 trillion GDP and we get 3.6% direct inflation (not counting leap frog pushups which may not add up to that much – LBJ’s median wage was only 25% higher than his minimum – high minimum wages often approach median level in other economies).
Oakland won’t educate its way out of poverty and crime. Catch 22: political scientist Martin Sanchez-Jankowski, from neighboring UC Berkeley — who spent nine years in five poor New York and Los Angeles neighborhoods (and ten years before that researching street gangs) — explains in his 2008 book Cracks in the Pavement that ghetto schools don’t work mostly because students (and teachers!) don’t expect anything decent awaiting for them in the labor market, so think it hopeless to make the effort.
In 1956 majority leader LBJ steered an $8.50/hr ($1/hr nominally) minimum wage bill through the US Senate. In 1968 (hourly increments and retail workers added in years between) president LBJ piloted a minimum wage of $10.50/hr ($1.60/hr nominally) into law — per capita income having expanded 25% in the dozen years intervening.
Per capita income has doubled in the two generations since 1968.
There would be a dismal gap even between a minimum wage of $15/hr, or $30,000/yr and a reality-based minimum needs (poverty) level for a family of three – and even between a median wage 25% higher of $18.75/hr, or $37,500/yr.
A realistic poverty line for a family of three is $45,476 in 2012 dollars according to the 2001 Ms. Foundation book Raise the Floor (table 3-2 on p.44 — includes $8,786 medical insurance cost). Raise totals up from a comprehensive list of expenses, including taxes to get its figure. (Raise provides extensive explanations for its minimum needs parameters in Appendix B, citing Solutions for Progress — allots $3,000 to yearly medical expenses even if the family has insurance.)
$19,090, supposedly covers the minimum needs for a family of three under the 1955 era federal formula. Both the Ms. and government formulas calculate about $6 per person/per day for food – the ancient federal methodology multiplies the cost of food three times and leaves it at that. Which is why you won’t see the federal measure quoted much anywhere except as a formula multiple (2X, 3X, 4X).A wage even 50% higher than today’s median, of $22.75/hr or $45,000/yr, would barely support a family of three.
“Since 1973 [note: the last year national income gains were shared across-the-board], productivity has grown roughly 80 percent while median hourly compensation improved by roughly 11 percent.” Something more elemental than “raising the floor” needs to be prescribe.
Anyone can work up a list ruses by which the average American’s interests are being hung out to dry these days. I was just going to say the only thing not foisted upon us so far is foreign firms buying up local water rights and charging them back to us triple.
Then I remembered Chicago leasing its parking meter system for 75 years for $1.15 billion:
Up the road from Oakland City Hall – up College Avenue – on the UC of Berkeley campus labors as progressive a progressive economics faculty as anyone should wish. They could you tell you, Madam Mayor, and tell everyone else at the same time [this essay may hopefully edge them in the latter direction] about a species of labor legislation that can potentially re-write the American social contract front to back, economic to political.
Legislation that has been tried and tested over half a century in the first world (Germany, France) moving to the second and third worlds (Argentina, Indonesia) as well as right next door (French Canada). Legislation bringing to Americans a labor market setup devised – not by Karl Marx – but by post WW II German and other continental industrialists – not to empower labor — but to stifle union wage races-to-the-top that would divert money from industrial bases rebuilding. (England did not take this path which is why it fell behind – which I’m pretty sure I read in Berkeley’s, Barry Eichengreen’s 2008 The European Economy Since 1945.)
Europe’s fabled welfare state was offered as a compensation for labor price moderation. Magic bullet: legally mandated, sector-wide collective bargaining – wherein everyone working the same category of job (e.g., retail clerk) in the same geographic locale (where applicable) works under one common contract with all employers – thwarts the race-to-the-bottom just as surely – just the right barraging balance.
The late David Broder, dean of the Washington press corps, said that, when he came to D.C. 50 years ago, all the lobbyists were union – which meant: naturally balanced campaign financing, someone minding the store on the average person’s interests, all backed by the majority of voters — perfect democracy.
Your friendly economics faculty up the avenue can tell you all about all of this – but you’ll have to ask.
Chicago (sometimes Berkeley)
i’m on your side. suggestions for selling:
drop the “male pack animal” it doesn’t help the selling and will definitely turn off half of your audience.
be a little more modest… 45k might be “poverty” for three in San Francisco.. but you could start a little lower and have a better chance of not scaring away the customer.
4% “direct inflation” may not be the best way to describe it. in the first place it’s not inflation. it may be a transfer of income from hamburger buyers to hamburger workers.. but that is NOT inflation.
good luck with this.
This whole thing is a smoke-and-mirrors trick to get our big forebrain economists past the dumb programing of their midbrains.
Forebrain — midbrain? A million lawyers rise for the judge and not one thinks “I don’t have to salute the flag.” The midbrain is a left over from our lizard fore-bearers who reacted in set ways to set stimuli. Our social instincts (e.g., privacy) have to be stored in a similar fixed response way or they would not be instincts.
40+ years ago in Manhattan I was as street peddler. A cop on a scooter came buzzing along. I told my customers not to look so he would not be forced to do his job and chase me. If they were six males none would have moved until the cop was half a block away and then one would have taken the first sneaky look gradually followed by others. To my surprise and consternation every one of six females immediately turned their heads and followed him going away like six radar dishes.
In my north Bronx neighborhood little five year old boys would come up to my low, turned over box peddling stand and pick up items to look at and then put them back in the same place, careful to get them at the right angle. A mother and her teen daughter would pick up stuff and when finished looking just let it drop to the box — in two minutes my careful display was a pile.
I don’t know anything special about the labor market — maybe for a cab driver. I just know a sales block when I see one.
When I was a paper boy in 1960 I took over a route that had extra new customer potential: the other boy hadn’t tried to canvas for customers, the paper wasn’t distributed to the newstands down this street (you had to go to the train station), I delivered it for 25% less than you could buy it on the stand and we had a special Bronx section.
I figured giving a week free was the way to tap into that. But I also figured people would be afraid to get involved — if I just made the offer verbally at the door. So I came up with printing free coupons. Now the social situation was completely different — same product — now they had money they could spend in only one place: worked like a charm.
You used to see the stupid 12.5% federal poverty line quoted by all even though most knew better (three times the price of food?!!!). But the male pack hunter thing.
I did a little eighth-grade math and came up with the $45,000 which makes the line 36% on the Census family income page if they all have to pay for their own health insurance — 26% if not (call it 30%). Sent (thousands?) of those around; didn’t see the stupid 12.5% anymore — too much differential even for slavish pack followers (I take full credit, of course).
It’s all about smoke and mirrors. Taking advantage of the gun violence explosion in Oakland and Chicago and the new big move for gun control (shall I say it? — mostly because some white children got killed for once — ask ghetto mothers if I should say it) set up this purely psychological ploy.
PS. I’m a freak: my mother’s actor’s empathy and my father’s flood of mechanical associations combine to allow me to think: If the judge wants me to take my hat off, he should tell the ladies to put hats on. 🙂
Not world class IQ stuff but if I do the “Johnny Menomic” had hurt my poor brain with enough painful info I can come up with some pretty wheels within wheels. 😉
i don’t doubt it, and enjoy the stories.
Another full-fledged problem with our progressive economic friends is that they apparently live so distantly divorced from everyday experience. I’m looking at an article from today’s American Prospect by Mike Konczal (top 25 finance blog — was “Rorty Bomb”, now, much more to my liking, “Next New Deal”; sounds like he has some inkling at least that a really big shakeup is needed) interviewing one of three authors of the supposedly most advanced minimum wage study.
Understanding that raising the minimum will “increase the cost of production” but with not too much concern (okay). As noted later workers who have less chance of employment but for higher pay are probably better off. What is missing again and again is any notion of the scale to which lower wages have dropped off the living cliff: if you doubled Wal-Mart wages, prices would not even increase 10% as 10% is the wage cost of most retail business. The giant drop off is nowhere on these guys’ radars.
The expert touches on employment flows as a consideration to balance against employment levels — higher paying jobs have less turnover. Again without any sense of the massive price drop on labor makes such concerns minor to nonexistent. Since 1968 population increased 50% — by early 2007 the minimum wage dropped almost 50% — under Malthusian theory BEFORE INDUSTRIALIZATION INCREASED PRODUCTIVITY EVERY YEAR the minimum wage should have dropped only 33% to reflect same resources shared by 50% more people. 🙂
Next they discuss EITC and food stamps bandaids — again not noticing the minimum could be twice what it was if LBJ were president for life and it only went up 50% while per capita increased 100%.
Most incredibly — and I quote: “How much of the gains go to people who are poor?” — thinking most gains may go to what they incredibly call middle class families — EITC and food stamps being relied on to help the poor. A median wage of $15 in this economy which arguably should be the minimum wage means anyone earning the minimum wage or significantly more should be considered poor if you figure living from paycheck to paycheck in dread of medical or dental disaster is poor — this is not Mumbai.
Next ivory tower factoid: saying the ($10.50/hr) 1968 minimum wage was half the average production wage and $9/hr is about half today’s production wage without exhibiting any sense at all that the median wage — half the nation’s wage and presumably those not too far above it — has been stagnant (I would say for no other reason than declining bargaining muscle) since 1973.
All of which reminds me of the adage: “I’d rather be ruled by the first 2000 people in the Boston telephone book than by the Harvard faculty.” I don’t wish to be harsh but the truth is harsh: when it comes to the American labor market our very top academics are like children — like permanent 18 year olds. So we have a double sales problem. Maybe the lady mayor can get these guys (ivory tower males) over both selling blocks at once.
Allow me to use up more bandwidth with my own destroyed by the American labor market 30 years of taxi driving tragedy.
Between 1981 and 1997, Chicago allowed one 30 cent increase in the mile charge at which 1990 mid-point it started adding 40% more taxis, opening up livery unlimited, building trains to both airports and then, the shot in the head not the stick that broke the camel’s back, free trollies between all the hot spots downtown.
I ended up 2000 miles away in San Francisco in a $600/month room to make a living. In San Francisco they are so liberal they treat you like you have a union even if you don’t.
In New York in 1976 the last successful taxi strike raised the meter to $2.25/mile in 2004 dollars. By early 2004 the meter had dropped to $1.50/mile. Guys were going back to India for a better life. (An old Pakistani cab driver from nearby Evanston recently told me was going back to make a better living.)
The union was broken by moving to the (independent contractor) lease system. Under that system profit comes only after the company gets its money — so the short meter hits the driver twice as hard.
Used to be a good job — buy a house; put kids through college — 60 hour weeks.
Just came from super market where new employees are paid less — no longer a ticket to the middle class thanks to Wal-Mart underpaying its employees. Wal-Mart closed 88 big boxes in Germany because it could not survive paying the same as everyone else.
Think any of this registers at “Harvard”?
I couldn’t agree with you more about “Harvard.”
but if you have time you might want to read Stiglitz, “The Price of Inequality,” or Barofsky, “Bailout”.
Even the smart boys figure some things out sometimes. Some of them.
Not to beat a point to death but who is likely to try to shake up the country from the Senate? Elisabeth Warren (a female). (Just got one of her emails — made think of this; ho, ho.)
“Rachel Maddow gushed over Elizabeth Warren’s latest viral video — which got 500,000 YouTube views in 1 day.
“In a hearing this week, Warren got the head of the Securities and Exchange Commission (which regulates Wall Street) to admit that they have no idea when they last took a bank to trial.
“Click here * to watch Warren’s latest viral sensation — and help her stay on offense by demanding that the SEC finally take Wall Street banks to trial!
“Warren didn’t ask tricky questions. But through one simple question, she exposed that the cop on the beat isn’t much of a cop.
She also coined a new term: Too big for trial.”
Overnight I thought of another unrealistic minimum wage discussion which you can hear in academia — not in the Prospect interview — abou how much concern should we have that a higher minimum wage may displace lower skilled workers. Pretty much the only persons willing to work for today’s American minimum wage are immigrants from poor, low education backgrounds (Mexico, Mumbai) many of whom even have low language skills. Hardly any Americans.
In Chicago 100,000 * out of 200,000 gang age, minority males are in street gangs, selling drugs or whatever. Not because half of minority age males want to be evil — but because the American labor market does not pay enough for legitimate labor.
Some of these academic discussions sound very sound in principle but they are about a fair and balanced America that has long ceased to exist.
And here is the great Krugman today with more minimal to zero deep thought about America’s half-what it should be minimum wage — touting the Konczal interview:
February 16, 2013, 2:56 pm144 Comments
Minimum Wage Economics
I’m doing this kind of backwards, writing about the politics first. But I wanted to have my intellectual ducks — or rather, my lucky duckies — in a row before taking on the economics. And while I was grubbing around, Mike Konczal produced the perfect post summing it all up.
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. This actually is Econ 101, but done right: given a second-best world in which you use imperfect tools to help deserving workers, two tools together can produce a better outcome than either one on its own.
So a minimum wage increase isn’t some kind of counsel-of-despair way to help workers a bit in a dysfunctional political scene (although there’s that too); it’s actually good policy.
I commented thus on Krugman’s blogpost on the Konczal interview:
Most of the points made in the Konczal interview and in these [other] comments would be understood as non-germane if today’s minimum wage either were $2/hr or if it could be demonstrated — as it is in the comment just above — that the minimum could be twice what it is at little increase in prices.
One example from the interview: it is stated, admittedly w/o too great concern, that (typically envisioned incremental) increases in the minimum will add to the cost of production. American lower and middle wages have fallen into such a deep sinkhole that doubling Wal-Mart wages across the board would not even add 10% to Wal-Mart prices (retail wages run about 10% of costs — fast food the very highest of all, 33%).
Half the workforce moving to $15/hr good for Wal-Mart’s and Ronald’s businesses me thinks. Simple business sense and eighth-grade math — no need for supposedly esoteric expert studies.
REALLY LAST GASP (?):
Just add this comment on Krugman:
If the minimum wage had gradually grown 50% from 1968 to present (from $10.50/hr to $15/hr) as per capita income grew 100% I don’t think anyone should have objected strenuously to $15/hr today. In many economies the minimum wage is indexed to automatically grow in step with both inflation an increases in average income — in which case the American minimum wage would be even higher than that …
… depending on whose growth and income numbers you go by. The most commonly accepted inflation measure (CPI-U, used by the BLS) says the minimum was $10.50 in 1968. Another (sounds like CPI-U-RS, used by the Census) say it was only $9.25/hr. Double indexing (inflation and growth) would not give a much different overall index result however because when inflation registers lower, growth registers higher (because money is worth more) …
… in which double indexing case the American minimum wage would be closer to $20/hr.
certainly like the idea of wage indexing. gets the politics of “inflation indexing” off the table.
alas, i don’t think the min wage is a matter of artithmetic or even profits. the bad guys in this case can’t help but think it terms of squeezing labor… even when it costs them money.
i’d be willing to bet there is something in your life that you “just can’t help” even when you know it is bad for you. that’s just human behavior. and these guys…. the bosses… don’t even know it’s bad for them. can’t imagine it. “why, common sense shows…”