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Minimum wage…who and how much??

Spencer England has written about minimum wages and employment,

and Minimum wage and employment from 2008 and Teen unemployment and the minimum wage

What the fiscal cliff means for the middle class and state and local taxes

Economist Robert Pollin, Professor of Economics at the University of Massachusetts in Amherst and founding co-Director of the Political Economy Research Institute (PERI), has a series on wages/employment and the minimum wage via Real News Network (they provide transcripts) here

Professor Richard Burkhauser has commented on President Obama’s call to raise the minimum wage to $9 an hour. And here’s what Burkhauser had to say:

President Obama’s call for an increase in the minimum wage to reduce poverty flies in the face of 30 years of evidence from Card and Krueger to Newmark and Washer that increases in the minimum wage have no effect on poverty rates.
Bob, the argument that Burkhauser gives is that most people working at minimum-wage jobs are not heads of families, they’re younger people in families that already have income earners, and that if you raise the minimum wage, it’s going to reduce the number of jobs available for young people who are mostly in these minimum-wage jobs and really do nothing about poverty levels, because the main bread-earners are already earning more than the minimum wage, he argues. He says that’s the evidence for 30 years. What do you make of that?

POLLIN: Well, that’s not the evidence that I’m familiar with. The evidence that I’m familiar with, having studied living-wage proposals, minimum-wage proposals around the country at state levels, at municipal levels, and national levels, the evidence is the overwhelming majority of people who are at or near minimum-wage levels of wages are not teenagers—let’s put it that way. They’re—the median age is roughly in the 30s. Most of the people have been at their job or at similar jobs for over a decade. They are on their long-term employment trajectory; they’re not about to jump up to some middle-income job as soon as they get out of college.
That doesn’t mean that there aren’t teenagers. The number of teenagers in the labor force are disproportionately at or near minimum-wage jobs. But the majority of people at or near minimum wages are not teenagers.

Now, there is another point. There are many cases in which teenagers or young people who are working at or near minimum-wage jobs are part of families that are above the poverty line, and some of my own research has shown that in fact the contribution of the teenager is what significantly helps to bring the family above the poverty line…

  • Denis Drew says:

    Could it cause such a small economic hiccup if we were to more than double the federal minimum wage, even in just one, single year — say, three quick jumps — from $7.25/hr to $15/hr …

    … 70 million workers (half the work force — $15/hr being today’s median wage) X average raise $8,000 (half the full $16,000) = a mere $560 billion increase in the cost of a GDP output of $15.6 trillion: yielding a piddling 3.6% direct inflation …

    … as to be barely noticeable?

    Now, imagine instead that starting from an even higher minimum wage (say, $10.50/hr — just to pick a number out of a hat), we had spread a wage raise to $15/hr over a whole 45 years (say, from 1968 to 2013 — just to pick “arbitrary dates”) — and, that, per capita income grew 100% in the same time frame to (oh, so conveniently) further cushion the “shock” of 2% direct increase in the cost of GDP output (only 2% assuming the minimum wage had never sunk back to, say, an “unthinkable” $7.25/hr) …

    … would anyone have barely noticed a $30,000/yr minimum wage?

  • rjs says:

    denis, why dont you figure out how much tax revenues would increase with your $15 / hr minimum?

    suspect it would turn a lot of EITC recipients into taxpayers…

    and how much less would outlays for SNAP and TANF be?

    and how about payroll taxes to fund social security, too?

  • Denis Drew says:

    Not to mention 100,000 out of 200,000 Chicago males between 15 and 35 years old are in street gangs. Are minority males evil? No; they — desperately — will not work for nothing.

    Can only figure what you figured above. Sorry; my Ph.D. is in cab driving: NYC, Chicago, SF — can only do the eighth grade math. 🙂

  • rjs says:

    you could also call a minimum wage increase of that magnitude a stealth bank bailout…

    once everyone is working at a decent wage, young people will be able to move out of their parent’s basements, and those who’ve doubled up will again be in the market for housing, which will ultimately put a floor under real estate prices, and thus would even save the banks from having to mark those depressed loan assets to market…

  • Denis Drew says:

    And only 45 years after LBJ declared war on poverty.

    Of course it’s hard to win the war on poverty if the minimum wage skydives from $10.50/hr (adjusted*) in 1968 to $5.75/hr by early 2007.

    LBJ’s OFFICIAL poverty rate was something like 14.5%. Now, the same government measure says 12.5%. Problem is the same measure is three times the price of food or about $18 a day per person — and that’s all — which is supposed to pay for everything from housing to medicine to taxes.

    According to MS. Foundation book “Raise the Floor”, on p. 44, table 3-2, a totally of real world costs of living add up to over $45,000/yr for a family of three (same $6 a day for food) — not the official federal line of $19,000.

    The official line is based on a formula that worked in the mid 50s and was adopted a decade later — already falling below reality. By now it is more than half way off.

    The official federal line should be indexed — for reality! In fact it is. How many times have you seen an eligibility line for some entitlement draw as an multiple of the official poverty line?

    How is poverty supposed to drop — how can we possibly defeat poverty — while the minimum wage drops almost in half — BTW, AS AVERAGE INCOME DOUBLES? CRAZE!

  • Read this yesterday (screaming under my breath) and couldn’t DISagree with this gal more, but I don’t have the chops to refute all her crap. She’s a regular on MarketWatch (of course, a WSJ spawn)

    Her statement about restaurant workers is pure bullshit, unless things have changed. Isn’t the hourly wage still $2.31 or thereabouts, with tips expected to make up the difference? Back in my hash-slinging days (someone of brilliance recently said – maybe on this blog – that everyone should have to be wait staff at some point in their lives), we didn’t have to pool tips, although we were expected to share with the busboys, dishwashers, etc. So, I’m pretty sure this is a straw man.

    The rest of it was the usual clap-trap scare tactics. None of this is news to anyone here, of course, but it was such an annoying example of the garbage that needs refuting, I had to post it.

  • rjs says:

    i dont have any idea what restaurant workers are paid, sandi, but the suggestion that less young people will be working if the minimum is raised doesnt hold water…unless the restaurants close, someone still has to wait tables and clean up afterwards…is walmart gonna stop stocking shelves? hardly…

    washington state has a minimum of $9.19, oregon is at $8.95; any evidence of any such troubles out there?

  • Denis Drew says:

    I think retail store wages are about 10% of prices so a $15/hr minimum wage would not even jump up Wal-Mart prices 10%. Fast food is the highest wage cost — about 33%. So a Mac meal would go from $6 to $8 — but the half of the workforce that most likely eats in McDonalds would get a raise to $30,000/yr, probably spending more at Ronald’s, unless they decided to move “up scale.”

    Seriously; when the Illinois minimum wage made a quick jump from $5.15/hr to $8.00/hr a few years ago (1956 federal level) business noticeably picked up in my neighborhood Ronald’s mostly in the third world (poor immigrant) end — other people noticed it too.

  • rjs says:

    well, here’s more grist for your mill, denis:

    Minimum Wage Would Be $21.72 If It Kept Pace With Increases In Productivity: Study: The minimum wage should have reached $21.72 an hour in 2012 if it kept up with increases in worker productivity, according to a March study by the Center for Economic and Policy Research. While advancements in technology have increased the amount of goods and services that can be produced in a set amount of time, wages have remained relatively flat, the study points out.
    Even if the minimum wage kept up with inflation since it peaked in real value in the late 1960s, low-wage workers should be earning a minimum of $10.52 an hour, according to the study.

  • Jack says:

    Raise the Roof Beams, Franny and Zoey.Well maybe just the Bayonne Bridge.Apparently people in high places seem to think it wise to raise up the Bayonne Bridge to save the ports of NJ. From this: “To accommodate the bigger container ships that are going to passing through the Panama Canal once the canal is widened in 2015, the Port Authority plans to raise the roadway of the Bayonne Bridge 64 feet, a project that will cost $1 billion and is expected to be completed in 2016. Besides raising the bridge, channels near the bridge will be deepened to 50 feet”

    Hmmm, to accomodate the bigger freighters that will be coming through the newly widened Panama Canal. And where on Earth do you suppose those bigger freighters are coming from given that they need to pass through the Canal to reach the ports of NY and NJ? Interesting enough the pols in California are not so keen on the widening of the Panama Canal as that will shift docking of these new mega ships away from California ports.

    So who is it that benefits from the clamour to expand access for surper freighters from Asia? Bigger ships carry more Made In Asia products and reduce the cost of shipping pper item. So we start with exploited super cheap labor from the Asian hinter lands and now our elected reps can’t wait to make room for super duper freighters that can assure the continuation of the competitive edge created by cheap labor and now cheap transport. So who benefits from the expense of raising the bridges and widening the Canal? Not the ports on the whole since one’s gain is the other’s loss. God forbid someone come up with the bright idea of building something that adds jobs over the long run rather than steals jobs from one place to another and still results in a flood of foreign made goods.

  • rjs says:

    it’s not just the new york area ports that are preparing for that larger canal, jack; there’s been a lot of articles about ports all the way down the atlatic seaboard & along the gulf coast being refurbished for the larger container ships…

    what’s interesting is that with the arctic melting as fast as it is, the shortest sea route from china, korea, & japan to NYC by the time they open the new panama lane will be over the pole…

  • Denis Drew says:

    Thanks for the cannon ammunition. 🙂

  • juan says:

    Besides getting ‘kids’ killed in Vietnam LBJ also forced ‘The War on Poverty’ which included –

    ”Revenue Act of 1964 – The existing 18% withholding rate on income taxes was reduced to 14 % on enactment of the bill.

    Minimum Wage Bill of 1966 – Congress enacted legislation substantially broadening federal minimum wage and overtime pay protection and increasing the minimum wage from $1.25 per hour to $1.60 per hour.

    School Breakfast Program – This program started under the Child Nutrition Act of 1966. Federal money is provided for each breakfast served, depending on the family income of the participating child.

    Special Milk Program – This program also began under the Child Nutrition Act of 1966. Federal reimbursements are offered for each half-pint of milk served to a child who is participating in a school or facility caring for children that does not participate in other federally subsidized meal programs.

    Food Stamp Act of 1964 – Congress in 1964 enacted legislation converting the 1961 pilot food-stamp program into a permanent food-stamp program financed by the Federal Government. This program was designed to help poverty stricken families improve their diets.

    Weapon III – Job Creation – “Our American answer to poverty is not to make the poor more secure in their poverty but to reach down and to help them lift themselves out of the ruts of poverty and move with the large majority along the high road of hope and prosperity”

    Job Corps (1964) – provides residential centers for young men and women, ages 16 through 21, in a coordinated program of basic education, skill training, and constructive work experience. This was designed specifically to give education and work experience to high school drop-outs.

    College Work Study Program (1964) – provides part-time and summer jobs for college students who would be unable to afford college education without such assistance.

    The Neighborhood Youth Corps (1964) – provides employment, job counseling, and remedial education to low-income young people aged 16 through 21. This program aims to help participants to continue or resume their education and to increase their employability.
    The Work Experience Program (1964) – is meant to benefit unemployed parents and other needy people–many on welfare–who suffer from educational deficiencies and a sporadic work history. Participants are provided vocational instruction and on-the-job training, as well as basic educational and personal counseling.

    Manpower Act of 1965 – provided retraining for experienced workers with family responsibilities who had been employed but had lost their jobs because of technological change. It also provided help for the illiterate jobless, out-of-school and out-of-work youths 16 years and older. Individuals who lacked basic education were included.”

    And yeah, even though pwogish, ‘something’ like that should
    have been done again rather
    than multiple wars, lop
    sided tax cuts and many
    trillions to try to
    support finance.

    Obie’s upside down.

  • juan says:

    Labor’s Share of Income

    and worse today, point though is to show long trend. Better to end profit and wages by transcending the senile, death agonistic, mode of
    production which
    still dominates

  • juan says:


    ”It’s the Inequality, Stupid”

    MJ – Charts upon charts…

    Ammunition is right though this may be the wrong form.

  • Bruce Webb says:

    “washington state has a minimum of $9.19, oregon is at $8.95; any evidence of any such troubles out there”

    Sort of. The major population centers of Idaho are on the border with those of Northern Idaho essentially being an adjunct to larger Eastern Washington towns and cities while Boise in the South has the opposite in the form of most residential suburbs/farm towns across the river in Oregon.

    At least in the North Washinton’s higher minimum wage has caused a labor shortage-in Idaho. Because the kids from Idaho just drive across the border to share in the higher wage job market. On the other hand most of the college students in Eastern Washington aren’t going to drive to Idaho just for a Big Mac. To take advantage of the looser liquor laws and liquor prices sure, plenty of cross border traffic driven precisely by market fundamentals there, but who is going to take a special trip to save a dime on a fast food pizza?

  • Denis Drew says:

    I just found out — 2013 figures — that the $7.25/hr minimum wage of late 2007 would be $8.05 today if it had kept up with inflation. Meaning Obama’s raise over 2007 is a piddling .95/hr (and still $1.50/hr below LBJ’s $10.50/hr — DOUBLE per capita income later).

    rjs; tell my how you make links work on this forum, please.

  • rjs says:

    denis, you see below the comment block that it says you can use can use some HTML tags, such as b, i, a

    a is your tag for a link; the basic structure of html code is enclosed by two brackets<> <> where the first bracket starts your code & the second one with a slash “/” closes it…unfortunately, any attempt i make to show you here will be invisible (the code disappears when one posts the comment)

    so i’ll point you to a few tutorials:

    HTML Hyperlink Codes.
    HTML Tutorial – Text Links
    Commonly Used HTML Tags

    it looks complicated when you first start, but after you’ve coded a couple dozen of them it almost becomes second nature…

    i use these because i know readers are much more likely to click on a link than to copy & paste one into their browswer…

  • Denis Drew says:

    Everything LBJ accomplished was watered down to a worse poverty level than when he started (the official federal poverty line measures 3 X the price of food or $18/day per person; that’s it, nothing else) has become more than 200% inaccurate over time — so more than double it for reality; needs to be indexed for reality).

    What America needs to re-balance both labor market bargaining power and political muscle power is something called SECTOR-WIDE LABOR AGREEMENTS where everybody (e.g., retail clerks) performing the same type of work in the same geographic locale (where applicable) work under a common contract with all employers.

    I’ll post below a long sneak-up description of sector-wide bargaining that I sent to Oakland mayor Jean Quan (and a few “million” others — still going out as much as I can stomach to email every day).

    The way my brother phrased it after I explained all this was: “As soon as Martin Luther King got his people on the up escalator it started going down for everybody.”

    The way I put it: Under Malthusian theory — from 1968 to early 2007 American population increased 50% so there should have been 33% less to go around per person (this theory preceded industrialization whence productivity increases tend to double twice as fast as population). But the early 2007 minimum wage had dropped off more like 50%: UNDER-PERFORMING MALTHUS! !!!

  • Denis Drew says:

    I hate the word “inequality” — so weak, wan, antiseptic, anemic, limp, flimsy, light, slight, frail, thin — and just plain inadequate.

    I cannot come up with a good substitute. It should be something like “the great wage depression” or “American labor market sinkhole.”

    “Inequality” is such an underpowered word for describing the giant shit the inside-out labor market has taken on most American lives, so non-descriptive that nobody walking by, hearing the word, even knows what we are talking about.

  • Denis Drew says:

    Late dean of the Washington press corps told a new reporter in town that when he arrived 50 years ago all the lobbyists were union. Half our problems are not getting paid — the other half is nobody is minding the store for us; no advocacy organization as the seats of government watching our for our every last need: our labor unions. Here’s my lead up to that to the mayor:

    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.

    Denis Drew
    Chicago (sometimes Berkeley)

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  • Denis Drew says:

    IT WORKED! Sorry; the delete function is not working for me.

  • rjs says:

    denis, after you asked, i thought of a way to show how, by making a deliberate error; in this case, i will substitute a single parenthesis for the the double needed in the code:

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