Krugman does not share labor’s share

I wondered about that labor market blindness myself. Right now the economy seems like a carburetor that is flooded with gas — to much fuel for the amount of air available to burn it — the end result of giving too much money to who the Republicans call the “job creators”; to people who (WONT) invest in new factories and new stores while old ones lay idle — the fuel and the air both being made of the same things in economics (dollars).

Lately it has occurred to me that Democratic politicians could RAISE enormous POLITICAL CAPITAL by loudly hawking the $15 an hour minimum wage and re-unionizing America (via legally mandated, sector-wide labor agreements; start with supermarket and airline workers who would kill for that) even if they failed in to get the whole thing at once (initially).

But, the big barrier for our would be progressives (pols and profs) seems to be their failure to notice us poor working folks in the first place — as you note!

This is especially wasteful because labor market reform today — unlike civil rights in the 60s — would have no down political side for progressive politicians. I was just reading how JFK lost the needed votes of all the Southern Democrats on all his other progressive issues (Medicare, minimum wage) when he took on civil rights.

No disincentive of that kind exists here. Most of the country will dive head first into doubling the minimum wage and legally establishing centralized collective bargaining (as it is called in Europe). Even if the public cannot see going the whole way (at first) it will make them see Democratic politicians as their heroes (for the first time in a very long time).

What we are talking here is a CULTURAL CHANGE in EXPECTATIONS of how society is supposed to perform — something that is impossible for many good guys like JFK and the CLINTONS and Obama to achieve while holding high political office. All these “good guys” seem to be skilled at is re-arranging the deck chairs on the Titanic — not so true of some other good guys like TR, FDR and Truman; some got it, some don’t.

CULTURAL CHANGE often must be brought by non-politician Martin Luther King types who are not frozen in the old culture by fear of political tradeoffs somewhere else.

But reforming the American labor market today (by leaps and bounds and not deck chair arranging) would uniquely have no political trade off somewhere else (which today paralyzes the re-arranging set) but would be a CULTURAL CHANGE that practical politicians are actually in the best position to lead — because it helps most people and would be popular even if most people did not buy into the whole package right away (though they well might!).

But first there is the Krugman, Obama core problem that you point out: they don’t know — notice that — we exist.

I’m sure $11 an hour would thrill all the Mexicans and (East) Indians who work for the minimum wage where I live now, Chicago. But, I have serious doubts it will be enough to tempt gang age, minority males to get them out of crime: reportedly 100,000 out of I would guess about 200,000.

THE BIG QUESTION that should always be asked about the practicality of raising the minimum wage is: will the people paying the higher prices decide that they don’t need the products or services provided by the minimum wage workers — depending on how prices of their particular output jumps? That is THE BIG QUESTION.

Pretty easy to resolve: even if we double (!) the federal minimum wage to $15 an hour — to continue buying the same old products produced by — would only transfer 3% of overall income from the top 55% of earners who currently partake of 90% of income to the bottom 45% who current take in 10%.

Easy math: 45% of the workforce is 63 million workers — multiplied by average $8000 raise = $504 billion increase in the cost of output — divided by $15.8 trillion GDP = 3.2% increase in prices — shift of income. (Correct me if I missed something important.)

Almost half the workforce sent home — no longer needed?! Even if (impossibly) half of the half were laid off the lower 45% would still receive the same amount of income. IOW, when the minimum wage is $3.50 an hour lower than it was when per capita output was about half of today’s — we have a crazy amount of catching up to do; AND SEEMINGLY VERY PAINLESSLY just because we are starting from so extraordinarily far behind.
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Here are some trickling down the trickle down numbers on Obama’s proposed $9 an hour minimum and California’s new $10 an hour:

If Obama gets his (not very fervent) wish to raise he federal minimum wage by $2 an hour over two years that will shift all of ONE-THIRD OF ONE PERCENT of overall income in this country from the top 80 percentile who get about 95% of all income to the bottom 20% …

… as per capita income grows TWO PERCENT, P-E-R Y-E-A-R*. Talk about-trickling the down the trickle-down.
http://money.cnn.com/2013/08/29/news/economy/gdp-report/

Which is exactly what California’s raise from $8 an hour to $10 an hour over two years has achieved. (California income number only 5% higher than national averages so comparisons should hold.)
http://www.cpec.ca.gov/FiscalData/50StateEconGraph.asp?Type=MedIncomeAverage&Gender=Total
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ASSUMPTIONS:
$9 an hour is about 15 percentile wage. 5% of work force at minimum wage. 20% of national workforce gets a raise to $9 an hour.

20% of the national workforce = 28 million people. Average pay raise $1 an hour. Assume 2000 hour work year. 28 million X $2,000 = $56 billion out of a $15.8 trillion dollar economy = .0033734 = one-third of one percent price rise or shift of income from top to bottom.

What’s the problem with a $504 billion dollar increase in spending? How many workers would you have to lay off to meet the increase in demand? I’ve never understood the opponents of higher minimum wages. Unlike the takers, who are currently shuffling that half a trillion dollars unproductively on the stock market, minimum wage workers will spend just about every additional penny they get. There’s a reason that return on investment has nearly collapsed. Everyone, rich and poor, would do better if we undid the Reagan Revolution and went back to our old anti-business, pro-growth policies.