Minimum wage 20 years ago
Lifted from comments by Fred C. Dobbs at Economist View:
Supersize My Wage http://nyti.ms/1cOvtvS
NYT Magazine – December 17, 2013 – ANNIE LOWREY
About 20 years ago, in the midst of a recession, New Jersey decided to boost its minimum wage to $5.05 an hour from $4.25. Its neighbor to the west, Pennsylvania, chose not to tinker with its wage floor. Two bright young economists at Princeton, David Card and Alan B. Krueger, recognized in that dull occurrence a promising natural experiment (*).The two found fast-food joints along the New Jersey-Pennsylvania border, and surveyed them twice over the course of 11 months about how many people they employed. They figured that when New Jersey’s minimum wage went up, Garden State burger joints would hire fewer workers. The ones on the Pennsylvania side, acting as a kind of control, would see no change.
What endlessly strikes me in minimum wage pieces done these days is the missing sense proportion: whether the piece is pro, anti or down the middle. I can see the same articles being written by the same authors whether it was back in 1968 when the wage was $10.75 an hour (adjusted) or in 2013 if the wage were either $5.15 or $20.
Proportion: a one dollar an hour minimum wage hike would transfer all of one-quarter of one percent of GDP from the top 80% of earners who take 98% (yes, that’s ninety-eight) to the bottom 20% who take 2% (two). Are the 80% who earn more than $9 an hour going to tell the 20% who earn less that their efforts are no longer needed — stay home from work?
http://ontodayspagelinks.blogspot.com/2008/08/income-share.html
A $15 an hour minimum wage would transfer $560 billion — less than 4% of GDP — from the top 55% who take 90% of overall income to the bottom 45% who take only 10%. Same “we wont need you anymore” question.
BTW, fast food which accounts I think for 1% of employment tends to be the regular example in these essays. Fast food takes the biggest hit: lowest tarting point and highest labor costs, 33% (price increase caused by doubling minimum wage only 25%). Wal-Mart on the opposite extreme (but closer to average) has a higher starting point and lowest labor costs, 7%. Raise Wal-Mart wages from $10 an hour to $15 an hour and prices rise 3.5% in my simple (but ballpark) calculation. Ronald should do pretty well anyway if half the labor force gets an average $8000 a year raise.
Some dollars will switch from Nostrums to Target: low income consumers tend to buy from low income labor.
Ghetto schools don’t work because half the students (and teachers!) don’t see anything waiting for them in the labor market to make striving worth the bother.
http://www.amazon.com/Cracks-Pavement-Social-Resilience-Neighborhoods/dp/0520256751/ref=sr_sp-atf_title_1_1?ie=UTF8&qid=1387476396&sr=8-1&keywords=cracks+in+the+pavement
100,000 out of 200,000 Chicago gang age minority males are in street gangs for the same reason.
http://www.cbsnews.com/news/gang-wars-at-the-root-of-chicagos-high-murder-rate/
The proportion side of the story might better get through — especially to progressives — were the problem labeled “The Great Wage Depression” instead of the saccharine “inequality.”
PS. The big answer to the Great Wage Depression as well as to private means-of-production possession of the government (capital-ocialism?) is something originated by industrialists on the European continent post WWII, with the object of avoiding a labor race-to-the-top to prioritize rebuilding: centralized bargaining — where by law everyone doing the same job in the same locale (could be the whole country in some industries) works under one unified contract with all firms (Jimmy Hoffa accomplished something like this for truck drivers for the whole country with his national master contract).
Centralized bargaining is now found across the world from French Canada to Indonesia. Wal-Mart closed 88 big-boxes in Germany because it could not compete paying the same wages and benefits as the competition. Meantime super market workers and airline employees in the US would kill for sector-wide bargaining. The usefulness — the compelling need for this kind of labor market setup here would be too obvious if we thought in terms of the “Great Wage Depression” (or some slicker phrase).
PPS. Obama has a unique opportunity here to build political capital. Reforming the American labor market is so badly — so desperately — needed by so many people that he wouldn’t have to trade off anything anywhere else to pursue it — get away from re-arranging the deck chairs and change the cultural DNA.
I’ve been reading up on the election and it is so surprising that the Republicans who only occasionally rise above “zombie” class (Mitt was at least human) are forever neck-and-neck with Democrats. Problem is Dem progressives live in DC/academic land where everybody knows certain issues are “the relevant” issue and they are on the right side of most. But in the countryside where people see in proportion (that’s where we came into this movie) they don’t see the Dems doing anything to change their struggling lives in any broad brush way at all. Time for the Dems to wake up and smell the political opportunity.