Open thread June 11, 2019 Dan Crawford | June 11, 2019 9:37 am Tags: open thread Comments (8) | Digg Facebook Twitter |
Top Chicago business leader opposes $15 minimum wage, demands changes to ‘fair workweek’ ordinance
“You can’t use the business community as a piggybank . . . they’re not gonna create as many jobs. Companies aren’t gonna locate here and invest here,” Jack Lavin said.
By Fran Spielman Jun 7, 2019
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My spam response to Chicago City Council, mayor’s office and Sun-Times and Tribune:
1968 fed min wage, DOUBLE-indexed for inflation and per cap growth = $23.44 an hour.
yr….per capita..real min…(nominal)…(DBL-index)
76…..20,705…..10.13……(2.30)…(14.00) [11.49 X 1.22]
81…..21,997……9.43……(3.35)…(14.94) [11.49 X 1.3]
91…..25,728…..7.73…….(4.25)…(17.46) [11.49 X 1.52]
97…..29,395…..7.93…….(5.15)…(19.99) [11.49 X 1.74]
09…..30,385……8.41……(7.25)….(20.68) [11.49 X 1.8]
18…..34,489……7.16……(7.25)….(23.44) [11.49 X 2.04]
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Minimum wage should reflect maximum that high labor costs/low wage businesses can pay. Should not be considered a standard for all low wage businesses. Fast food for instance has 25% labor costs. Most businesses come in around 10-15%. And Walmart comes in at 7%. We could very realistically be looking for most jobs to pay at least $20/hr (Walmart $1000/wk?). We are trying to move 40% of the workforce that earns less than $15/hr up from taking about 10% of overall income up to more like 20% — not unrealistic.
The minimum wage only should only set a bottom for the bottom — not a good guide for what most jobs can pay; not a good guide for the max consumers would be willing to pay, IOW. Realistically, the only way to sort out what different firms can charge their customers (pay their employees) is the free market — also known as collective bargaining.
Let Americans set their wages naturally — the way all other modern economies:
Headline from the South China Morning News:
“US accused of undermining trade talks by demanding ‘hundreds’ of changes to Chinese law
State Council adviser Shi Yinhong says America’s insistence on strong intellectual property protections is asking too much of Beijing
Chinese officials have started to think ‘no deal is better than a bad deal’ as the gap between the two sides continues to widen”
If both bullet points were the final say on this matter, then I would celebrate.
In the first case, US corporations which wanted to continue to do business with China would be on notice that they would be giving their intellectual property away. All in the name of some potential profit over the short run. And the US government should periodically remind them of their “deal with the devil”.
In the second case, no deal would encourage President Trump to raise tariffs on another $300Billion of Chinese imports into the US. Tariffs are revenue to the federal government. Tariffs are also a tax on consumption, and given the current Total Household Debt (THD) it appears that something needs to be done to limit consumption and thus debt. (THD as reported by the New York Fed) At least this way a part of US consumer’s reckless spending will go toward limiting the federal deficit.
Of course the naysayers will object on the grounds that this would throw us into another recession. I would point out that the recovery from the Great Recession has been so slow and costly to the federal government that we can hardly say that the next “recession” will be a new one. Our next recession will be like the one in 1938, which Maynard Keynes indirectly pointed out was brought on by a reduction in the federal deficit spending.
I believe that free trade was and still is damaging the US domestic economy. In order to maintain their standard of living, US consumers increased their debt levels from about 1996 to 2008. That effectively hid the effects of free trade until consumers’ ability to borrow more money ended. Then came the bankruptcies, the realization of fraud, a recognition that the banks had been reckless, and then the bailout of the banks and the economy in general. Almost a trillion dollars in stimulus and a 0.25% Fed Funds Rate.
From 2008 to 2017 inclusive, the national debt had increased by $11,237Billion. During the previous 10 years the national debt had increased by $3,595Billions and that period included very expensive wars.
See: From: https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287
Where do you think that additional $7.642Trillion of federal spending went if not to prop up the US economy?
On 5 June 2019, Robert Waldmann posted an article on AngryBear titled “Keynes’s Private Letter to Roosevelt”. It included a link to a December 2008 Brad DeLong blog post with a transcribed copy of the February 1938 letter to President Roosevelt in February 1938.
I wish that I had seen the copy of Keynes letter in 2008. It was so interesting that I wondered how President Roosevelt had responded. That set off a short search.
The original Keynes letter and a draft of President Roosevelt’s reply are included in a pdf file on the FDR Library website.
In reading the original I noticed this sentence:
“But an increased supply will not by itself generate an adequate demand.”
This point seems to be ignored in modern economics.
“The influence of (ii) evapor-ates as employment Improves, so that there is a dead point beyond, which this factor cannot carry the economic system. Recourse to (iii) has been greatly curtailed In the past year.”
Note that (ii) was the adequate system of relief for the unemployed. And (iii) was public works and other investments aided by Government funds or guarantees;
So Keynes is confirming that the federal government’s economic stimulus had been reduced before the 1938 recession began.
This is a very interesting letter.
Interesting because it is from the period when deep examinations of the economic data from the Great Depression were being made and before the academics could force their interpretations on the data.
I can delete it from Robert’s post if you like plus your follow up comment saying it was a mistake.. Please advise.
“given the current Total Household Debt (THD) it appears that something needs to be done to limit consumption and thus debt.”
Debt service as a percent of disposable personal income,
is at record lows, so I think you are presenting an example of something that is different from what it appears.
You are certainly not alone in prefering the debt service statistic.
But the ability to service one’s current debts tell us almost nothing about consumers’ financial well being. (US consumers as a group.) And debt service can be reasonable this year and become unreasonable next year or over the next few years. (Given the stagnant wages.)
But the Total Household Debt (THD) can provide some greater insight. In 2008 $12.675Trillion of Total Household Debt was the limit before consumer spending stalled and then actually decreased. Working class incomes have been more or less stagnant so the debt can not go much higher than it was 10 years ago.
The only real exception to debt being limited seems to be student loan debt which apparently can rise forever. But student loan debt will constrain those borrowers far far into the future since escape thru bankruptcy is difficult to impossible.
At the end of Q1 2019 the THD had increased $992.6Billion from Q3 2008 and $875.1Billion of that increase was from Student Loans.
So I prefer to look at Total Household Debt.
Yes, delete both of those.
Before Q1 2003 the New York Fed did not include Student Loans as a part of Total Household Debt (THD) statistics. At the end of Q1 2003 Student Loan debt was shown as $241Billion and THD was $7.231Trillion. Student Loan debt was growing very slowly in the quarters after Q1 2003. ($231, $243, $249, $253, $260, $263, $330 and $346 in billions) So the changes in the Student loans before Q1 2003 were probably not a significant factor and can be ignored.
The New York Fed did report THD back to Q1 1999. In Q3 1999 THD was $4.82Trillion.
So between Q3 1999 and Q3 2008 the Total Household Debt had increased by $7.8554Trillion.
And between Q3 2008 and Q3 2017 the Total Household Debt had increased by $.2796Trillion. This increase is ridiculously low for 9 years in the US economy!
I believe that consumers had been about tapped out from Q3 2008 to Q3 2017.
Total Household Debt has been increasing more rapidly since Q3 2017. But it is difficult to see that as a positive indicator for the working class in view of the very large new auto dealer inventories, factory shutdowns, increasing homelessness, suicides, and deaths by drug overdose. That increase in borrowing is more likely to be an indicator of the weakening of the financial health of the upper middle class. Or worse yet, just a last gasp before US consumers accept their fate. (Sure, honey, we can afford to replace your 9 year old SUV with that brand new, heavily discounted, great looking, SUV!)
In my opinion the Total Household Debt is the best financial health indicator for the working class and the Personal Savings Rate is the best indicator for the others.