Relevant and even prescient commentary on news, politics and the economy.

Wage stickiness ?

Sorry for the thin posting lately…I have had some SI joint problems which makes for difficulty sitting still to focus.

Via Keven Drum comes this research paper addressing the issue of sticky wages in the economics of today:

First off, a new paper by a trio of researchers confirms some old news: Adjusted for inflation, wages began stagnating for both men and women 10 years ago. Men’s wages have actually decreased slightly since 2000, while women’s wages, which had been rising steadily for decades, flattened out nearly to zero. But it could have been worse. Economists have long known that there’s a floor to wages because employers don’t like to reduce nominal wages. If you make $10 per hour, they won’t cut your wage to $9 per hour. They’ll just hold it at $10 and let inflation eat it away. This phenomenon is called wage stickiness.

But in “Wage Adjustment in the Great Recession,” these researchers have found that wage stickiness, which is driven mostly by social convention, not economic law, might be dying out. During the Great Recession, employers were increasingly willing to cut nominal wages. Among hourly workers, the usual number who experience wage cuts is around 15 percent. That had risen to 25 percent by 2011. Among nonhourly workers, the number rose from about 25 percent to nearly 35 percent. Increasingly, it seems, wage stickiness isn’t acting as a barrier against wage losses.

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Wages, prices, "profit", and productivity…and Black Friday too

Black Friday around here in New England begins to night in stores about 8 P.M. On the internet Black Friday’s discounts began last week as the competition heats up between companies with stores and internet based sales. Stores have responded with aggressive discounts, especially visible is Walmart.

This post is relevant to the issue of wages at Walmart, and points to deeper economic issues one has to keep in mind when reading about the economics overall versus a company policy.  This becomes especially poignant as some Walmart workers attempt to draw attention to wages, benefits, and hours the company paints as necessary.

Demos has some figures for thought in How Raising Wages Would Benefit Workers, the Industry and the Overall Economy.   Here’s a summary of the study from Demos:

This study assumes a new wage floor for the lowest-paid retail workers equivalent to $25,000 per year for a full-time, year-round retail worker at the nation’s largest retail companies, those employing at least 1,000 workers. For the typical worker earning less than this threshold, the new floor would mean a 27 percent pay raise. Including both the direct effects of the wage raise and spillover effects, the new floor will impact more than 5 million retail workers and their families. This study examines the impact of the new wage floor on economic growth and job creation, on consumers in terms of prices, on companies in terms of profit and sales, and for retail workers in terms of their purchasing power and poverty status.

“There is a flaw in the conventional thinking that profits, low prices and decent wages cannot co-exist,” says Catherine Ruetschlin, study author and Demos Policy Analyst. “The findings in the study prove the country’s largest retailers are in an ideal position to launch a private sector stimulus, leading the way towards a new model for American prosperity.”

Robert Reich offers his viewpoint below the fold:

Most new jobs in America are in personal services like retail, with low pay and bad hours. According to the Bureau of Labor and Statistics, the average full-time retail worker earns between $18,000 and $21,000 per year.

But if retail workers got a raise, would consumers have to pay higher prices to make up for it? A new study by the think tank Demos reports that raising the salary of all full-time workers at large retailers to $25,000 per year would lift more than 700,000 people out of poverty, at a cost of only a 1 percent price increase for customers.

And, in the end, retailers would benefit. According to the study, the cost of the wage increases to major retailers would be $20.8 billion — about one percent of the sector’s $2.17 trillion in total annual sales. But the study also estimates the increased purchasing power of lower-wage workers as a result of the pay raises would generate $4 billion to $5 billion in additional retail sales.

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Ezra Klein’s straw man argument. Rep Shuler’s 500 jobs and only 3 apply. Coburn on Washington Journal

by Daniel Becker
updated: Tom Coburn, not John.
I was not sure how to title this but, today on Washington Journal, Tom Coburn was on to talk about the economy and unemployment.

At 2 minutes into the interview, Greta Brawner presents Ezra Klein’s take from this article:

“And we’re just going to leave them without incomes and without job opportunities and without money to spend in their wrecked local economies — thus making it harder for those economies to generate new jobs? That’s the economic theory this country is going to embrace amid terrible joblessness?”

Mr Coburns setup to his full response response: Well, all that is, is a straw man argument.

Interesting perspective as to what a straw man argument is. Feel free to analyze that. However, I’m writing about what happened next. At 3:09 minutes Coburn states that he lives with congressman Heath Shuler. Just yesterday Mr. Shuler told him that he had a job fair. Mr. Shuler worked hard to set up this jobs fair. Over 500 jobs, every major employer represented.

“3 people showed up. 3 people showed up for 500 jobs in an area of unemployment above 10 %.”

According to Mr. Coburn, Mr. Shuler’s explanation for the lack of attendance:

“they are not going to do it until the benefits lessen. And that may not be an exact interpretation of what his words were but…

What did not happen next is the issue because it is the dictionary example as to why this nation can not actually solve anything such that the risk of living is reduced for all.

There was no statement by Greta Brawner questioning such a result regarding the job fair. There was no statement by Greta Brawner suggesting the Cspan research department would check such a story for facts. Maybe call Rep Shuler? I mean, 500 jobs, 10% plus unemployment and only THREE people showed up? Coburn tells a tale as huge as any 4 year old trying to talk their way into what they want and appears to admit he telling a really big one yet there is no response? 

Greta Brawner lets him go on for another minute before saying a word: “There’s an editorial in the Washington Post this morning…” Granted she is bringing up an editorial that is asking about extending the tax cuts for the rich while denying unemployment extensions based on the “pay for” it line, but, the really big talking point, the really big insulting talking point, the really big insulting,  and out right lie is that people are not motivated to go to work do to the availability of unemployment.

Hey Congressman Heath Shuler, care to respond? After all, it’s your cred that is now invoked. Maybe there are some readers from his district? Contact him here.

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Bruce Webb, Dale Coberly, Arne Larson and the National Academy of Social Insurance

Rdan

The National Academy of Social Insurance report on options for Social Security is public and now available in pdf form. “The purpose of this report is to help analysts and policymakers consider options to bring Social Security into long-term balance in ways that also address concerns about benefit adequacy.”

One cannot simply glance through such dense material and numbers, but I did find the following on page 14 (or actually page 20 of 44 pdf form). (the exact numbers have been changed from the proposal by NASI, but are faithful to the process):

From page 14:

Option #7c: Schedule a Very Gradual Contribution Rate Increase Over 20 Years. To avoid abrupt changes in Social Security contribution rates, this option would schedule very gradual increases in the Social Security contribution rate (one-twentieth of one percent per year over 20 years for employees and employers, each), beginning in 2015. By 2035, the Social Security rate would be 7.2 percent for both workers and employers. In 2015, the increase for an average earner making $53,085 then would be $26.50 a year, or about 50 cents a week. It would reduce the 75-year deficit by 1.39 percent of taxable payroll or by about 69 percent. Dale Coberly, a frequent commenter on Social Security, recommended a gradual tax increase of this sort (Coberly, Larson and Webb 2009).11

Footnote also on page 14 of the NASI report:

11 Dale Coberly is a student of Social Security policy and frequent commenter on Social Security via the blog Angry Bear. Angry Bear was named one of the top 25 independent economic blogs on the Internet by the Wall Street Journal and TimeCNN. Coberly, Arne Larson and Bruce Webb collaborated on a modified version of this option in their Northwest Plan. For details of the Northwest Plan, see “The Angry Bear Social Security Series” at http://bruceweb.blogspot.com/2008/08/angry-bear-social-security-series.html.

Like many contributors not in the spotlight the hours devoted to creating material to even be noticed, then evaluated, and then published is a testimony to hard work, due diligence, and a non-profit motive. The weekend hours and midnight oil burned by NASI personnel and contributors is rarely noticed by media, nor appreciated by recipients. Many of us talk about ‘they’….well, meet three. Best to Bruce, Dale, and Arne.

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