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to the financial well being of this nation
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Minimum wage not enough to beat poverty, research says
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Your thinking is a threat
to the financial well being of this nation
you are a domestic terrorist threat!!
Why We Shouldn’t Raise The Minimum Wage
Why We Shouldn’t Raise The Minimum Wage
Why We Shouldn’t Raise The Minimum Wage
Pay rent or eat? It’s not that hard of a question is it?
Better Than Raising the Minimum Wage
Better Than Raising the Minimum Wage
Help Americans who need it with a major, carefully crafted expansion of the Earned Income Tax Credit.
By WARREN BUFFETT
May 21, 2015 7:12 p.m. ET
The American Dream promises that a combination of education, hard work and good behavior can move any citizen from humble beginnings to at least reasonable success. And for many, that promise has been fulfilled. At the extreme, we have the Forbes 400, most of whom did not come from privileged backgrounds.
Recently, however, the economic rewards flowing to people with specialized talents have grown dramatically faster than those going to equally decent men and women possessing more commonplace skills. In 1982, the first year the Forbes 400 was compiled, those listed had a combined net worth of $93 billion. Today, the 400 possess $2.3 trillion, up 2,400% in slightly more than three decades, a period in which the median household income rose only about 180%.
Meanwhile, a huge number of their fellow citizens have been living the American Nightmare—behaving well and working hard but barely getting by. In 1982, 15% of Americans were living below the poverty level; in 2013 the proportion was nearly the same, a dismaying 14.5%. In recent decades, our country’s rising tide has not lifted the boats of the poor.
No conspiracy lies behind this depressing fact: The poor are most definitely not poor because the rich are rich. Nor are the rich undeserving. Most of them have contributed brilliant innovations or managerial expertise to America’s well-being. We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like.
Instead, this widening gap is an inevitable consequence of an advanced market-based economy. Think back to the agrarian America of only 200 years ago. Most jobs could then be ably performed by most people. In a world where only primitive machinery and animals were available to aid farmers, the difference in productivity between the most talented among them and those with ordinary skills was modest.
Many other jobs of that time could also be carried out by almost any willing worker. True, some laborers would outdo others in intelligence or hustle, but the market value of their output would not differ much from that of the less talented.
Visualize an overlay graphic that positioned the job requirements of that day atop the skills of the early American labor force. Those two elements of employment would have lined up reasonably well. Not today. A comparable overlay would leave much of the labor force unmatched to the universe of attractive jobs.
That mismatch is neither the fault of the market system nor the fault of the disadvantaged individuals. It is simply a consequence of an economic engine that constantly requires more high-order talents while reducing the need for commodity-like tasks.
The remedy usually proposed for this mismatch is education. Indeed, a top-notch school system available to all is hugely important. But even with the finest educational system in the world, a significant portion of the population will continue, in a nation of great abundance, to earn no more than a bare subsistence.
To see why that is true, imagine we lived in a sports-based economy. In such a marketplace, I would be a flop. You could supply me with the world’s best instruction, and I could endlessly strive to improve my skills. But, alas, on the gridiron or basketball court I would never command even a minimum wage. The brutal truth is that an advanced economic system, whether it be geared to physical or mental skills, will leave a great many people behind.
In my mind, the country’s economic policies should have two main objectives. First, we should wish, in our rich society, for every person who is willing to work to receive income that will provide him or her a decent lifestyle. Second, any plan to do that should not distort our market system, the key element required for growth and prosperity.
That second goal crumbles in the face of any plan to sizably increase the minimum wage. I may wish to have all jobs pay at least $15 an hour. But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty.
The better answer is a major and carefully crafted expansion of the Earned Income Tax Credit (EITC), which currently goes to millions of low-income workers. Payments to eligible workers diminish as their earnings increase. But there is no disincentive effect: A gain in wages always produces a gain in overall income. The process is simple: You file a tax return, and the government sends you a check.
In essence, the EITC rewards work and provides an incentive for workers to improve their skills. Equally important, it does not distort market forces, thereby maximizing employment.
The existing EITC needs much improvement. Fraud is a big problem; penalties for it should be stiffened. There should be widespread publicity that workers can receive free and convenient filing help. An annual payment is now the rule; monthly installments would make more sense, since they would discourage people from taking out loans while waiting for their refunds to come through. Dollar amounts should be increased, particularly for those earning the least.
There is no perfect system, and some people, of course, are unable or unwilling to work. But the goal of the EITC—a livable income for everyone who works—is both appropriate and achievable for a great and prosperous nation. Let’s replace the American Nightmare with an American Promise: America will deliver a decent life for anyone willing to work.
http://www.wsj.com/articles/better-than-raising-the-minimum-wage-1432249927
Better Than Raising the Minimum Wage
Help Americans who need it with a major, carefully crafted expansion of the Earned Income Tax Credit.
By WARREN BUFFETT
May 21, 2015 7:12 p.m. ET
The American Dream promises that a combination of education, hard work and good behavior can move any citizen from humble beginnings to at least reasonable success. And for many, that promise has been fulfilled. At the extreme, we have the Forbes 400, most of whom did not come from privileged backgrounds.
Recently, however, the economic rewards flowing to people with specialized talents have grown dramatically faster than those going to equally decent men and women possessing more commonplace skills. In 1982, the first year the Forbes 400 was compiled, those listed had a combined net worth of $93 billion. Today, the 400 possess $2.3 trillion, up 2,400% in slightly more than three decades, a period in which the median household income rose only about 180%.
Meanwhile, a huge number of their fellow citizens have been living the American Nightmare—behaving well and working hard but barely getting by. In 1982, 15% of Americans were living below the poverty level; in 2013 the proportion was nearly the same, a dismaying 14.5%. In recent decades, our country’s rising tide has not lifted the boats of the poor.
No conspiracy lies behind this depressing fact: The poor are most definitely not poor because the rich are rich. Nor are the rich undeserving. Most of them have contributed brilliant innovations or managerial expertise to America’s well-being. We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like.
Instead, this widening gap is an inevitable consequence of an advanced market-based economy. Think back to the agrarian America of only 200 years ago. Most jobs could then be ably performed by most people. In a world where only primitive machinery and animals were available to aid farmers, the difference in productivity between the most talented among them and those with ordinary skills was modest.
Many other jobs of that time could also be carried out by almost any willing worker. True, some laborers would outdo others in intelligence or hustle, but the market value of their output would not differ much from that of the less talented.
Visualize an overlay graphic that positioned the job requirements of that day atop the skills of the early American labor force. Those two elements of employment would have lined up reasonably well. Not today. A comparable overlay would leave much of the labor force unmatched to the universe of attractive jobs.
That mismatch is neither the fault of the market system nor the fault of the disadvantaged individuals. It is simply a consequence of an economic engine that constantly requires more high-order talents while reducing the need for commodity-like tasks.
The remedy usually proposed for this mismatch is education. Indeed, a top-notch school system available to all is hugely important. But even with the finest educational system in the world, a significant portion of the population will continue, in a nation of great abundance, to earn no more than a bare subsistence.
To see why that is true, imagine we lived in a sports-based economy. In such a marketplace, I would be a flop. You could supply me with the world’s best instruction, and I could endlessly strive to improve my skills. But, alas, on the gridiron or basketball court I would never command even a minimum wage. The brutal truth is that an advanced economic system, whether it be geared to physical or mental skills, will leave a great many people behind.
In my mind, the country’s economic policies should have two main objectives. First, we should wish, in our rich society, for every person who is willing to work to receive income that will provide him or her a decent lifestyle. Second, any plan to do that should not distort our market system, the key element required for growth and prosperity.
That second goal crumbles in the face of any plan to sizably increase the minimum wage. I may wish to have all jobs pay at least $15 an hour. But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty.
The better answer is a major and carefully crafted expansion of the Earned Income Tax Credit (EITC), which currently goes to millions of low-income workers. Payments to eligible workers diminish as their earnings increase. But there is no disincentive effect: A gain in wages always produces a gain in overall income. The process is simple: You file a tax return, and the government sends you a check.
In essence, the EITC rewards work and provides an incentive for workers to improve their skills. Equally important, it does not distort market forces, thereby maximizing employment.
The existing EITC needs much improvement. Fraud is a big problem; penalties for it should be stiffened. There should be widespread publicity that workers can receive free and convenient filing help. An annual payment is now the rule; monthly installments would make more sense, since they would discourage people from taking out loans while waiting for their refunds to come through. Dollar amounts should be increased, particularly for those earning the least.
There is no perfect system, and some people, of course, are unable or unwilling to work. But the goal of the EITC—a livable income for everyone who works—is both appropriate and achievable for a great and prosperous nation. Let’s replace the American Nightmare with an American Promise: America will deliver a decent life for anyone willing to work.
http://www.wsj.com/articles/better-than-raising-the-minimum-wage-1432249927
Fast-Food Workers Have Won the Wage Fight in New York By Tove Danovich | Takepart.com
Fast-Food Workers Have Won the Wage Fight in New York
By Tove Danovich | Takepart.com
September 11, 2015 3:13 PM
TakePart.com
Fast-food workers in New York state are getting a big raise. On Sept. 10, New York accepted a wage board’s recommendation to raise the pay of fast-food employees to $15 an hour by 2021. Like many low-wage workers, these employees have been struggling to make ends meet at a minimum wage of roughly $8 an hour—which amounts to an average annual income of $16,920. Half of all fast-food workers are over the age of 23, according to a report by the Center for Economic and Policy Research, and nearly a quarter of all employees have at least one child.
But chain restaurants aren’t the only place where minimum-wage workers are struggling. And while some 200,000 fast-food workers in the state—the raise applies to employees of chains with 30 or more locations—are set to benefit from the wage hike, Gov. Andrew Cuomo said on Thursday that he wants a state minimum wage of $15 an hour, which would benefit nearly 3 million residents.
“A study was released just this week that showed that there is not a single neighborhood in New York City that is affordable to someone earning the minimum wage,” said Cuomo, flanked by Vice President Joe Biden, in a Thursday press conference featuring plenty of blue-collar Bruce Springsteen anthems.
“The truth is, it’s wrong to have an economy where the rich get richer while the poor get poorer, where the American dream of mobility and opportunity has become more of a cruel myth,” Cuomo continued. Though cities including Seattle, San Francisco, and Los Angeles are phasing in a $15 local minimum wage, New York would be the first to adopt the policy statewide if the measure passes.
The fast-food wage increase won’t just affect the employee’s paychecks but those of New York taxpayers as well. Sixty percent of fast-food workers in New York are enrolled in one or more public assistance programs. Nationally, almost half of all fast-food jobs provide only 20 to 35 hours a week of employment, and only 13 percent of the employees receive health benefits.
This particular industry has been at the forefront of efforts to raise the minimum wage since the first protest for a $15 minimum wage took place in New York City in 2012. Roughly 200 workers from McDonald’s, KFC, and other chains went on strike, sparking what would become a national movement.
In three years, the public has come a long way from insisting that only teens or college students working over the summer take minimum-wage jobs at local fast-food joints. As a 2013 report from the UC Berkeley Labor Center found, “The restaurants and food services sector has the highest public program participation rate of any industry.” Funding the public assistance programs that more than half of fast-food workers are enrolled in—more than twice the rate for the average American worker—costs $7 billion annually.
With more workers ending up in low-wage jobs across the board in the wake of the Great Recession, the $15 wage fast-food workers have been fighting for has become the benchmark for a new minimum wage among progressives—and a talking point in the run-up to the 2016 presidential primaries.
In July, Sen. Bernie Sanders, who hopes to be the Democratic nominee for president in 2016, introduced a bill to raise the federal minimum wage to $15. While Hillary Clinton has supported local efforts to raise wages, her position on a federal policy remains unclear. Donald Trump told MSNBC’s Morning Joe, “I think having a low minimum wage is not a bad thing for this country.” Meanwhile, Jeb Bush and Scott Walker have stated that they don’t believe a minimum wage is necessary at all.
Businesses including McDonald’s, Panera, and others have already responded to the threat of increased personnel costs by adopting touch-screen kiosks to replace cashiers. And fast food is just one of many food-service sectors worried about a higher minimum wage. Some restaurant owners who typically pay front-of-house employees like servers and bartenders a reduced “tipped wage” also worry about the effect of an increase to payroll.
But the fast-food workers who have been fighting for higher wages see the New York proposal for a $15 state minimum wage as a sea change.
“When we first went on strike three years ago, nobody gave us a shot to win $15,” Alvin Major, who works at a KFC in Brooklyn and is a member of the National Organizing Committee of the Fight for $15, said in a press release. “But we stuck together, went on nine more strikes, and even got arrested. Our voices were heard. Gov Cuomo heard us; Vice President Biden heard us; and workers all over the country heard us, joining together in what has become an unstoppable movement that is changing lives and changing the country.”
https://news.yahoo.com/fast-food-workers-won-wage-fight-york-191332669.html
Fast-Food Workers Have Won the Wage Fight in New York
By Tove Danovich | Takepart.com
September 11, 2015 3:13 PM
TakePart.com
Fast-food workers in New York state are getting a big raise. On Sept. 10, New York accepted a wage board’s recommendation to raise the pay of fast-food employees to $15 an hour by 2021. Like many low-wage workers, these employees have been struggling to make ends meet at a minimum wage of roughly $8 an hour—which amounts to an average annual income of $16,920. Half of all fast-food workers are over the age of 23, according to a report by the Center for Economic and Policy Research, and nearly a quarter of all employees have at least one child.
But chain restaurants aren’t the only place where minimum-wage workers are struggling. And while some 200,000 fast-food workers in the state—the raise applies to employees of chains with 30 or more locations—are set to benefit from the wage hike, Gov. Andrew Cuomo said on Thursday that he wants a state minimum wage of $15 an hour, which would benefit nearly 3 million residents.
“A study was released just this week that showed that there is not a single neighborhood in New York City that is affordable to someone earning the minimum wage,” said Cuomo, flanked by Vice President Joe Biden, in a Thursday press conference featuring plenty of blue-collar Bruce Springsteen anthems.
“The truth is, it’s wrong to have an economy where the rich get richer while the poor get poorer, where the American dream of mobility and opportunity has become more of a cruel myth,” Cuomo continued. Though cities including Seattle, San Francisco, and Los Angeles are phasing in a $15 local minimum wage, New York would be the first to adopt the policy statewide if the measure passes.
The fast-food wage increase won’t just affect the employee’s paychecks but those of New York taxpayers as well. Sixty percent of fast-food workers in New York are enrolled in one or more public assistance programs. Nationally, almost half of all fast-food jobs provide only 20 to 35 hours a week of employment, and only 13 percent of the employees receive health benefits.
This particular industry has been at the forefront of efforts to raise the minimum wage since the first protest for a $15 minimum wage took place in New York City in 2012. Roughly 200 workers from McDonald’s, KFC, and other chains went on strike, sparking what would become a national movement.
In three years, the public has come a long way from insisting that only teens or college students working over the summer take minimum-wage jobs at local fast-food joints. As a 2013 report from the UC Berkeley Labor Center found, “The restaurants and food services sector has the highest public program participation rate of any industry.” Funding the public assistance programs that more than half of fast-food workers are enrolled in—more than twice the rate for the average American worker—costs $7 billion annually.
With more workers ending up in low-wage jobs across the board in the wake of the Great Recession, the $15 wage fast-food workers have been fighting for has become the benchmark for a new minimum wage among progressives—and a talking point in the run-up to the 2016 presidential primaries.
In July, Sen. Bernie Sanders, who hopes to be the Democratic nominee for president in 2016, introduced a bill to raise the federal minimum wage to $15. While Hillary Clinton has supported local efforts to raise wages, her position on a federal policy remains unclear. Donald Trump told MSNBC’s Morning Joe, “I think having a low minimum wage is not a bad thing for this country.” Meanwhile, Jeb Bush and Scott Walker have stated that they don’t believe a minimum wage is necessary at all.
Businesses including McDonald’s, Panera, and others have already responded to the threat of increased personnel costs by adopting touch-screen kiosks to replace cashiers. And fast food is just one of many food-service sectors worried about a higher minimum wage. Some restaurant owners who typically pay front-of-house employees like servers and bartenders a reduced “tipped wage” also worry about the effect of an increase to payroll.
But the fast-food workers who have been fighting for higher wages see the New York proposal for a $15 state minimum wage as a sea change.
“When we first went on strike three years ago, nobody gave us a shot to win $15,” Alvin Major, who works at a KFC in Brooklyn and is a member of the National Organizing Committee of the Fight for $15, said in a press release. “But we stuck together, went on nine more strikes, and even got arrested. Our voices were heard. Gov Cuomo heard us; Vice President Biden heard us; and workers all over the country heard us, joining together in what has become an unstoppable movement that is changing lives and changing the country.”
https://news.yahoo.com/fast-food-workers-won-wage-fight-york-191332669.html
Republicans, capitalists, libertarians, conservatives, wing nuts are wrong again!
source: Forbes
Seattle Food Jobs Soar After $11 Minimum Wage Starts
Trying to tie short-term data to employment and economic trends is a dangerous game. Usually the time frame is too narrow, creating the danger of seeing patterns that don’t mean anything in a larger context. Sometimes when you wait longer, what seems to have been a disaster turns into something else.
One example from last summer was when the American Enterprise Institute released an analysis of Bureau of Labor Statistics data collected and presented by the Federal Reserve Bank of St. Louis. AEI claimed that the minimum wage increase in Seattle was responsible for a loss of 1,300 restaurant jobs in that area. The think tank, which has a bias against minimum wage and regulation, claimed, “The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession.”
Many restaurant and fast food jobs are at minimum wage levels. One of the criticisms of increasing the minimum wage has been the chilling effect it would have on employment of low-wage workers. Changes in restaurant employment are often seen as proxies for the effects of wage policies.
At the time of the AEI piece I did a detailed analysis to show how poorly the organization had examined the data. Large drops in Seattle-area restaurant employment were hardly unknown and the period between May 2015 and June 2015, immediately after the $11 an hour minimum wage went into effect, showed an increase in sector employment for the region. Cherry-picking time frames is unwise if you are really interested in addressing questions of economics and public policy.
So what has happened in the time following the AEI analysis? A sharp increase in the number of restaurant jobs after the $11-an-hour minimum wage hike. Here is the available 2015 data (chosen specifically to include the period during which there was a drop in the number of restaurant jobs) with the number of jobs in thousands:
Yes, the loss of 1,000 jobs between April and May, after the implementation of the $11 an hour minimum wage, was large. There was a 900 position drop between August and September, which only shows that few trends work in absolute straight lines. But the gain of 1,100 jobs between May and June, at the same $11 an hour minimum wage, was larger. And that was equaled by the 1,100 position jump between September and October.
In short, the number of restaurant jobs dropped by 2,000 between January 2015 and May, but then increased by 2,900 between May and November, again after the April increase to $11 an hour. Net gain from January to November was 900 jobs.
It’s impossible to say that the increased minimum wage, or anticipation of the hike, had no influence on the number of food jobs. Perhaps restaurant employment would have grown faster (although that would have been out of step with the overall historical trends in the area). Maybe some number of restaurateurs or food franchise owners gave up and closed shop with increased wages adding to other pressures.
But what is clear is that the $11 minimum wage failed to crush restaurant employment as opponents apparently hoped to prove.
source: Forbes
Seattle Food Jobs Soar After $11 Minimum Wage Starts
Trying to tie short-term data to employment and economic trends is a dangerous game. Usually the time frame is too narrow, creating the danger of seeing patterns that don’t mean anything in a larger context. Sometimes when you wait longer, what seems to have been a disaster turns into something else.
One example from last summer was when the American Enterprise Institute released an analysis of Bureau of Labor Statistics data collected and presented by the Federal Reserve Bank of St. Louis. AEI claimed that the minimum wage increase in Seattle was responsible for a loss of 1,300 restaurant jobs in that area. The think tank, which has a bias against minimum wage and regulation, claimed, “The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession.”
Many restaurant and fast food jobs are at minimum wage levels. One of the criticisms of increasing the minimum wage has been the chilling effect it would have on employment of low-wage workers. Changes in restaurant employment are often seen as proxies for the effects of wage policies.
At the time of the AEI piece I did a detailed analysis to show how poorly the organization had examined the data. Large drops in Seattle-area restaurant employment were hardly unknown and the period between May 2015 and June 2015, immediately after the $11 an hour minimum wage went into effect, showed an increase in sector employment for the region. Cherry-picking time frames is unwise if you are really interested in addressing questions of economics and public policy.
So what has happened in the time following the AEI analysis? A sharp increase in the number of restaurant jobs after the $11-an-hour minimum wage hike. Here is the available 2015 data (chosen specifically to include the period during which there was a drop in the number of restaurant jobs) with the number of jobs in thousands:
- January 2015 — 135.3
- February 2015 — 134.6
- March 2015 — 134.5
- April 2015 — 134.3
- May 2015 — 133.3
- June 2015 — 134.4
- July 2015 — 134.7
- August 2015 — 135.3
- September 2015 — 134.4
- October 2015 — 135.5
- November 2015 — 136.2
Yes, the loss of 1,000 jobs between April and May, after the implementation of the $11 an hour minimum wage, was large. There was a 900 position drop between August and September, which only shows that few trends work in absolute straight lines. But the gain of 1,100 jobs between May and June, at the same $11 an hour minimum wage, was larger. And that was equaled by the 1,100 position jump between September and October.
In short, the number of restaurant jobs dropped by 2,000 between January 2015 and May, but then increased by 2,900 between May and November, again after the April increase to $11 an hour. Net gain from January to November was 900 jobs.
It’s impossible to say that the increased minimum wage, or anticipation of the hike, had no influence on the number of food jobs. Perhaps restaurant employment would have grown faster (although that would have been out of step with the overall historical trends in the area). Maybe some number of restaurateurs or food franchise owners gave up and closed shop with increased wages adding to other pressures.
But what is clear is that the $11 minimum wage failed to crush restaurant employment as opponents apparently hoped to prove.
A Major Leap for the Minimum Wage
California announced a deal to reach $15 an hour by 2022, and New York could soon follow.
Mary Altaffer / AP
When it began a few years ago, the campaign for a $15 minimum hourly minimum wage seemed little more than a populist pipe dream. The target was more than twice a federal floor of $7.25 that hasn’t been touched since 2009, and it easily swamped the most aggressive proposals from leading Democrats, which barely scraped double digits.
That goal looks much different now, as two of the nation’s largest states are poised to write $15 minimum wages into law within the span of a week. Both California and New York would phase in their increases over several years, but simply enshrining a path to $15 marks a rapid advance that has surprised liberal activists and economists alike.
On Monday, Governor Jerry Brown struck a deal among top legislators, labor leaders, and his Democratic administration in California to reach $15 an hour by 2022 for large businesses and a year later for companies with 25 employees or less. The state legislature could enact the plan by the end of the week. In announcing the agreement, Brown leapfrogged fellow Democrat Andrew Cuomo of New York, who for weeks has been trying to cajole legislative leaders into raising the wage floor to $15 statewide within five years and sooner for New York City, where the cost of living is higher.
If both states pass their proposals, more than 5 million minimum-wage workers could see a raise, according to government estimates. Democrats might need to win the White House and both houses of Congress to enact increases at the federal level, but states and cities have been leading the way on the minimum wage for a while now.
Where the Minimum-Wage Fight Is Being Won
The deal in California is “the biggest victory yet” for the Fight for 15 movement, said Kendall Fells, the campaign’s national organizing director. Momentum at the city level has been building since 2012, fueled by public pressure that included rallies and strikes by fast-food workers. Cities including Seattle, San Francisco, and Los Angeles have enacted paths to $15, and Massachusetts has moved to raise the hourly pay of home health workers to $15. In New York, fast-food workers are set to hit the target following action by the state’s wage board, which Cuomo controls.
Yet California would be the first state to enact $15 statewide across all industries—unless Cuomo can strike a deal in New York that would increase the state’s $9 minimum wage at a much faster clip. While the governor’s office told TheWall Street Journal that Brown’s announcement would not impact negotiations in Albany, a top union advocate for increasing the state’s minimum wage said otherwise. “It’s absolutely lit a fire under the negotiators,” said Michael Kink, the executive director of the Strong Economy for All Coalition, in an interview Tuesday afternoon. Kink said he expects Cuomo and legislative leaders to announce a budget deal that includes a minimum-wage increase within the next 24 to 48 hours. “There’s a competitive streak in our governor,” Kink added, in what most political observers would consider an understatement about the second-term Democrat. “I think that he intends to demonstrate national leadership.”
Unlike California, New York could create different minimum-wage time lines for New York City as compared with the rest of the state. But the Golden State proposal includes key “off ramps” that have not—thus far—been under consideration in New York. They would allow the governor to unilaterally pause or slow the yearly increases if job growth stalls or tax revenue plummets. Once the minimum hits $15, however, the governor could not lower it. “You get a big recession, and particularly in different parts of the state where wages are a lot lower, there could be real problems in terms of a reduction of jobs,” Brown said. The off ramps, as he called them, would take into account “the vagaries of the capitalistic economy.”
There were already indications on Tuesday that Republicans in New York were seizing on the fine print in the California proposal to extract concessions from Cuomo, which liberals vowed to fight. “We would oppose the kind of off ramps proposed in California, and they’re not under consideration in New York,” said Bill Lipton, the state director of the New York Working Families Party. “A $15 minimum wage is the minimum that it will take to make sure working people can support themselves and their families, and when families can not just survive but thrive, that’s good for the economy.”
While Cuomo has been pushing for a $15 minimum wage in New York for the last six months, Brown faced a different political dynamic in California. The deal he struck was, he acknowledged, an attempt to head off a ballot initiative that was expected to pass in November. The proposal on the ballot would have phased in the increases sooner and without giving the governor flexibility to slow them during a recession. Union leaders who had been backing the ballot initiative said they would scrap it as soon as the legislature passed the compromise proposal. Fells said it was an acceptable trade-off for most workers. “The difference between a year or two is not a big difference when you haven’t been receiving any raises at all,” he said. “That’s the situation these workers are in.”
“We’ve already run the experiment. We know the answers.”
Brown’s demand for off ramps underscores the concern that exists even among supporters of a higher minimum wage that an increase to $15 an hour could have negative economic effects, especially in regions where prices and wages are lower. Alan Krueger, a Princeton economist and the former chairman of President Obama’s Council of Economic Advisers, wrote last October that while a “moderate” minimum wage should have little to no effect on employment, a $15 an hour floor “could well be counterproductive,” at least on the federal level.
Longtime opponents of higher minimum wages have far fewer doubts that the new laws would discourage hiring. “We’ve already run the experiment. We know the answers,” said Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former dir
.ector of the Congressional Budget Office. He said the impact would be particularly bad for teenage unemployment, which shot up to more than 20 percent after the last federal increase was enacted in the middle of the Great Recession. “They are the classic low-skilled, least-experienced kind of worker that gets hit by the minimum wage,” he said on Tuesday. “We’ll see the same thing in California and New York and whoever else decides to go that way.”
Holtz-Eakin said, however, that the consequences would be more subtle than mass layoffs. “The caricature of the employer throwing them out the front door—that’s not how it happens,” he said. “They can’t afford to expand, and the new locations can’t afford to start, and the dynamics of employment growth get interfered with.”
Supporters of minimum-wage increases argue that any negative effects on hiring will be more than outweighed by the boost in the purchasing power of workers with bigger paychecks, who will spend more money and spark a virtuous cycle for the economy. And they say $15 is not as large—or dangerous—a figure as it might look at first blush. Because the minimum wage was never indexed for inflation, either on the federal level or in most states, it lost value over the years, and the sharp increase merely catches it up to where it was—relative to the broader economy—in the 1960s. As Kink put it: “This is not necessarily a wild experiment.”
SOURCE: http://www.theatlantic.com/politics/archive/2016/03/a-major-leap-for-the-minimum-wage/475920/
.
California announced a deal to reach $15 an hour by 2022, and New York could soon follow.
Mary Altaffer / AP
When it began a few years ago, the campaign for a $15 minimum hourly minimum wage seemed little more than a populist pipe dream. The target was more than twice a federal floor of $7.25 that hasn’t been touched since 2009, and it easily swamped the most aggressive proposals from leading Democrats, which barely scraped double digits.
That goal looks much different now, as two of the nation’s largest states are poised to write $15 minimum wages into law within the span of a week. Both California and New York would phase in their increases over several years, but simply enshrining a path to $15 marks a rapid advance that has surprised liberal activists and economists alike.
On Monday, Governor Jerry Brown struck a deal among top legislators, labor leaders, and his Democratic administration in California to reach $15 an hour by 2022 for large businesses and a year later for companies with 25 employees or less. The state legislature could enact the plan by the end of the week. In announcing the agreement, Brown leapfrogged fellow Democrat Andrew Cuomo of New York, who for weeks has been trying to cajole legislative leaders into raising the wage floor to $15 statewide within five years and sooner for New York City, where the cost of living is higher.
If both states pass their proposals, more than 5 million minimum-wage workers could see a raise, according to government estimates. Democrats might need to win the White House and both houses of Congress to enact increases at the federal level, but states and cities have been leading the way on the minimum wage for a while now.
Where the Minimum-Wage Fight Is Being Won
The deal in California is “the biggest victory yet” for the Fight for 15 movement, said Kendall Fells, the campaign’s national organizing director. Momentum at the city level has been building since 2012, fueled by public pressure that included rallies and strikes by fast-food workers. Cities including Seattle, San Francisco, and Los Angeles have enacted paths to $15, and Massachusetts has moved to raise the hourly pay of home health workers to $15. In New York, fast-food workers are set to hit the target following action by the state’s wage board, which Cuomo controls.
Yet California would be the first state to enact $15 statewide across all industries—unless Cuomo can strike a deal in New York that would increase the state’s $9 minimum wage at a much faster clip. While the governor’s office told TheWall Street Journal that Brown’s announcement would not impact negotiations in Albany, a top union advocate for increasing the state’s minimum wage said otherwise. “It’s absolutely lit a fire under the negotiators,” said Michael Kink, the executive director of the Strong Economy for All Coalition, in an interview Tuesday afternoon. Kink said he expects Cuomo and legislative leaders to announce a budget deal that includes a minimum-wage increase within the next 24 to 48 hours. “There’s a competitive streak in our governor,” Kink added, in what most political observers would consider an understatement about the second-term Democrat. “I think that he intends to demonstrate national leadership.”
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“There’s a competitive streak in our governor. I think
that he intends to demonstrate national leadership.”
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“There’s a competitive streak in our governor. I think
that he intends to demonstrate national leadership.”
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Unlike California, New York could create different minimum-wage time lines for New York City as compared with the rest of the state. But the Golden State proposal includes key “off ramps” that have not—thus far—been under consideration in New York. They would allow the governor to unilaterally pause or slow the yearly increases if job growth stalls or tax revenue plummets. Once the minimum hits $15, however, the governor could not lower it. “You get a big recession, and particularly in different parts of the state where wages are a lot lower, there could be real problems in terms of a reduction of jobs,” Brown said. The off ramps, as he called them, would take into account “the vagaries of the capitalistic economy.”
There were already indications on Tuesday that Republicans in New York were seizing on the fine print in the California proposal to extract concessions from Cuomo, which liberals vowed to fight. “We would oppose the kind of off ramps proposed in California, and they’re not under consideration in New York,” said Bill Lipton, the state director of the New York Working Families Party. “A $15 minimum wage is the minimum that it will take to make sure working people can support themselves and their families, and when families can not just survive but thrive, that’s good for the economy.”
While Cuomo has been pushing for a $15 minimum wage in New York for the last six months, Brown faced a different political dynamic in California. The deal he struck was, he acknowledged, an attempt to head off a ballot initiative that was expected to pass in November. The proposal on the ballot would have phased in the increases sooner and without giving the governor flexibility to slow them during a recession. Union leaders who had been backing the ballot initiative said they would scrap it as soon as the legislature passed the compromise proposal. Fells said it was an acceptable trade-off for most workers. “The difference between a year or two is not a big difference when you haven’t been receiving any raises at all,” he said. “That’s the situation these workers are in.”
“We’ve already run the experiment. We know the answers.”
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“We've already run the experiment. We know the answers."
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“We've already run the experiment. We know the answers."
___________________________________________________________
Brown’s demand for off ramps underscores the concern that exists even among supporters of a higher minimum wage that an increase to $15 an hour could have negative economic effects, especially in regions where prices and wages are lower. Alan Krueger, a Princeton economist and the former chairman of President Obama’s Council of Economic Advisers, wrote last October that while a “moderate” minimum wage should have little to no effect on employment, a $15 an hour floor “could well be counterproductive,” at least on the federal level.
Longtime opponents of higher minimum wages have far fewer doubts that the new laws would discourage hiring. “We’ve already run the experiment. We know the answers,” said Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former dir
.ector of the Congressional Budget Office. He said the impact would be particularly bad for teenage unemployment, which shot up to more than 20 percent after the last federal increase was enacted in the middle of the Great Recession. “They are the classic low-skilled, least-experienced kind of worker that gets hit by the minimum wage,” he said on Tuesday. “We’ll see the same thing in California and New York and whoever else decides to go that way.”
Holtz-Eakin said, however, that the consequences would be more subtle than mass layoffs. “The caricature of the employer throwing them out the front door—that’s not how it happens,” he said. “They can’t afford to expand, and the new locations can’t afford to start, and the dynamics of employment growth get interfered with.”
Supporters of minimum-wage increases argue that any negative effects on hiring will be more than outweighed by the boost in the purchasing power of workers with bigger paychecks, who will spend more money and spark a virtuous cycle for the economy. And they say $15 is not as large—or dangerous—a figure as it might look at first blush. Because the minimum wage was never indexed for inflation, either on the federal level or in most states, it lost value over the years, and the sharp increase merely catches it up to where it was—relative to the broader economy—in the 1960s. As Kink put it: “This is not necessarily a wild experiment.”
SOURCE: http://www.theatlantic.com/politics/archive/2016/03/a-major-leap-for-the-minimum-wage/475920/
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source: Forbes
Report: Walmart Workers Cost Taxpayers $6.2 Billion In Public Assistance
Walmart’s low-wage workers cost U.S. taxpayers an estimated $6.2 billion in public assistance including food stamps, Medicaid and subsidized housing, according to a report published to coincide with Tax Day, April 15.
Americans for Tax Fairness, a coalition of 400 national and state-level progressive groups, made this estimate using data from a 2013 study by Democratic Staff of the U.S. Committee on Education and the Workforce.
“The study estimated the cost to Wisconsin’s taxpayers of Walmart’s low wages and benefits, which often force workers to rely on various public assistance programs,” reads the report, available in full here.
“It found that a single Walmart Supercenter cost taxpayers between $904,542 and $1.75 million per year, or between $3,015 and $5,815 on average for each of 300 workers.”
Americans for Tax Fairness then took the mid-point of that range ($4,415) and multiplied it by Walmart’s approximately 1.4 million workers to come up with an estimate of the overall taxpayers’ bill for the Bentonville, Ark.-based big box giant’s staffers.
The report provides a state-by-state breakdown of these figures, as well as some context on the other side of the coin: Walmart’s huge share of the nationwide SNAP, or food stamp, market.
“Walmart told analysts last year that the company has captured 18 percent of the SNAP market,” it reads. “Using that figure, we estimate that the company accounted for $13.5 billion out of $76 billion in food stamp sales in 2013.”
Walmart spokesperson Randy Hargrove described this week’s report as “inaccurate and misleading,” referring to its use of extrapolated data and adding that public assistance program eligibility requirements vary from state to state.
“More than 99 percent of our associates earn above minimum wage,” he said. “In fact, the average hourly wage for our associates, both full and part-time, is an average of $11.83 per hour.”
He said the company had no internal figures to share on the number of workers receiving public assistance.
“The bottom line is Walmart provides associates with more opportunities for career growth and greater economic security for their families than other companies in America,” he said. “Our full and part-time workers get bonuses for store performance, access to a 401K-retirement plan, education and health benefits.”
Hargrove added that the number of Walmart employees receiving Medicaid is similar to the percentage for other large retailers — and comparable to the national average.
He pointed to a 2005 report by economist Jason Furman, now a White House adviser, describing Walmart’s Medicaid enrollment as “a reflection of [its] enormous size.”
Other large retail chains have been the focus of similar reports in recent months. In October, two studies released to coincide showed that American fast food industry outsourced a combined $7 billion in annual labor costs to taxpayers. McDonald's MCD +0.21% alone accounted for $1.2 billion of that outlay.
Yum Brands came in at a distant number two, with its Pizza Hut, Taco Bell and KFC subsidiaries costing $648 million in benefits programs for workers each year.
Report: Walmart Workers Cost Taxpayers $6.2 Billion In Public Assistance
Walmart’s low-wage workers cost U.S. taxpayers an estimated $6.2 billion in public assistance including food stamps, Medicaid and subsidized housing, according to a report published to coincide with Tax Day, April 15.
Americans for Tax Fairness, a coalition of 400 national and state-level progressive groups, made this estimate using data from a 2013 study by Democratic Staff of the U.S. Committee on Education and the Workforce.
“The study estimated the cost to Wisconsin’s taxpayers of Walmart’s low wages and benefits, which often force workers to rely on various public assistance programs,” reads the report, available in full here.
“It found that a single Walmart Supercenter cost taxpayers between $904,542 and $1.75 million per year, or between $3,015 and $5,815 on average for each of 300 workers.”
Americans for Tax Fairness then took the mid-point of that range ($4,415) and multiplied it by Walmart’s approximately 1.4 million workers to come up with an estimate of the overall taxpayers’ bill for the Bentonville, Ark.-based big box giant’s staffers.
The report provides a state-by-state breakdown of these figures, as well as some context on the other side of the coin: Walmart’s huge share of the nationwide SNAP, or food stamp, market.
“Walmart told analysts last year that the company has captured 18 percent of the SNAP market,” it reads. “Using that figure, we estimate that the company accounted for $13.5 billion out of $76 billion in food stamp sales in 2013.”
Walmart spokesperson Randy Hargrove described this week’s report as “inaccurate and misleading,” referring to its use of extrapolated data and adding that public assistance program eligibility requirements vary from state to state.
“More than 99 percent of our associates earn above minimum wage,” he said. “In fact, the average hourly wage for our associates, both full and part-time, is an average of $11.83 per hour.”
He said the company had no internal figures to share on the number of workers receiving public assistance.
“The bottom line is Walmart provides associates with more opportunities for career growth and greater economic security for their families than other companies in America,” he said. “Our full and part-time workers get bonuses for store performance, access to a 401K-retirement plan, education and health benefits.”
Hargrove added that the number of Walmart employees receiving Medicaid is similar to the percentage for other large retailers — and comparable to the national average.
He pointed to a 2005 report by economist Jason Furman, now a White House adviser, describing Walmart’s Medicaid enrollment as “a reflection of [its] enormous size.”
Other large retail chains have been the focus of similar reports in recent months. In October, two studies released to coincide showed that American fast food industry outsourced a combined $7 billion in annual labor costs to taxpayers. McDonald's MCD +0.21% alone accounted for $1.2 billion of that outlay.
Yum Brands came in at a distant number two, with its Pizza Hut, Taco Bell and KFC subsidiaries costing $648 million in benefits programs for workers each year.
The Curse of Econ 101
When it comes to basic policy questions such as the minimum wage,
introductory economics can be more misleading than it is helpful.
Bettmann / Getty
In a rich, post-industrial society, where most people walk around with supercomputers in their pockets and a person can have virtually anything delivered to his or her doorstep overnight, it seems wrong that people who work should have to live in poverty. Yet in America, there are more than ten million members of the working poor: people in the workforce whose household income is below the poverty line. Looking around, it isn’t hard to understand why. The two most common occupations in the United States are retail salesperson and cashier. Eight million people have one of those two jobs, which typically pay about $9–$10 per hour. It’s hard to make ends meet on such meager wages. A few years ago, McDonald’s was embarrassed by the revelation that its internal help line was recommending that even a full-time restaurant employee apply for various forms of public assistance.
Poverty in the midst of plenty exists because many working people simply don’t make very much money. This is possible because the minimum wage that businesses must pay is low: only $7.25 per hour in the United States in 2016 (although it is higher in some states and cities). At that rate, a person working full-time for a whole year, with no vacations or holidays, earns about $15,000—which is below the poverty line for a family of two, let alone a family of four. A minimum-wage employee is poor enough to qualify for food stamps and, in most states, Medicaid. Adjusted for inflation, the federal minimum is roughly the same as in the 1960s and 1970s, despite significant increases in average living standards over that period. The United States currently has the lowest minimum wage, as a proportion of its average wage, of any advanced economy, contributing to today’s soaring levels of inequality. At first glance, it seems that raising the minimum wage would be a good way to combat poverty.
The argument against increasing the minimum wage often relies on what I call “economism”—the misleading application of basic lessons from Economics 101 to real-world problems, creating the illusion of consensus and reducing a complex topic to a simple, open-and-shut case. According to economism, a pair of supply and demand curves proves that a minimum wage increases unemployment and hurts exactly the low-wage workers it is supposed to help. The argument goes like this: Low-skilled labor is bought and sold in a market, just like any good or service, and its price should be set by supply and demand. A minimum wage, however, upsets this happy equilibrium because it sets a price floor in the market for labor. If it is below the natural wage rate, then nothing changes. But if the minimum (say, $7.25 an hour) is above the natural wage (say, $6 per hour), it distorts the market. More people want jobs at $7.25 than at $6, but companies want to hire fewer employees. The result: more unemployment. The people who are still employed are better off, because they are being paid more for the same work; their gain is exactly balanced by their employers’ loss. But society as a whole is worse off, as transactions that would have benefited both buyers and suppliers of labor will not occur because of the minimum wage. These are jobs that someone would have been willing to do for less than $6 per hour and for which some company would have been willing to pay more than $6 per hour. Now those jobs are gone, as well as the goods and services that they would have produced.
The minimum wage has been a hobgoblin of economism since its origins. Henry Hazlitt wrote in Economics in One Lesson, “For a low wage you substitute unemployment. You do harm all around, with no comparable compensation.” InCapitalism and Freedom, Milton Friedman patronizingly described the minimum wage as “about as clear a case as one can find of a measure the effects of which are precisely the opposite of those intended by the men of good will who support it.” Because employers will not pay people more money than their work is worth, he continued, “insofar as minimum-wage laws have any effect at all, their effect is clearly to increase poverty.” Jude Wanniski similarly concluded in The Way the World Works, “Every increase in the minimum wage induces a decline in real output and a decline in employment.” On the campaign trail in 1980, Ronald Reagan said, “The minimum wage has caused more misery and unemployment than anything since the Great Depression.” Think tanks including Cato, Heritage, and the Manhattan Institute have reliably attacked the minimum wage for decades, all the while emphasizing the key lesson from Economics 101: Higher wages cause employers to cut jobs.
In today’s environment of increasing economic inequality, the minimum wage is a centerpiece of political debate. California, New York City, and Seattle are all raising their minimums to $15, and President Barack Obama called for a federal minimum of $10.10. An army of commentators has responded by reminding us of what we should have learned in Economics 101. In The Wall Street Journal, the economist Richard Vedder explained, “If the price of something rises, people buy less of it—including labor. Thus governmental interferences such as minimum-wage laws lower the quantity of labor demanded.” Writing for Forbes, Tim Worstall offered a mathematical proof: “A reduction in wage costs of some few thousand dollars increases employment. Obviously therefore a rise in wage costs of four or five times that is going to have significant unemployment effects. QED: A $15 minimum wage is going to destroy many jobs.” (Of theoretical arguments in favor of a higher minimum wage, he continued, “I’m afraid I really just don’t believe those arguments.”) Jonah Goldberg of the American Enterprise Institute and National Review chimed in, “A minimum wage is no different from a tax on firms that use low-wage and unskilled labor. And if there’s anything that economists agree upon, it’s that if you tax something you get less of it.”
______________________________
The supply-and-demand diagram is a
good conceptual starting point for
thinking about the minimum wage.
But on its own, it has limited
predictive value in the much more
complex real world.
_____________________________
The supply-and-demand diagram is a
good conceptual starting point for
thinking about the minimum wage.
But on its own, it has limited
predictive value in the much more
complex real world.
_____________________________
The real impact of the minimum wage, however, is much less clear than these talking points might indicate. Looking at historical experience, there is no obvious relationship between the minimum wage and unemployment: adjusted for inflation, the federal minimum was highest from 1967 through 1969, when the unemployment rate was below 4 percent—a historically low level. When economists try to tackle this question, they come up with all sorts of results. In 1994, David Card and Alan Krueger evaluated an increase in New Jersey’s minimum wage by comparing fast-food restaurants on both sides of the New Jersey-Pennsylvania border. They concluded, “Contrary to the central prediction of the textbook model ... we find no evidence that the rise in New Jersey’s minimum wage reduced employment at fast-food restaurants in the state.”
Card and Krueger’s findings have been vigorously contested across dozens of empirical studies. Today, people on both sides of the debate can cite papers supporting their position, and reviews of the academic research disagree on what conclusions to draw. David Neumark and William Wascher, economists who have long argued against the minimum wage, reviewed more than one hundred empirical papers in 2006. Although the studies had a wide range of results, they concluded that the “preponderance of the evidence” indicated that a higher minimum wage does increase unemployment. On the other hand, two recent meta-studies (which pool together the results of multiple analyses) have found that increasing the minimum wage does not have a significant impact on employment. In the past several years, a new round of sophisticated analyses comparing changes in employment levels between neighboring counties also found “strong earnings effects and no employment effects of minimum wage increases.” (That is, the number of jobs stays the same and workers make more money.) Not surprisingly, Neumark and Wascher have contested this approach. The profession as a whole is divided on the topic: When the University of Chicago Booth School of Business asked a panel of prominent economists in 2013 whether increasing the minimum wage to $9 would “make it noticeably harder for low-skilled workers to find employment,” the responses were split down the middle.
The idea that a higher minimum wage might not increase unemployment runs directly counter to the lessons of Economics 101. According to the textbook, if labor becomes more expensive, companies buy less of it. But there are several reasons why the real world does not behave so predictably. Although the standard model predicts that employers will replace workers with machines if wages increase, additional labor-saving technologies are not available to every company at a reasonable cost. Small employers in particular have limited flexibility; at their scale, they may not be able to maintain their operations with fewer workers. (Imagine a local copy shop: No matter how fast the copy machine is, there still needs to be one person to deal with customers.) Therefore, some companies can’t lay off employees if the minimum wage is increased. At the other extreme, very large employers may have enough market power that the usual supply-and-demand model doesn’t apply to them. They can reduce the wage level by hiring fewer workers (only those willing to work for low pay), just as a monopolist can boost prices by cutting production (think of an oil cartel, for example). A minimum wage forces them to pay more, which eliminates the incentive to minimize their workforce.
In the above examples, a higher minimum wage will raise labor costs. But many companies can recoup cost increases in the form of higher prices; because most of their customers are not poor, the net effect is to transfer money from higher-income to lower-income families. In addition, companies that pay more often benefit from higher employee productivity, offsetting the growth in labor costs. Justin Wolfers and Jan Zilinsky identified several reasons why higher wages boost productivity: They motivate people to work harder, they attract higher-skilled workers, and they reduce employee turnover, lowering hiring and training costs, among other things. If fewer people quit their jobs, that also reduces the number of people who are out of work at any one time because they’re looking for something better. A higher minimum wage motivates more people to enter the labor force, raising both employment and output. Finally, higher pay increases workers’ buying power. Because poor people spend a relatively large proportion of their income, a higher minimum wage can boost overall economic activity and stimulate economic growth, creating more jobs. All of these factors vastly complicate the two-dimensional diagram taught in Economics 101 and help explain why a higher minimum wage does not necessarily throw people out of work. The supply-and-demand diagram is a good conceptual starting point for thinking about the minimum wage. But on its own, it has limited predictive value in the much more complex real world.
Even if a higher minimum wage does cause some people to lose their jobs, that cost has to be balanced against the benefit of greater earnings for other low-income workers. A study by the Congressional Budget Office (CBO) estimated that a $10.10 minimum would reduce employment by 500,000 jobs but would increase incomes for most poor families, moving 900,000 people above the poverty line. Similarly, a recent paper by the economist Arindrajit Dube finds that a 10 percent raise in the minimum wage should reduce the number of families living in poverty by around 2 percent to 3 percent. The economists polled in the 2013 Chicago Booth study thought that increasing the minimum wage would be a good idea because its potential impact on employment would be outweighed by the benefits to people who were still able to find jobs. Raising the minimum wage would also reduce inequality by narrowing the pay gap between low-income and higher-income workers.
In short, whether the minimum wage should be increased (or eliminated) is a complicated question. The economic research is difficult to parse, and arguments often turn on sophisticated econometric details. Any change in the minimum wage would have different effects on different groups of people, and should also be compared with other policies that could help the working poor—such as the negative income tax (a cash grant to low-income households, similar to today’s Earned Income Tax Credit) favored by Milton Friedman, or the guaranteed minimum income that Friedrich Hayek assumed would exist.
________________________________
Instead of greedily demanding higher
profits, industry executives can
invoke Economics 101, which
provides a simple explanation of the
world that serves their interests.
________________________________
Instead of greedily demanding higher
profits, industry executives can
invoke Economics 101, which
provides a simple explanation of the
world that serves their interests.
________________________________
Nevertheless, when the topic reaches the national stage, it is economism’s facile punch line that gets delivered, along with its all-purpose dismissal: people who want a higher minimum wage just don’t understand economics (although, by that standard, several Nobel Prize winners don’t understand economics). Many leading political figures largely repeat the central theses of economism, claiming that they have only the best interests of the poor at heart. In the 2016 presidential campaign, Senator Marco Rubio opposed increasing the minimum wage because companies would then substitute capital for labor: “I’m worried about the people whose wage is going to go down to zero because you’ve made them more expensive than a machine.” Senator Ted Cruz also chimed in on behalf of the poor, saying, “the minimum wage consistently hurts the most vulnerable.” Senator Rand Paul explained, “when the [minimum wage] is above the market wage it causes unemployment” because it reduces the number of employees whom companies can afford to hire. The former governor Jeb Bush also invoked Economics 101, saying that wages should be left “to the private sector,” meaning companies like Walmart, which “raised wages because of supply and demand.” For Congressman Paul Ryan, raising the minimum wage is “bad economics” and “will hurt the economy because it raises the price of labor.”
This conviction that the minimum wage hurts the poor is an example of economism in action. Economists have many different opinions on the subject, based on different theories and research studies, but when it comes to public debate, one particular result of one particular model is presented as an unassailable economic theorem. (Politicians advocating for a higher minimum wage, by contrast, tend to avoid economic models altogether, instead arguing in terms of fairness or helping the poor.) This happens partly because the competitive market model taught in introductory economics classes is simple, clear, and memorable. But it also happens because there is a large interest group that wants to keep the minimum wage low: businesses that rely heavily on cheap labor.
The restaurant industry has been a major force behind the advertising and public relations campaigns opposing the minimum wage, including many of the op-ed articles repeating the basic lesson of supply and demand. For example, Andy Puzder, the CEO of a restaurant company (and President-elect Trump’s nominee to lead the Labor Department), explained in The Wall Street Journal, “Every retailer has locations that are profitable, but only marginally. Increased labor costs can push these stores over the line and into the loss column. When that happens, companies that want to stay competitive will close them.” As a result, “broad increases in the minimum wage destroy jobs and hurt the working-class Americans that they are supposed to help.” A recent study by researchers at the Cornell School of Hotel Administration, however, found that higher minimum wages have not affected either the number of restaurants or the number of people that they employ, contrary to the industry’s dire predictions, while they have modestly increased workers’ pay. Because restaurant closings do not seem to increase, the implication is that paying employees more cuts into excess profits—profits beyond those necessary to stay in business. Or, as the financial commentator Barry Ritholtz put it, “raising the minimum wage works as a wealth transfer, from shareholders and franchisees, to minimum wage workers.” But instead of greedily demanding higher profits, industry executives can invoke Economics 101, which provides a simple explanation of the world that serves their interests.
The fact that this is the debate already demonstrates the historical influence of economism. Once upon a time, the major issue affecting workers’ wages and income inequality was unionization. In the 1950s, about one in every three wage and salary employees was a union member. Unions, of course, were an early and frequent target of economism. Hayek argued that unions are bad both for workers, because “they cannot in the long run increase real wages for all wishing to work above the level that would establish itself in a free market,” and for society as a whole, because “by establishing effective monopolies in the supply of the different kinds of labor, the unions will prevent competition from acting as an effective regulator of the allocation of all resources.” For Friedman, unions “harmed the public at large and workers as a whole by distorting the use of labor” while increasing inequality even within the working class. The changing composition of the U.S. workforce, state right-to-work laws, and aggressive anti-unionization tactics by employers—increasingly tolerated by the National Labor Relations Board, beginning with the Reagan administration—all contributed to a long, slow fall in unionization levels. By 2015, only 12 percent of wage and salary employees were union members—fewer than 7 percent in the private sector. Low- and middle-income workers’ reduced bargaining power is a major reason why their wages have not kept pace with the overall growth of the economy. According to an analysis by the sociologists Bruce Western and Jake Rosenfeld, one-fifth to one-third of the increase in inequality between 1973 and 2007 results from the decline of unions.
With unions only a distant memory for many people, federal minimum-wage legislation has become the best hope for propping up wages for low-income workers. And again, the worldview of economism comes to the aid of employers by abstracting away from the reality of low-wage work to a pristine world ruled by the “law” of supply and demand.
This article has been adapted from James Kwak’s book, Economism: Bad Economics and the Rise of Inequality.
SOURCE: https://www.theatlantic.com/business/archive/2017/01/economism-and-the-minimum-wage/513155/
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