Minimum Wage, Justice and Economics

It would be easy to sign a petition stating in the strongest terms that you support the idea that all minimum wage workers should be able to make a living.  I want that and at the same time, when employers say that the market value of their minimum wage workers’ labor is not even minimum wage, I believe them.  Any minimum wage worker who quits or is fired for cause can be replaced in an afternoon.  I can accept that as a fact. 

With little persuasion, I think I can accept that raising minimum wage to a living wage would cause more problems than it solves.  What would that be, any way;  doubling it as the hapless McDonalds workers in New York are demanding?  Working minimum wage full-time equals about $15000 a year.  So, OK, yeah, doubling it.

There are plenty of arguments in favor of it, simple justice being one of them.  Robert Reich points out that McDonalds’ CEO made 800 times what a McDonalds worker makes and Walmart’s CEO makes 1000 times what a Walmart worker makes.  Even a comfortably vested shareholder should have trouble with those numbers.  That comes out of the company’s earnings with commensurately less flow-through to the stockholders in the form of dividends or capital gains.  At 13.8 to 20.7 million dollars a year, respectively, each of those guys must be really, really smart and very good managers.

Paul Krugman points out that minimum wage has not kept up with inflation. In real (inflation adjusted) terms it should be above $10/hour.  Furthermore, in that time, worker productivity has doubled.  Fairness says it’s time for a raise.

I don’t shed a lot of tears for corporations and CEOs.  But if we are talking about fairness, I don’t think we should force employers to swim upstream through the raging rapids of ineluctable market forces.  It is not their personal or collective responsibility to guarantee a living wage to individual employees.  Then whose is it?  Oh-h-h, now we are treading on thin ice – smells like Socialism! 

Low wage workers, like all workers, need to pay bills, raise their kids, protect their health, all of that.  The Earned Income Tax Credit – basically a taxpayer subsidy of low wage workers - is one fair and equitable vehicle toward achieving that goal.  And I’m piling onto the bandwagon with Reich who also adds childcare, good schools, health insurance, and union rights.

"Right to Work" Explained

Many young new workers do not know about "right to work" and the reason behind the contention and emotion that goes with a discussion about "right to work".  A longish explanation is provided by Mother Jones.  This one, provided here in full, covers the basics: 

“Right to Work” Laws Explained

Thursday, 27 December 2012 10:04By se smith, Care2 | Report

The phrase “right to work,” which appears to date to 1902, sure seems catchy; it sounds like a guarantee of employment, right? In fact, it has nothing to do with whether you’re guaranteed to have and hold a job. Since it’s been in the news a lot in 2012, when the number of right to work states rose to 24, it’s worth taking a closer look at what this term means as well as the history behind it. All sides of the right to work debate are heating up, and it may be another critical labor issue in 2013.

To put it simply, a right to work law states that employees cannot be compelled to pay union fees and dues, even if they are covered under a union contract. The idea is that even if a union is operating in a given workplace, people shouldn’t be forced to join to keep their jobs, or ordered to join the union if other workers want to organize. Proponents of these laws say they protect the freedom of association, allowing people to opt out of union membership if they’re not interested.

Before 1947, right to work laws weren’t possible, but that changed with the passage of the Taft-Hartley Act, which outlawed the so-called “closed shop.” Closed shops restricted employment to union members only, requiring membership as a term of employment. People are also protected if they want to join unions, under open shop rules, which allow people to decide if they want to join unions and work regardless of union membership.

The Wall Street Journal, among other publications with a somewhat conservative lean, suggests that right to work laws promote job growth, but correlation is not causation. If there is a link, it may have to do with the fact that such laws are often used to entice business away from states without such laws with promises of lower wages; even the Journal has to admit that right to work states tend to have lower wages and less favorable employment contracts, because the collective bargaining power of unions is diluted.

Meanwhile, opponents of such laws argue that they create a bit of a free rider problem. Administering unions can be a costly endeavor, and the process of negotiating contracts can be painstaking and expensive, as can providing benefits for union members. If everyone in the union pays dues, costs can be kept lower for all members, and every worker is equally invested in the union. If some people aren’t paying, it creates an imbalance, and when union and non-union employees are covered under the same negotiated contract, it means that some people effectively get some of the benefits of union membership for free.

For labor organizers, such laws can represent part of an attack on organizing and union membership, making it harder for unions to promote the welfare of their members and workers in general. In the larger picture, less money also makes it more difficult for unions to engage in advocacy, political lobbying and other activities to protect workers and raise public awareness. For employers, such laws can reduce labor costs, as a weak union can struggle to assert itself at the bargaining table. As for workers, a strong union can make for better working conditions, a safer workplace, better benefits and more pay, and unions are stronger with more dues-paying members.

An Empty Offer

I read Dennis Richardson’s August 26 newsletter.  He is a legislator from the 4^th District of the Oregon House of Representatives.   I didn’t know much about him.  Now I know he is a Republican and a declared candidate to run for Governor.  I also read about Richardson in an August 19  post on a conservative blog, The Governed | NW Politics.  The Governed reveals that Richardson hasn’t a chance because he has betrayed his conservative roots.  With that confident assertion in mind, I’d guess that The Governed is probably correct.  Richardson also isn’t making good friends with another group that is usually considered to be outside that first group.  That leaves a rapidly shrinking middle.

Richardson manages to demonize, in double-digit percentages, big slices of a big group, Oregon workers.  He’s railed against PERS (Public Employee Retirement System) and presumably the beneficiaries who do, or hope to, participate in promised PERS benefits.  And he names three big public sector unions in Oregon – OEA, AFSCME, and SEIU.  All of them, according to Richardson, are responsible for various evils that have befallen Oregon.

You can follow along with the back-of-the-envelope calculations in the spreadsheet provided (for illustration only, dates from different samples may not match by a couple of years).  In a nutshell, there are about 1,670,000 workers in Oregon – 100% of the workforce.  Non-retired PERS workers are about 13% of the workforce.  Retired PERS workers – 118000 of them – are not part of the work force but they are probably sensitive to schemes to tamper with their fixed income.  The three big unions make up 7% of Oregon workers.

The question remains, whom exactly does Richardson represent?  Like Richardson, I can name names (I already have).  A number of them don’t even live in Oregon but their money and their influence do.  They share an activist agenda with a few very wealthy Oregonians. That agenda includes “right to work” (suppressing collective bargaining and collective union action), tax cuts for business and the wealthy, and cutting support for expensive services like schools, public safety, and human services.

More important than Richardson or his candidacy is how emblematic his position is: ideological and simplistic (the cure for unemployment is more jobs).  He offers less than nothing because his “solutions” come at the expense of social services, schools, workers, retirees and poor people.  

The Sequester

The Sequester is the ultimate IED rigged to rip the foundation from the lives of Americans wherever they take for granted any services from the federal government.  This post will not explain the Sequester but merely point to it.  On the face of it, the government will suffer a thousand cuts to the tune of $109 billion a year for ten years.  We’ve seen or heard of some of them and fidgeted a little in our seats from the sound of it.  But this is just the first round.  There will be cuts upon cuts upon cuts.  We are not talking about cutting fat.  We are talking about amputations, and sick surgery, doing away with redundant kidneys, lobes of liver, all teeth and a small amount of jaw bone.

I have no desire to be the Cassandra of the blogosphere.  I will not harp on the Sequester by describing color and texture, as the quicksand rises to our nostrils.  Neither will I ignore it.  I’m opening up a new page on this blog entirely dedicated to the Sequester.  I will mostly re-blog without comment by providing links.

More Attacks on Public Schools: Pennsylvania

For reasons of space I can't include this entire article from Salon.  It is about yet another attack on public schools by state administrations, this time by rogue idealogue Governor Tom Corbett of Pennsylvania.  I urge you to read it.

MONDAY, AUG 19, 2013 04:01 PM PDT

“Indescribably insane”: A public school system from hell

Pennsylvania's right-wing governor drains public schools of basic funds -- and the sickening details will shock you

BY AARON KASE

Pennsylvania Gov. Tom Corbett(Credit: Associated Press)

Want to see a public school system in its death throes? Look no further than Philadelphia. 

Aaron Kase is a freelance writer and a reporter for Lawyers.com. Follow him on Twitter at @Aaron_Kase.

Please read the full article at Salon.

Invisible Face of the Long Term Unemployed

There is a website called ShadowStats.com published by John Williams which criticizes government methodology in processing economic data, particularly in regard to the unemployment rate which, ostensibly, is grossly understated.  Such a mission is automatically open to skepticism: What is the agenda here?  Is the reporter an anti-government crank or conspiracy theorist?  I think in this case that such a perfunctory dismissal is undeserved.  The posted unemployment rate, whether at a national or regional level, is hugely misunderstood and therefore, hugely misleading.

On the face of it, the idea of an unemployment rate is relatively simple.  A rate or percentage is a fractional part of some “whole thing” expressed as a decimal fraction (part of a hundred - %).  The “whole thing” of the unemployment rate is only that part of the population that is available – ready, willing, and able to work.  That’s the population that is actively working or actively looking for work.  They are called the Total Civilian Labor Force. The fractional part of that “whole thing” is the group of actively-searching potential workers who are currently unsuccessful at finding a job. They are Unemployed. 

Here are some counter-examples:  a 38-year old, stay-at-home mom with a PhD in immunology who resigned her $100,000/yr job 4 months ago is not unemployed.  She is unavailable and not counted.  A homeless veteran who fights PTSD every day, refuses benefits and services, and lives off his route of trash cans and dumpsters is identically not unemployed.  If you are below the radar, you are not unemployed.

There is a vast army of people who are not working and who are not in the same boat. “Discouraged workers” want desperately to have a job but they have stopped looking.  The profile and circumstances are unique for each individual.  What they have in common is that they fit the usual criteria for being unemployed but they are under the radar and they are not counted. They are not in the “whole thing” of the available labor force; they are not part of the posted percentage rate.  Discouraged workers render the official unemployment rate a poor reflector  – not only the state of the economy – but of the plight and prospects of millions trying to participate and provide for themselves or their families. 

An unemployment number that includes all the people who would go to work this afternoon if you offered them a job will range between 13% and 24%.  The difference depends on how alarmist or conspiratorial you want to be.  The Bureau of Labor Statistics number, U6, is  “total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”  For July 2013 that number (seasonally adjusted) is 14% - down from 14.9 in July 2012.  John Williams of ShadowStats, after some massaging of the data, comes up with a rate of 23.3% for June 2013.

Especially if you are one of the “marginally attached”, the argument of which number is right is totally irrelevant.  Objectively it is a true statement that both numbers are at Depression levels.  I guess it’s also irrelevant that a more inclusive unemployment rate report was discontinued in 1994.

There are a handful of gloomy clouds that darken the horizon for the long-term unemployed.  Two them have been mentioned here before – globalization and technology.  Globalization means that labor costs are cheaper somewhere else and that’s where a lot of the jobs go.  Technology provides state-of-the-art workplace solutions that make workers in living-wage jobs obsolete – even jobs that traditionally weren’t touched by robots: think accounting, the postal service, numerous middle-management functions or a full range of face-to-face or voice-to-voice personal services.

Possibly worse than either of these two is an employer bias against hiring someone who has been out of a job for more than six months.  The conventional wisdom is that “the longer a worker is unemployed, the more difficult it may become to find a job” because “over time, people who are unemployed tend to lose human capital and attachment to networks that could help them find work.”  (Apparently human capital means workplace skills.)  Whether or not this is revealed truth (and it may not be) it is an exceptionally high barrier for a hobbled job-seeker to jump over.

Recession is a technical term that refers to at least two consecutive quarters of a shrinking GDP.  So the recession (with a small “r”) ended in 2009.  Corporate profits are way up, especially because of diminished labor costs.  A few people are doing very, very well.  This is cold comfort for somewhere between a tenth to a quarter of the American workforce.

Who did not win from globalization and technology?

Globalization has opened markets and increased trade.  Technology has increased productivity and provided a universe of solutions and possibilities.  But there are winners and losers.  Corporations, CEOs and investors - big thumbs up.  The middle class - thumbs down.  Read this article in The Alantic to find out how and why.

Bash Brothers: How Globalization and Technology 

Teamed Up to Crush Middle-Class Workers

       By Derek Thompson

REUTERS

Profits have never been higher. Wages have never been lower.

Okay, that sounds like an awfully oversimplified analysis of the frustrating recovery. And it is sort of simplified. It's also sort of true. 

Go back to 1960, and corporate profits have never been higher while salary income has never been lower, as a share of GDP. Take a look here (graph via Floyd Norris):

This isn't a new trend, but something really did change in the last generation. Here's a graph of the growth in corporate profits, labor income, and GDP since 1970. As you can see, corporate profits took off in the 1990s, returned to earth after the tech bubble burst and then, in the 2000s, started jumping around like a bouncy ball dropped from a helicopter. Meanwhile, labor income fell further and further behind overall growth.

Sky-high corporate profit and stagnant wages aren't juxtaposing stories. They're the same story. And the main characters of that story are the familiar twin forces of globalization and technology, both of which have accelerated since the early 1990s.

In a sentence: Globalization (in particular, increased trade with China) has opened the doors to more consumers and more cheap workers while labor-saving technology has created more efficient ways to serve those consumers. As a result, the businesses are bigger, but the workers' share is getting smaller. Fifty years ago, the four most valuable U.S. companies employed an average of 430,000 people with an average market cap of $180 billion. These days, the largest U.S. companies have about 2X the market cap of their 1964 counterparts with one-fourth of the employees. That's what doing more with less looks like.

In macro explanations of the economy, globalizationandtechnology are often served up together in one big mixture, like another G&T you might know. But they don't have a monolithic effect. These are two distinct forces with distinct implications for distinct cities, according to new research by David Autor, David Dorn, and Gordon Hanson.

You have to define something to measure it, so they isolated hundreds of "commuting zones" (sort of like metro areas) and used the growth of Chinese imports as a proxy of globalization. Technological change they took as the decline in a city area's routine-intensive jobs -- e.g.: bookkeeping -- which are easily replaced by computers.

Here's the bumper sticker version of their conclusion: Globalization increases unemployment; technology increases inequality. 

Globalization: The authors found that metros with more exposure to Chinese trade -- mostly concentrated in the swoosh of states extending from Indiana down to the Gulf of Mexico and up through North Carolina -- saw significant job losses, both in manufacturing and overall. For every $1,000 increase in imports per worker, the share of people with jobs declined by 0.7 percentage points -- and more for non-college grads. As manufacturing jobs declined, demand for local services would decline, and thus job losses could extend into areas like retail and hotels.

Technology: The computerization of certain tasks hasn't reduced employment, the authors find. But it has reduced the availability of decent-paying, routine-heavy jobs. Middle-class jobs, like clerks and sales people and administration support, have disappeared as computers gradually learned to perform their routines more efficiently. But as those jobs disappeared, cities saw an increase in both high-skill work and lower-paid service sector work, leading to little overall change in employment. 

Back to the top two graphs. With globalization replacing American workers with Chinese labor and computers replacing middle-class workers with software programs, labor costs have fallen for companies while demand has grown all over the world. The result has been higher profits, not just for the finance companies who make up a growing share of domestic corporate earnings, but also for manufacturing companies and other multinational firms. It's a sad, inescapable truth that many international companies are thriving, not despite the incredible shrinking American worker, but because of him.

This article available online at:

http://www.theatlantic.com/business/archive/2013/08/bash-brothers-how-globalization-and-technology-teamed-up-to-crush-middle-class-workers/278571/

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