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“Low Wage Jobs Endanger Nothing”: Wall Street’s 2013 Bonuses Were More Than All Workers Earned Making The Federal Minimum

Purveyors of Ferraris and high-end Swiss watches keep their fingers crossed toward the end of each calendar year, hoping that the big Wall Street banks will be generous with their annual cash bonuses.

New figures show that the bonus bonanza of 2013 didn’t disappoint. According to the New York State Comptroller’s office, Wall Street firms handed out $26.7 billion in bonuses to their 165,200 employees last year, up 15 percent over the previous year. That’s their third-largest haul on record.

That money will no doubt boost sales of luxury goods. Just imagine how much greater the economic benefit would be if that same amount of money had gone into the pockets of minimum-wage workers.

The $26.7 billion Wall Streeters pocketed in bonuses would cover the cost of more than doubling the paychecks for all of the 1,085,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.

And boosting their pay in that way would give our economy much more bang for the buck. That’s because low-wage workers tend to spend nearly every dollar they make to meet their basic needs. The wealthy can afford to squirrel away a much greater share of their earnings.

When low-wage workers spend their money at the grocery store or on utility bills, this cash ripples through the economy. According to my new report, every extra dollar going into the pockets of low-wage workers adds about $1.21 to the national economy. Every extra dollar a high-income American makes, by contrast, only adds about 39 cents to the gross domestic product (GDP).

And these pennies add up.

If the $26.7 billion Wall Streeters pulled in on their bonuses last year had instead gone to minimum wage workers, our economy would be expected to grow by about $32.3 billion — more than triple the $10.4 billion boost expected from the Wall Street bonuses.

This immense GDP differential only speaks to one price we pay for Wall Street’s bonus reward culture. Huge bonuses, the 2008 financial industry meltdown made clear, create an incentive for high-risk behaviors that endanger the entire economy.

And yet, nearly four years after passage of the Dodd-Frank financial reform, regulators still haven’t implemented the modest provisions in that law to prohibit financial industry pay that encourages “inappropriate risk.” Time will tell whether last year’s Wall Street bonuses were based on high-risk gambles that will eventually blow up in our faces.

Low-wage jobs, on the other hand, endanger nothing. The people who harvest, prepare and serve our food, the folks who keep our hotels clean, and the workers who care for our elderly all provide crucial services. They deserve much higher rewards.


By: Sarah Anderson, Moyers and Company, Bill Moyers Blog, March 12, 2014; This post originally appeared at Other Words

March 13, 2014 Posted by | Economic Inequality, Executive Compensation | , , , , , , , , | 1 Comment

“Dangerous ‘Intended’ Consequences”: The Laughable Logic Behind Marco Rubio’s Plan To Limit Government Regulation

Republicans like to talk about government in the broadest, most abstract terms—arguing that it’s too big, too intrusive, and too expensive. The argument plays well politically, since the public tends to agree. But it also allows Republicans to avoid talking about real trade-offs—like the fact that government unemployment checks help people pay their bills while they are out of work, or that government guidelines for product safety keep kids safe when they play with toys. So perhaps it’s no surprise that the latest big idea from Republicans is a “national regulatory budget”—a proposal by Senator Marco Rubio that, however sensible sounding, could force government to scale back protections that people very much need.

Under Rubio’s plan, an independent agency would calculate the economic costs of all existing regulations. Congress would then set an upper limit on how much regulations can cost the economy—and use that figure to establish caps for each individual federal agency. What would that mean in practice? Imagine that the Environmental Protection Agency wanted to impose a new regulation on pollution. If the EPA was already at its limit, it would have to rescind an old regulation (or regulations) in order to make room.

“The essence of this proposal is a budget accounting mechanism—a one in requires one out. So one regulation in requires a similar regulation to be repealed,” said Amit Narang, a policy advocate at Public Citizen and an expert on the federal regulatory process. “The premise of the legislation is that we are currently at the perfect level of regulation. We don’t need anymore.”

One of Rubio’s goals is to force regulatory agencies to go back through old regulations and eliminate outdated and costly ones. There’s a strong case for that: Government agencies don’t do this very often and plenty of duplicative, cumbersome regulations exist. But Rubio’s method for forcing agencies to review past regulations is clumsy—and, according to many experts, dangerous. Among other things, the plan requires agencies to eliminate a regulation (or regulations) with the same economic cost as the new one. If the EPA wants to impose a major regulation (such as one on coal-fired power plants), it would have to rollback a significant one in return. “It’s not out of the realm of possibility to imagine this kind of budgetary system resulting in, say, the EPA, in order to put forward new chemical regulations—maybe they would have to repeal old lead regulations,” Narang said.

Rubio seems to think that Congress can set an arbitrary cap on the burden of regulations, at the precise level where agencies can ensure public safety without unduly hurting the economy. “This would force federal agencies to enact only those regulations that truly serve an essential role,” Rubio said in a speech at Google’s Washington D.C. headquarters on Monday. “It would put in place and enshrine the cost-benefit analysis and the regulatory framework that we are lacking right now.” Rubio is right that under his plan, federal agencies would have to evaluate their regulations and repeal the ones that had the worst cost-benefit ratio. But Congress could easily set the cap at a level which would force agencies to eliminate regulations whose benefits exceed their costs. That’s a dangerous unintended (or maybe intended) consequence of his proposal.

The ultimate problem with Rubio’s plan is that it actually has nothing to do with cost-benefit analysis. On the contrary, it sets a cap based solely on the economic costs of regulations, regardless of their benefits. Rubio wants agencies to evaluate the current costs and benefits of old regulations (they already do so with new ones), but he wants to ensure that even if the benefits exceed the costs, federal agencies will be forced to do away with many regulations anyway. Rubio says he wants to ensure a rigorous analysis of our regulatory system. What he really wants to do is rig the game.


By: Danny Vinik, The New Republic, March 11, 2014

March 12, 2014 Posted by | Federal Regulations, Marco Rubio | , , , , , | Leave a comment

“Killing Germs, Not Jobs”: A New Report Confirms That Business Fears About Paid Sick Day Laws Are Unfounded

Every time the idea of implementing a paid sick days law – which requires that workers earn paid time off to use when they fall ill – gets  floated somewhere, the same thing occurs: Businesses and conservative lawmakers cry bloody murder about the effect the law will supposedly have on small businesses and job creators. Every mom and pop store will have to close, they say! Job creators will flee elsewhere to escape the job-killing mandate! Oh, the humanity! (Check out the Cry Wolf Project for some choice quotes.)

Reality, though, stubbornly refuses to conform to the script. For instance, when San Francisco adopted a paid sick days law in 2007, its job growth actually outperformed surrounding counties that did not have a similar law. (This isn’t to imply that having paid sick leave caused any job growth, just that it didn’t hurt either.) And a new report from the Center on Economic and Policy Research shows that Connecticut experienced much the same thing after becoming the first state to adopt a paid sick days law 18 months ago.

Gathered via both surveys and site visits, the Center’s data show businesses faced extremely modest costs – if any – due to the sick days law. As the Center’s Eileen Appelbaum, Ruth Milkman, Luke Elliott and Teresa Kroeger wrote:

Most employers reported a modest effect or no effect of the law on their costs or business operations; and they typically found that the administrative burden was minimal. … Despite strong business opposition to the law prior to its passage, a year and a half after its implementation, more than three-quarters of surveyed  employers expressed support for the  earned paid sick leave law.

Not only that, but the data show that “in the period since [Connecticut’s law] took effect, employment  levels rose in key sectors covered by the  law, such as hospitality and health services, while employment fell in manufacturing, which is exempt from the law.” Some job killer! Business warnings about employees abusing their sick leave also failed to come true.

On an economic level, this actually makes perfect sense. Sick employees coming to work and infecting others reduces productivity, as does the constant turnover if workers have to quit to recover from an illness or are fired for missing time while sick. In addition, most workers already have paid sick leave, so the disruptive power of applying it to the usually low-income, service sector workers who don’t is low. San Francisco, New York, Seattle, Jersey City and Washington, D.C. all have some form of paid sick leave requirement, and all of them continue to have functioning economies. Plus, paid sick day laws have the added benefit of cutting down on the transmission of diseases, including those of the decidedly deadly variety.

This report is actually the second knock this week to the notion that business regulation automatically increases costs and kills jobs. A Bloomberg News report yesterday noted that in the 15 years since Washington state voted to gradually increase its minimum wage, its job growth has outpaced the national average, with jobs even growing in the sectors thought particularly susceptible to a minimum wage hike, such as food services. Even the recent Congressional Budget Office report showing that a national minimum wage increase would cause some workers to drop out of the labor force or reduce their hours showed benefits that vastly outweigh any cost.

The moral of the story is this: The Econ 101 notion of more regulations or higher mandatory wages automatically translating into fewer jobs and higher business costs doesn’t actually hold true out in the real world. Paid sick days laws actually kill germs, not jobs.

By: Pat Garofalo, Washington Whispers, U. S. News and World Report, March 6, 2014

March 9, 2014 Posted by | Businesses, Jobs | , , , , , , , | 1 Comment

“The Misguided War On Envy”: Conservatives Love To Hate The Envy Their Policies Caused

Conservatives have launched a War on Envy. This week, Arthur Brooks, president of the American Enterprise Institute lamented “a national shift toward envy” which, he said, would be “toxic for American culture.” Venture capitalist Tom Perkins recently made the same point in much more inflammatory terms: He equated those who criticize rising inequality with Nazis persecuting Jews, a salvo attack that quickly drew censure from those now running KPCB, the VC powerhouse that he once led.

Both conservatives and progressives agree on basic facts: The percentage of Americans who see this country as a land of opportunity, in which hard work leads reliably to material reward, is falling rapidly. This shift brings envy, resentment, cynicism and despair. And these negative emotions undermine our social structure and bring unhappiness.

But that’s where the agreement ends. Conservatives insist the problem is one of perception. They think that if the media would just stop talking about inequality things would get better. They say that if our leaders (read: President Obama) would simply offer up “an optimistic vision in which anyone can earn his or her success,”  the envy would dissipate and everything would be just fine.

That is not going to work.

It won’t work because the sense that the dream is slipping away, the sense of diminished mobility, of a system that’s increasingly rigged, is not a fantasy that can be dispelled with clever rhetoric. It is the everyday, lived experience of millions of Americans. The only consequence of elites refusing to discuss it will be to confirm that those elites are indeed out of touch with ordinary Americans and their problems. That aloofness is reflected in the appallingly low approval ratings of the current Congress.

Brooks and other influential conservatives fail to acknowledge that the envy they lament, and the loss of opportunity that fuels it, results directly from the policies they have championed over the years. Consider higher education, which is acknowledged by both liberals and conservatives as the single most powerful force for economic mobility. Conservatives have succeeded in slashing taxes at all levels of government, and these cuts have gutted state funding of higher education.

Tuitions have spiked as a result. The soaring cost has put college out of reach for many middle-class families and nearly all of the poor and near poor. In 1971 an American family at the median income level had to pay 13 percent of its annual income to send each child to a public four-year university. That’s tough but it’s doable, with considerable sacrifice, savings, loans, a part time job and so on. Now the cost has more than doubled to 29 percent of income. This puts college out of reach for many, and leads to students graduating with staggering debt burdens. To put it mildly, this much debt does not encourage entrepreneurship.

That’s not the only way that conservative policies have limited upward mobility and destroyed confidence in the American Dream. Conservatives have long championed corporate tax policies that accelerate the harsher aspects of globalization, outsourcing and offshoring. As a result, American workers in many industries have seen their wages stagnate even as productivity has gone up, profits have soared and those who hold stock and options have done exceedingly well. Hard work now means breaking even for most Americans, rather than pulling ahead.

Here’s another example: Conservatives have championed individual tax structures that reduce the share of taxes born by the richest and increase the share born by the rest. Tax law changes such as the reduction in top tax brackets, lowering of capital gains rates and elimination of estate taxes confirm many Americans’ suspicion that the deck is indeed stacked against them.

I built and enjoyed a successful career in business before becoming an advocate for a sustainable economy. One of the things I learned in my career was to look for the true root cause of problems and not waste time attacking symptoms. Another thing I learned was that if what you’re doing isn’t working, stop doing it and try something else.

We are not going to bring optimism back to ordinary Americans by belittling those who discuss the real state of our economy. Waging war on envy won’t make people more confident in their job prospects and more entrepreneurial in their careers. Not if the reality of our tax, trade, labor and other policies is to strip away the rewards of working Americans and concentrate more and more wealth at the top.

It’s good that both left and right want to make the American dream credible again for more people. It’s good that both sides see loss of optimism as a problem. But diminished opportunity won’t be solved by refusing to talk honestly about its causes, and envy won’t be eliminated by more of the policies that kindled it in the first place. The success of the American economy and the American political system depends on people having the genuine conviction, based on the reality of their day-to-day experience, that hard work brings upward mobility.

By: David Brodwin, U. S. News and World Report, March 6, 2014

March 9, 2014 Posted by | Conservatives, Economic Inequality | , , , , , , , , | 1 Comment

“Almost Anything Would Be More Important”: Memo To Fiscal Hawks, The Long-Term Deficit Doesn’t Matter

Over the weekend I got in a long argument with some ally of the deficit hawk group Fix the Debt on Twitter, and while most of the conversation turned on who should be blamed for mass unemployment, it did reach an interesting place in one respect. This person took as a given that long-term deficit reduction is a policy priority of the first rank — a belief that is very common among America’s elite.

This priority is misguided both in detail and in general. Here’s why.

There are two points to make here: First, long-term deficits are entirely about the rising cost of health care. Centrist elites insist that this is a reason to make our social insurance programs less generous, but the reality is that America’s high prices are driven by inefficient service provision, not by excessively generous programs. American health care is unfair, monopolistic, and captured by specialist doctors, and our policies are designed poorly, which is why we pay about half again as much as the next-most-expensive developed nation for what is in fact a pretty threadbare safety net.

This point is crucial. What it means is that making our social insurance more stingy, by raising the Medicare eligibility age for example, will accomplish almost nothing. Unless you tackle the skyrocketing cost problem, the budgetary headroom created by benefit cuts will be eaten almost immediately by rising prices. In other words, no matter how many grannies you put into the poorhouse, on predicted trends eventually a single ibuprofen will cost the entire federal budget. (Unless, of course, you just repeal all social insurance altogether and let sick, poor, and old people go bankrupt and die in the hundreds of thousands per year.)

Fortunately, we just passed a gigantic health care reform package. You might have heard of it: It’s called ObamaCare, and it seems to be helping slow health care inflation.

Second, even if we set that issue aside and talk about the Platonic ideal of long-term deficits, there again the case for action is weak at best. The political problem is that America does not actually have the consensus necessary to reduce deficits on a long-term basis, despite the constant whining about it one hears all the time on cable news. One of our two political parties is composed of total hypocrites on this issue — just look at Paul Ryan. It is a near-certainty that any long-term work on the deficit would be immediately squandered on tax cuts for the rich the moment Republicans got a chance — it’s what happened in 2001.

But even on the merits, if you actually run through the economic reasoning (PDF), the case for worrying about the long-term deficit is weak at best. The U.S. is indebted in its own sovereign currency and cannot go bankrupt. Inflation could be a worry, but given current mass unemployment it’s a hypothetical concern at best.

So don’t worry about the deficit in 2050 or whatever. People ain’t got no jobs. People ain’t got no money. That’s what matters.


By: Ryan Cooper, The Week, March 3, 2014

March 5, 2014 Posted by | Deficits, Health Care Costs | , , , , , , , | Leave a comment


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