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“Power And Paychecks”: There’s No Excuse For Wage Fatalism; We Can Give American Workers A Raise If We Want To

On Wednesday, McDonald’s — which has been facing demonstrations denouncing its low wages — announced that it would give workers a raise. The pay increase won’t, in itself, be a very big deal: the new wage floor is just $1 above the local minimum wage, and even that policy only applies to outlets McDonald’s owns directly, not the many outlets owned by people who bought franchises. But it’s at least possible that this latest announcement, like Walmart’s much bigger pay-raise announcement a couple of months ago, is a harbinger of an important change in U.S. labor relations.

Maybe it’s not that hard to give American workers a raise, after all.

Most people would surely agree that stagnant wages, and more broadly the shrinking number of jobs that can support middle-class status, are big problems for this country. But the general attitude to the decline in good jobs is fatalistic. Isn’t it just supply and demand? Haven’t labor-saving technology and global competition made it impossible to pay decent wages to workers unless they have a lot of education?

Strange to say, however, the more you know about labor economics the less likely you are to share this fatalism. For one thing, global competition is overrated as a factor in labor markets; yes, manufacturing faces a lot more competition than it did in the past, but the great majority of American workers are employed in service industries that aren’t exposed to international trade. And the evidence that technology is pushing down wages is a lot less clear than all the harrumphing about a “skills gap” might suggest.

Even more important is the fact that the market for labor isn’t like the markets for soybeans or pork bellies. Workers are people; relations between employers and employees are more complicated than simple supply and demand. And this complexity means that there’s a lot more wiggle room in wage determination than conventional wisdom would have you believe. We can, in fact, raise wages significantly if we want to.

How do we know that labor markets are different? Start with the effects of minimum wages. There’s a lot of evidence on those effects: Every time a state raises its minimum wage while neighboring states don’t, it, in effect, performs a controlled experiment. And the overwhelming conclusion from all that evidence is that the effect you might expect to see — higher minimum wages leading to fewer jobs — is weak to nonexistent. Raising the minimum wage makes jobs better; it doesn’t seem to make them scarcer.

How is that possible? At least part of the answer is that workers are not, in fact, commodities. A bushel of soybeans doesn’t care how much you paid for it; but decently paid workers tend to do a better job, not to mention being less likely to quit and require replacement, than workers paid the absolute minimum an employer can get away with. As a result, raising the minimum wage, while it makes labor more expensive, has offsetting benefits that tend to lower costs, limiting any adverse effect on jobs.

Similar factors explain another puzzle about labor markets: the way different firms in what looks like the same business can pay very different wages. The classic comparison is between Walmart (with its low wages, low morale, and very high turnover) and Costco (which offers higher wages and better benefits, and makes up the difference with better productivity and worker loyalty). True, the two retailers serve different markets; Costco’s merchandise is higher-end and its customers more affluent. But the comparison nonetheless suggests that paying higher wages costs employers a lot less than you might think.

And this, in turn, suggests that it shouldn’t be all that hard to raise wages across the board. Suppose that we were to give workers some bargaining power by raising minimum wages, making it easier for them to organize, and, crucially, aiming for full employment rather than finding reasons to choke off recovery despite low inflation. Given what we now know about labor markets, the results might be surprisingly big — because a moderate push might be all it takes to persuade much of American business to turn away from the low-wage strategy that has dominated our society for so many years.

There’s historical precedent for this kind of wage push. The middle-class society now dwindling in our rearview mirrors didn’t emerge spontaneously; it was largely created by the “great compression” of wages that took place during World War II, with effects that lasted for more than a generation.

So can we repeat this achievement? The pay raises at Walmart and McDonald’s — brought on by a tightening job market plus activist pressure — offer a small taste of what could happen on a vastly larger scale. There’s no excuse for wage fatalism. We can give American workers a raise if we want to.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, April 3, 2015

April 5, 2015 Posted by | Businesses, Labor, Wages | , , , , , , , | 1 Comment

“How To Really Rein In The Super Rich”: Giving Everyday People Equal Input With Business And The Rich In Policy Deals

Thomas Piketty, meet Bobby Tolbert.

Piketty is the French economist who rocked the worlds of social and economic policy with his new book, Capital in the Twenty-First Century. In it, Piketty documents with meticulous detail—and data—how we are returning to an era of extreme inequality where a few dynasties amass great fortunes through inheritance and everyone else withers and suffers.  Such gross inequality, Piketty argues, is not an accident but inherent in capitalism and can only be addressed through government intervention.

All of which is plainly true.  As Paul Krugman has pointed out, conservatives chomping at the purse to refute Piketty have come up with nothing more than name-calling.

Pretty much everyone else agrees gaping inequality is a massive problem in the world and that something has to be done about it.  Heck, even the Pope tweeted, “Inequality is the root of social evil.”  Not the devil.  Inequality!

What the vast majority, who agree inequality is a crisis, do not agree on is what to do about it.  Piketty proposes a global wealth tax as well as a progressive income tax that approaches rates, at the top end, closer to what the United States had in place when prosperity was more broadly shared during the ’50s and ’60s.  They’re good ideas, but only a start.  What they’re missing is a Bobby Tolbert.

Bobby Tolbert is member of the community organization VOCAL NY—a grassroots organization that builds political power among New Yorkers affected by HIV/AIDS, drug use and mass incarceration.  Tolbert was in Washington, D.C., this weekend to speak at the annual meeting of National People’s Action, a network of community organizations made up of groups like VOCAL.

Tolbert spoke eloquently about how gross inequality is destroying communities across America.  [Full disclosure: I was at the event to help Tolbert and other grassroots leaders practice and deliver their speeches.]  Tolbert shared his own story, one only made possible by state-funded HIV medications that are constantly threatened by budget cuts.  Tolbert works as a peer health educator but is paid so little that he qualifies for public support.  Recently, even those few public benefits were taken away because Tolbert transitioned from supportive housing to independent living—a move you would think everyone would be in favor of, but which meant Tolbert’s government health benefits being jeopardized.  He’s currently fighting to have them reinstated.

“Big corporations and the rich are fine with people like me dying,” said Tolbert.  “The only problem with that is I’m not ready to die.”

And while for Bobby Tolbert, public supports literally make the difference between life and death, the situation is pretty much as dire for millions of Americans who increasingly rely on food stamps and Medicaid and housing assistance to survive. At the same time our deliberately and aggressively unequal economy has pushed millions more Americans toward poverty and they need more help than ever, conservative corporate elites are pushing for public assistance to be slashed. Tolbert agrees with Piketty—and the majority of American voters—about taxing the wealthy to spread assistance and opportunity to the poor and working class.

But Tolbert argues for something that Piketty and most of the academic and political debate about inequality seem to miss—that the nature of our economy, the rules of the game that currently incentivize unequal distribution, will never change unless the people making those rules, the people seated at the tables of power, change as well. In other words, as long as economic policy decisions are made by Wall Street and their proxies (see, e.g., Treasury Secretaries Robert Rubin, Henry Paulson and Timothy Geithner) then Thomas Piketty’s ideas won’t be included in the discussion, let alone Bobby Tolbert’s.

“We need a new political system,” Tolbert said, “one that takes money out and puts people in.”  Yes, that means campaign finance reform and reducing the barriers to voting, rather than increasing them.  That would help get more everyday Americans into positions of power.  But Tolbert’s vision also includes participatory budgeting in which communities, not special interests, set the government funding agenda—which is already happening in New York. And it means people’s organizations commanding and being given equal input with business interests and the rich in the smoke-filled rooms where policy deals are cut.  It means that when the Federal Reserve is weighing interest rates and the Senate Budget Committee is evaluating banking regulations, they should as a matter of habit meet with economists and CEOs and the everyday Americans whom their decisions affect most.

In his speech, Tolbert pointed to the diversity of the thousand-plus community leaders from around the country gathered in the auditorium in front of him.  “We represent every race, every gender, every sexual orientation—in fact, we represent America better than the people who are running it.”  In front of Tolbert were family farmers and immigrants and folks on welfare and small-business leaders—all of whom have stories to share about the ravages of inequality and solutions to offer.  Academic debates and data are useful and important, but until Bobby Tolbert and other everyday people like him are included in the discussion and political process, nothing will ever truly change.

 

By: Sally Kohn, The Daily Beast, April 29, 2014

 

 

April 30, 2014 Posted by | Businesses, Economic Inequality, Wall Street | , , , , , , , | 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 Scourge Of The Businessman Politician”: I’m No Politician, But I Can Clean Up Washington

Attentive readers will recall that among my many pet peeves (and being able to complain to a wide circle of people about your pet peeves is one of blogging’s greatest fringe benefits) is the candidate who proclaims that you should vote for him because he’s “a businessman, not a politician.” As though the fact that there are a lot of shady car mechanics out there means that when you need a new timing belt, the best person for the job would be a florist or an astronomer, because they’re not tainted by the car repair racket.

I’ve written at some length about why exactly success in business doesn’t prepare you to be a good senator or governor, but the short version is that the two realms are extremely different. So it isn’t too surprising that when businesspeople decide to run for office, most of the time they fail. They come in with a lot of money, flush it down the toilet on an overly expensive campaign, and quickly discover that there is a whole set of skills necessary for success that they don’t possess. When you try to think of business leaders who got elected, then used their business acumen to do things differently and really made a major impact, it’s hard to think of many names other than Michael Bloomberg. Here and there you’ll find someone like former Tennessee governor Phil Bredesen who did pretty well, but more common is candidates like Ross Perots, or Meg Whitman, or Linda McMahon, or Al Checci (there’s a blast from the past for you political junkies). They think, “Sure I can do this better than those empty suits—I’ve made a billion dollars!” And then they lose.

Not every time, of course, but most of the time. Which is why Democrats should be pleased to hear this:

Republicans are banking on businessmen to help them retake the Senate in 2014.

A half-dozen top GOP candidates boast records as wealthy businessmen and entrepreneurs. If voters decide they’re successful job creators on Election Day, Republicans could be on their way to the six seats they need to win the upper chamber.

Now maybe these candidates are all going to turn out to be just aces. But if history is any guide, more than a few of them are likely to be terrible at running for office. For many of them it’s their first time, which is often a disaster, and it’s particularly hard to have your first run for office be a high-profile Senate race with lots of pressure and press scrutiny. (The list of highly successful politicians who had a loss in their first run for office, or one of their first runs, is a notable one. It includes Barack Obama, George W. Bush, and Bill Clinton, among many others. It seems that early loss is a highly edifying experience.)

It’s easy to see why this is happening. These candidates are attractive to party leaders because they bring their own money. Republicans have also spent years creating a cult of the businessman, trying to convince others, and no doubt convincing themselves, that those who succeed in business are the most virtuous, brilliant, and generally admirable of all human beings. And that may extend to primary voters, to a degree anyway. Which gives them a good shot to make it to the general election, and which also means that we’re going to have to endure a lot more of that “I’m no politician, so I can clean up Washington!” crap in this election. But what else is new.

 

By: Paul Waldman, Contributing Editor, The American Prospect, February 26, 2014

March 3, 2014 Posted by | Businesses, Politics | , , , , , , | 1 Comment

“Not A Creator Or Manufacturer In The Lot”: America’s Would-Be Aristocrats Forget The Most Important Thing About Business

To paraphrase Tolstoy, every successful small business shares the same traits. And they all begin with high-quality employees. I’m thinking of three local establishments where I’ve traded for years: an auto repair garage, a dentist’s office, and a one-size-fits-all country store where I buy cattle- and horse-feed.

Along with just about everything else the aptly-named “Toad Suck One-Stop” might conceivably carry: from crickets and minnows to motor oil, pain remedies, kitty litter and homemade sandwiches. If you get up early enough, they’ll even fix you breakfast while somebody else loads feed sacks into your truck. (Toad Suck is a place name designating a long-ago ferryboat stop on the Arkansas River.)

It’s much the same at George Jett’s auto garage down in Little Rock; also at my dentist (his name is Lamar Lane). The first thing you notice is familiar faces. People who work at these places stay for years. And they do so because they’re well-paid, earn decent benefits, and are treated respectfully. So they like their jobs, take pride in their work, and are glad to see familiar customers.

Now I’m not going to lie that I love going to the dentist. But I do like feeling among friends, even if it means hearing Dr. Lane carry on about his LSU Tigers. (Because my wife was born in Baton Rouge, where her daddy played ball, I get a double dose.)

Something else: how a business treats employees also tends to be a reliable predictor of how they treat customers. Dr. Lane does high-quality work and stands by it. If a crown breaks, he replaces it free without asking if you were shelling pecans with your teeth.

My man George Jett hires good mechanics, values their skills, and guarantees their work. If the rattle’s still there, he’ll drive the vehicle around the block and then put it back on the lift to figure out why—also at no additional charge.

Jason down at the One-Stop isn’t exactly a philanthropist — at least not where Bermuda grass hay and Canadian night-crawlers are concerned. Keeping a business with so many moving parts running requires constant attention to detail. New hires that stand out back smoking when shelves need restocking tend not to last. Loyal longtime employees won’t cut them much slack.

Gas is cheaper at the Walmart across the river in Faulkner County, but the One-Stop’s pumps stay busy. It’s the community’s unofficial town hall. If you want to know who’s looking for a lost blue heeler or how Holly’s orphaned baby raccoons are doing, it’s got to be the One-Stop.

Ordinarily, such commonplaces would hardly be worth recording. So there are friendly folks at the country store.

Who’d have thunk it?

Unless, that is, you live in the United States of America, a large proportion of whose tycoon class appears determined to drag us back to the Gilded Age.

If they gave a Scrooge McDuck Award for the nation’s greediest knucklehead, the 2013 winner would be Home Depot’s billionaire founder Kenneth Langone, a Catholic who voiced public alarm at Pope Francis’s seeming enthusiasm for the gospel of Matthew 19. That’s where Jesus observes that “it is easier for a camel to go through the eye of a needle than for someone who is rich to enter the kingdom of God.”

The Pope didn’t cite that verse, nor discuss politics as such. However, his encyclical Evangelii Gaudium did warn against “crude and naive trust in the… sacralized workings of the prevailing economic system.”

What, not worship money? Never mind that this is elementary Christian doctrine. Langone warned that American plutocrats don’t want to hear about it, even in church.

You may not be surprised this same worthy also regards President Obama as “petulant” and “unpresidential.” His hawklike visage appeared prominently in a Forbes photo lineup of “Anti-Obama Billionaires.”

Scrutinizing the list, I noticed that almost everybody on it made his pile either by manipulating money or squeezing minimum-wage workers dry: casino operators, real estate speculators, corporate buyout scammers, hedge fund geniuses, fast-food franchisers, big-box retailers, and Donald Trump.

Not a creator or manufacturer in the lot. This is our would-be new American aristocracy, largely bereft of — indeed actively hostile toward — the retail virtues I’ve celebrated. (None of whose practitioners necessarily share my partisan views; I’m talking morals here, not politics.)

But the good news is that according to Adam Davidson in the New York Times, old-fashioned business ethics may be making a comeback through the unlikely agency of a Turk.  According to Davidson, the going thing in corporate circles is The Good Jobs Strategy, a book by Zeynep Ton, an M.I.T. business professor.

Ton argues that what some call the “Costco” strategy of hiring better-trained, better-paid employees “will often yield happier customers, more engaged workers and—surprisingly—larger corporate profits.”

 

By: Gene Lyons, The National Memo, January 8, 2014

January 9, 2014 Posted by | Businesses, Economic Inequality | , , , , , , , | 2 Comments

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