“Debunking The Myth”: Doable, Efficient, And Necessary, A Higher Minimum Wage Will Not Reduce Jobs
As fast-food workers strike across the nation, progressives must separate fact from fiction in order to secure a living minimum wage.
Fast-food workers are going on strike from New York to Seattle to demand higher wages, highlighting the never-ending controversy over the consequences of raising the minimum wage. Many news stories seem to suggest that economists have decided a higher minimum wage will cause job loss. However, with more analysis, we undercover the truth: there is no clear link between a higher minimum wage and reduced employment.
John Schmitt, a Senior Economist at the Center for Economic and Policy Research, reported in February 2013 that multiple meta-studies (studies that use statistical techniques to analyze a large number of separate studies) found that for both older and current studies alike, there is no statistical significance in the effect of an increased minimum wage. Put plainly, if the effect is not statistically significant, then there is no proven effect— increases in the minimum wage do not cause job loss.
Accordingly, a few weeks ago, over 100 economists at organizations ranging from the Center for American Progress to Boston University signed a petition in support of increasing the minimum wage. They present current research from well-established organizations such as the National Bureau of Economic Research that shows there are no negative employment effects from minimum wage increases. This includes the most comprehensive data available, based on the increasingly accurate testing that has occurred as more and more states increase minimum wage levels. Even more importantly, this recent series of studies uses cutting-edge econometric techniques to control for extraneous variables such as economic downturns and geographic effects. When economists do that, they find that minimum wage increases do not reduce employment.
Logically, this makes a lot of sense. A higher minimum wage is a win-win situation economically: Employees have more money to be consumers and are more productive, while businesses wind up reducing costs in the long run, since they won’t have to spend as much money hiring and training new workers (by analyzing data from five separate studies, economists representing the Political Economy Research Institute found that McDonald’s could easily make up for the costs of a higher minimum wage with a mere five-cent price increase on Big Macs). It’s just as Henry Ford realized—when he paid his workers more, they became part of his customer base, making his company even more profitable. Increasing the customer base and expanding customer pockets helps stimulate the entire economy, badly needed in the current recession.
So if we have no evidence linking high wages to job loss, our next question is: Are higher wages needed as a poverty reduction tool?
Currently, the 2013 federal poverty guidelines stipulate $23,550 for a family of four as poverty level. A $7.25 minimum wage currently nets the protesting fast-food workers $15,080 a year if the workers are lucky enough to work 40 hours a week. In a typical household with two parents and two children, parents who make $7.25 an hour earn far below the living wage of $13.55, according to an MIT wage calculator. The numbers become even starker when you separate out true living expenses: food, medical care, housing, transportation, and other needed expenses add up to a required $37,540 annual income before taxes, which is notably different from the poverty guidelines that the U.S. Department of Health & Human Services set. Even if the two parents worked 40 hours a week for 52 weeks, they would only earn $30,160 in total, significantly below the resources they need to live. Moreover, these estimates are only for a typical nuclear family. The struggle that single-income families, large families, or families living in high-cost cities go through is exponentially higher.
The buying power of the minimum wage has steadily been waning due to the effects of inflation for the past 40 years. When prices increase, a worker’s paycheck buys less and less. To put it in perspective, we look to another brief by John Schmitt: If minimum wage had continued to match productivity growth, it would have been $21.72 per hour in 2012. If we only adjust for the cost of living, a minimum wage pegged to inflation would be $10.52.
A huge bulk of evidence makes the case that increasing the minimum wage is a doable, efficient, and necessary change for the economy. This change needs to happen now. We as Americans have a moral obligation to make sure that other Americans who are working hard to support themselves and their families are able to make a living.
By: Emily Chong, The National Memo, August 8, 2013
“Rick Perry, Job Poacher”: Southern Grand Larceny With A Very Old Pedigree
Poaching on the labor of others is an ancient and honored Southern tradition, whose antebellum antecedents Texas Governor Rick Perry has recently brought up-to-date with a $1 million advertising campaign to encourage businesses to pack up and come on down to the Lone Star State where the taxes are lower than a worker’s wages.
Called “Texas is calling, your opportunity awaits,” the 30-second TV spots feature business leaders and celebrities like Dallas Cowboys running back Emmitt Smith calling Texas the “land of opportunity” and home of “creative renegades.”
On Fox News, Perry boasted, “Texas has the best business climate in the world. Over the last 10 years, 30% of all the new jobs created in America were in Texas.”
Wooing business from other states is all part of “healthy competition,” says Perry. “It’s the 50 laboratories of innovation that are out competing for the jobs to keep America at the front of the race,” the Governor insists.
Yet, when mayors and governors elsewhere talk about “growing” their economy they mean that literally – as in, creating new jobs where none existed before, from the ground up, nurtured by public-private partnerships, public investments in R&D and good schools, and other initiatives that create real value.
In Boston where I work, the South Boston Seaport District is one of the hottest real estate markets in the country right now, says Moody’s Investor Services, thanks in part to steps that Mayor Tom Menino has taken to make the area a magnet for entrepreneurs — an “Innovation District” — where start-up companies with bright ideas but not much cash can get reasonable financing and available space to help their businesses grow.
Just last week, the Boston Herald reported that the Small Business Administration called Menino’s Innovation District a model for other cities to follow who are interested in creating a cutting-edge start-up culture — “a Mecca for people from all over the world to launch out and build the next big company.”
He credited the city’s Innovation District initiative for creating a “community of entrepreneurship and creativity.”
Winslow Sargeant, chief counsel for the federal agency’s Office of Advocacy, said: “This ecosystem of innovation brings together entrepreneurs to share ideas and bring their vision to the marketplace. It presents a successful model and an ideal avenue for the public and private sectors to partner together for economic success,” he said.
In just three years, Boston’s Innovation District initiative has brought more than 4,000 jobs to the waterfront area.
Boston has become a great place to start a business, said Sargeant, who grew up in the city. “If someone wants to start a company or if someone wants to explore what it takes to, there are people that they can talk to and places they can go to network with others.”
Among the biggest benefits of the district, the Herald says, are the start-up incubators and accelerators that offer shared work spaces. “Magic things happen” when entrepreneurs get together and share work space and ideas, said Ben Einstein, founder of Bolt, one of the companies now operating in the district.
There is another economic development model, however, one favored by Governor Perry and governors throughout the South: Don’t make money the old fashioned way by earning it or actually “creating” anything. Let the Yankees do that with their fancy schools and business incubators. Then, when companies are off the ground and up and running, steal them away like cattle-rustlers in cross-border raids by luring owners with promises of lower taxes, fewer environmental regulations and protections against uppity workers who want a fair day’s pay for an honest day’s labor.
That is what Perry really means when he says that 30% of all the “new” jobs “created” in America were in Texas – proof of which is the $1 million Texas is now spending to steal other state’s jobs away from them.
There is political as well as economic method to Governor Perry’s madness since his desperado tactics are never aimed against other Republican governors, but only blue state Democratic ones in target-rich “enemy” territory.
Perry recently traveled to New York and Connecticut on a four-day trip to lure businesses away from those states. The trip comes on the spurred-heels of earlier raids into California and Illinois where Perry showed ads depicting an emergency exit door under the headline: “Get out while you still can.”
Both Perry’s trips and the ad campaign are being paid for by a group called TexasOne, which is a coalition of corporations and local chambers of commerce.
This sort of Southern grand larceny has a very old pedigree. A cold and forbidding climate like New England’s grows a population that must be skilled at living by its wits and the “Yankee Ingenuity” that cemented New England’s reputation as home to world-class education, the textile mills of Lawrence and Lowell that gave birth to America’s industrial revolution, and the Yankee traders who invented, then sailed, world-famous clipper ships like the Flying Cloud and Sovereign of the Seas.
A hot and humid climate like the South, rich in natural resources, on the other hand, tends to spawn a class of indolent, parasitic oligarchs whose labor saving inventions consist almost entirely of exploiting the labor of others.
In short, what we have in New England is called “entrepreneurial capitalism,” which means using the state as partner to nurture good ideas and develop them into profitable companies, perhaps whole new industries.
What Governor Perry exports from Texas, on the other hand, is “crony capitalism,” using the power of the state to enrich and reward powerful insiders, not by creating new opportunities but by lowering the rewards workers get from those opportunities that already exist.
And now that the GOP has become a Southern Party, Republicans have inherited the most disreputable features of what author Michael Lind calls this “Southernomics” as well.
It was not always thus. Between the 1930s and 1970s, so-called “modern Republicans” like Dwight Eisenhower and Richard Nixon tried to level the playing field among the states — not through regressive tax and labor policies — but through revenue sharing and other public investments in infrastructure, writes Lind in Made in Texas: George W. Bush and the Southern Takeover of American Politics.
Ironically, then, modern Republicans and New Deal modernists built an infrastructure for the South and West that traditional conservatives inherited and were able to use for their own “illiberal purposes,” says Lind.
It is no coincidence, says Lind, that the two biggest companies to fail during the Bush administration – Enron and WorldCom – were both Southern.
Entrepreneurial or “bourgeois” capitalism is alien to Texas and other Southern states, he says, because “crony capitalism is the only kind familiar to the Southern oligarchs, decedents of planters who could not balance their books and knights who despised mere trade.”
The lesson from these scandals, says Lind, as well as Governor Rick Perry’s politically-motivated raids against Democratic economies, is not that capitalism is unworkable, but that “capitalism only works where there are real capitalists.”
By: Ted Frier, Open Salon Blog, July 4, 2013
“Public Goals, Private Interests”: In Debt Campaign, Business Executives And Former Legislators Defending Their Narrower Interests
When Jim McCrery, a former Louisiana congressman, urged lawmakers last month to pursue entitlement cuts and tax reform, he was introduced on television as a leader of Fix the Debt, a group of business executives and onetime legislators who have become Washington’s most visible and best-financed advocates for reining in the federal deficit.
Mr. McCrery did not mention his day job: a lobbyist with Capitol Counsel L.L.C. His clients have included the Alliance for Savings and Investment, a group of large companies pushing to maintain low tax rates on dividend income, and the Win America Campaign, a coalition of multinational corporations that lobbied for a one-time “repatriation holiday” allowing them to move offshore profits back home without paying taxes.
In Washington’s running battles over taxes and spending, Mr. McCrery and his colleagues at Fix the Debt have lent a public-spirited, elder-statesman sheen to the cause of deficit reduction. Leading up to the fiscal negotiations, they set up grass-roots chapters around the country, met with President Obama and his aides, and hosted private breakfasts for lawmakers on Capitol Hill. In recent days, Fix the Debt has redoubled its efforts, starting a new national advertising campaign and calling on Mr. Obama and Congress to revise the tax code and reduce long-term spending on entitlement programs.
But in the weeks ahead, many of the campaign’s members will be juggling their private interests with their public goals: they are also lobbyists, board members or executives for corporations that have worked aggressively to shape the contours of federal spending and taxes, including many of the tax breaks that would be at the heart of any broad overhaul. While Fix the Debt criticized the recent fiscal deal between Mr. Obama and lawmakers, saying it did not do enough to cut spending or close tax loopholes, companies and industries linked to the organization emerged with significant victories on taxes and other policies.
“Some of these folks who are trying to be part of the solution have also been part of the problem,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a liberal-leaning advocacy group, and a former economic adviser to Vice President Joseph R. Biden Jr. “They’ve often fought hard against the kind of balance that we need on the revenue side. Many of the people we’re talking about are associated with policies that would make it a lot harder to fix the debt.”
Sam Nunn, a former Democratic senator from Georgia who is a member of Fix the Debt’s steering committee, received more than $300,000 in compensation in 2011 as a board member of General Electric. The company is among the most aggressive in the country at minimizing its tax obligations. Mr. McCrery, the Louisiana Republican, is also among G.E.’s lobbyists, according to the most recent federal disclosures, monitoring federal budget negotiations for the company.
Other board members and steering committee members have deep ties to the financial industry, including private equity, whose executives have aggressively fought efforts to alter a tax provision, known as the carried interest exception, that significantly reduces their personal income taxes.
Erskine B. Bowles, a co-founder of Fix the Debt, was paid $345,000 in stock and cash in 2011 as a board member at Morgan Stanley, while Judd Gregg, a former Republican senator from New Hampshire and a co-chairman of Fix the Debt, is a paid adviser to Goldman Sachs. Both companies have engaged in lobbying on international tax rules.
Mr. Gregg also sits on the boards of Honeywell and IntercontinentalExchange, a company that has warned investors that a tax on financial transactions would lower trading volume and curtail its profits. The two companies paid Mr. Gregg almost $750,000 in cash and stock in 2011.
In all, close to half of the members of Fix the Debt’s board and steering committee have ties to companies that have engaged in lobbying on taxes and spending, often to preserve tax breaks and other special treatment.
Fix the Debt does not endorse specific tax proposals. Instead, it advocates broad principles for debt reduction, including “comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit.” A spokesman, Jon Romano, said that the executives involved with the campaign were committed to tax reform, even if it closed loopholes that benefited their companies.
“All the people involved in this campaign have said from the beginning that everything has to be on the table,” Mr. Romano said. “Our C.E.O.’s, our state chapters, our small-business leaders — they are all willing to give something up for the sake of the country.”
Those involved with the campaign say they have tried to separate their advocacy for Fix the Debt and their private work for clients. Vic Fazio, a former Democratic congressman from California who is on the campaign’s steering committee, is a lobbyist at Akin Gump, a firm whose clients include KKR, a leading private equity shop, and the Private Equity Growth Capital Council, an industry trade group.
Mr. Fazio said that he and other people involved with the campaign had tried to set aside their parochial interests and had assumed that any grand bargain between Mr. Obama and Congress would include some elements they did not like.
“The people who have signed up to work with Fix the Debt are people with lots of tax preferences that are important to their business model,” Mr. Fazio said. “But they go along with it because they think there is an overriding benefit to their companies and to the country.”
But so far, at least, the companies and industries most closely linked to Fix the Debt have been aggressive in defending their narrower legislative interests.
The fiscal deal preserved the carried interest loophole, eliminated most of a large prospective increase in dividends taxes and preserved a tax break, known as the active financing exception, that allows G.E. and other multinational companies to avoid paying United States taxes on overseas profits.
The deal also forestalled large automatic cuts in military spending, a boon to contractors like Honeywell. The company’s chief executive, David M. Cote, is a co-founder of Fix the Debt; the group’s “core principles,” which call for retrenchment in entitlement programs like Social Security, make no mention of military spending, which constitutes about a fifth of the federal budget.
“It’s easier to get face time in Washington as a deficit hawk than as a corporate hack,” said Kevin Connor, the director of the Public Accountability Initiative, a watchdog group. “They are spending millions, but they are protecting billions in defense contracts and tax giveaways that would otherwise be on the chopping block.”
Yet after an election in which many industries, including Wall Street, bet heavily against Mr. Obama, Fix the Debt has also had more credibility among Democrats than some traditional business groups like the United States Chamber of Commerce. The chamber, by far the largest business advocacy group in Washington, staunchly opposed proposals to raise taxes before the fiscal deal.
At a news conference in New York on Tuesday, Mr. Bowles suggested that Fix the Debt was just getting started.
“I’m not a quitter,” he said at the event, which was sponsored by Nasdaq, the country’s second-largest stock exchange. “We’re going to stay until we get the job done.”
By: Nicholas Confessore, Nelson Schwartz, Contributor; The New York Times, January 9, 2013
“The Failure Of A Theme”: “We Built It” On The Taxpayers Dime
The Republican National Convention’s organizers probably thought they were being clever. They announced this week that on the second night of the gathering — with local, state, and federal officials standing by to help in the event of a hurricane — they’d host a “We Built It” day.
The idea, of course, is to mock President Obama’s belief that public institutions and government investments help create a society in which the private sector thrives. Republicans intend to host their “We Built It” day in an arena largely financed by taxpayers.
Wait, it gets worse.
On the day that the GOP convention will tout Fox-fueled myth “We Built It” as its primary theme, Delaware Lt. Gov. candidate and small business owner Sher Valenzuela is slated to deliver a speech about small business issues. But contrary to the evening’s theme, Valenzuela’s company, First State Manufacturing, has received millions of dollars in federal loans and contracts. Valenzuela has not only attributed her success in part to this outside assistance, but urged other small business owners to follow the same strategy of seeking government funds.
Media Matters found that Valenzuela even gave a presentation earlier this year on her small business success, crediting the use of “millions of dollars in secure government contracts.” She encouraged other entrepreneurs to take advantage of public institutions and government investments to help their businesses get ahead.
Making matters slightly worse, a featured guest at a Paul Ryan event yesterday boasted about getting government funding to help build his business, and in a new op-ed on his private-sector background, Mitt Romney boasted today about the success of many Bain businesses, several of which have benefited from government largesse.
As attacks go, this out-of-context smear has always been problematic. Romney was desperate to prove that American free enterprise thrives without the support of government, but when he pointed to examples, they all thrived thanks to the support of public institutions and tax dollars. This happened over and over and over and over again, ultimately proving that the entire line of attack is self-defeating.
And the problem will apparently continue, as if self-awareness no longer matters at all.
By: Steve Benen, The Maddow Blog, August 24, 2012
“Vote Republican Or The Economy Gets It”: The GOP Threat Behind All The “Fiscal Cliff” Talk
Greg Sargent has a fine post today about how Scott Brown has picked up on the Romney campaign’s effort to spin a mendacious take on the “you didn’t build that” quote, making it a double lie by tying it back to Elizabeth Warren (whose actual words were being paraphrased by what the president actually said). Indeed, Greg puts his finger on the broader message that both Republicans are trying to send:
The whole ”didn’t build that” dust-up is important, because the larger falsehood on display here — that Obama demeans success — is absolutely central to the Republican case against Obama. The Republican argument — Romney’s argument — is partly that Obama’s active ill will towards business owners and entrepreneurs is helping stall the recovery, so you should replace him with a president who wants people to succeed.
What makes this “vote Republican or the economy gets it” tactic devilishly effective is that its major premise—Obama hates “job creators”—doesn’t have to be true to wreak political damage so long as its minor premise—if “job creators” think Obama hates them they’ll stop creating jobs—is credible. And so it all turns into what amounts to blackmail: people like Mitt Romney are not “confident” in Obama’s stewardship of the economy, and if they don’t get ther way in November, they’ll tank the economy. This is also the threat behind all the “fiscal cliff” talk: we’re being told the financial markets will panic if there’s any chance the Bush tax cuts on the wealthy will lapse or that Pentagon spending will be cut at the end of the year. Somehow or another, the prospect of a Republican victory that will lead to very deep federal spending cuts, reductions in consumer buying power, and the elimination of many thousands of public sector jobs isn’t said to be a problem.
Now this is a very, very old game, certainly as old as the threats issued by business leaders at the behest of Mark Hanna in 1896 that votes for William Jennings Bryan would lose employees their jobs, or the eternal threats of non-unionized companies that they’d rather close their doors than submit to the indignity of collective bargaining. In reality, companies stay in business and investors keep investing not because they have the elected officials they’d prefer, but because they are making money. With profits being at near-record levels (even with the apparent recent softening), I don’t think we are really in any danger of capitalists “going Galt” because their executives’ marginal tax rates went back up to where they were when they were also doing very well in the late 1990s, or because their vast moral worth is being underappreciated by Barack Obama or Elizabeth Warren.
Still, the more aggressively ideological business leaders won’t lose a dime by issuing threats, so they and their political allies will keep doing so, reinforcing the GOP’s many efforts to convince persuadable voters that somehow or other, their jobs or their nest eggs depend on a Republican victory in November.
BY: Ed Kilgore, Contributing Writer,Washington Monthly Political Animal, July 23, 2012
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