“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
“Ted Cruz’s Imagined America”: A Detour Between His Biographical And Ideological Sections Into The Late Eighteenth Century
I just slogged through Ted Cruz’s presidential campaign announcement speech, and have to say it’s a formula composition: a combination of a Cruz family biography and a by-the-numbers recitation of conservative policy positions. To give it the requisite “lift,” the candidate and/or his brain trust chose a rather hackneyed “imagine” construction, and applied it mechanically to both parts of the speech:
Imagine a teenage boy, not much younger than many of you here today, growing up in Cuba. Jet black hair, skinny as a rail.
Involved in student council, and yet Cuba was not at a peaceful time. The dictator, Batista, was corrupt, he was oppressive. And this teenage boy joins a revolution. He joins a revolution against Batista, he begins fighting with other teenagers to free Cuba from the dictator. This boy at age 17 finds himself thrown in prison, finds himself tortured, beaten. And then at age 18, he flees Cuba, he comes to America.
Imagine for a second the hope that was in his heart as he rode that ferry boat across to Key West, and got on a Greyhound bus to head to Austin, Texas to begin working, washing dishes, making 50 cents an hour, coming to the one land on earth that has welcomed so many millions.
You get the idea.
And then later, this:
Imagine innovation thriving on the Internet as government regulators and tax collectors are kept at bay and more and more opportunity is created.
Imagine America finally becoming energy self-sufficient as millions and millions of high-paying jobs are created.
All this imagining gets very labored and tedious–particularly since Cruz takes a detour between his biographical and ideological sections into the late eighteenth century and the Holy Founders charged by God with forever limiting government (a staple of Con-Con revisionist history).
But in a way it’s appropriate, too, since Cruz is the self-designated champion for those who really don’t like America as it is and prefer an imagined version where the Calvin Coolidge administration is the wave of the future. He really, really wants these people to look to him as their first-choice candidate amidst a host of rivals, and he spares no rhetorical expense–and no opportunity cost in terms of appealing to anyone else–to make his pitch.
By: Ed Kilgore, Contributing Writer, Political Animal Blog, The Washington Monthly, March 23, 2015
“Defending Unions Against The Haters”: Right-To-Work Laws Are Intended To Limit Union Growth
Joining a union is the best investment a worker can make.
Unions need defending, maybe more than ever, because of the attacks they face. The passage of a right-to-work law in Wisconsin and Illinois Governor Bruce Rauner’s proposal for union-free zones show how distorted the lens is when the focus turns to organized labor.
Right-to-work laws are intended to limit union growth, but advocates never cite political motives or antipathy for working people. Instead, their calls for reducing labor market protections are based on the claim that unions restrain personal liberty and restrict economic development.
Nothing is further from the truth.
The “labor hater,” as Martin Luther King Jr. once called the corporate and political conservatives who mobilize against organized labor, argues that if you reduce unionization, economic prosperity will be unleashed. Yes, but for whom? Restricting union growth has always been bad for workers’ economic and political freedom. The cumulative weight of decades of social science has unquestionably demonstrated that union-bargained contracts provide workers with higher incomes, more and better benefits, and a stronger “voice” in the workplace.
Implementing a statewide right-to-work law in Illinois would be punitive for working men and women. According to a 2013 University of Illinois study that I co-authored, workers would suffer an income loss of 5.7 percent to 7.3 percent. Additionally, fewer workers would have health and retirement benefits, and with workers earning less, poverty would likely rise by 1 percent.
As King warned in the 1960s, after mostly Southern states moved to adopt right-to-work, the losses would be particularly harsh on people of color. Per-hour work incomes are at least $2.49 lower in right-to-work states for African-American, Latino, and Asian workers, compared with their wages in collective bargaining states. With lower earnings, annual state income tax revenues in Illinois would shrink by $1.5 billion.
To be fair, Rauner has not called for a statewide law. So what would the effects of a more limited local jurisdiction approach be on Illinois workers?
The premise of the local zones is that unionization suppresses job growth. But like so many claims for opposing policies that protect workers, the criticism doesn’t hold up.
A look at recent data for the Chicago area suggests that union membership levels have no direct correlation to higher unemployment. The opposite’s true, in fact. Around Chicago in 2013, the county with the fewest union members had the six-county area’s highest unemployment rate.
When you look more broadly, you find that the average unemployment rate for all eastern Illinois counties bordering right-to-work Indiana was 5.7 percent, compared with 7.6 percent for those Indiana counties just across the border. And while right-to-work prophets predict a paradise of unparalleled job creation, in 2014, Illinois added 103,000 jobs (fourth highest in the nation), compared with Indiana’s 89,000.
Union defenders should never suggest that collective bargaining is either the primary or sole driver of job creation; nor should right-to-work supporters argue that limiting union dues is a sure-fire way to put people to work.
What is assured is that the loss of income that would result from a reduction of union members will exacerbate existing income disparities. If just half of Illinois’ counties transitioned into “union free zones,” total employee compensation would drop an estimated $1.2 billion.
It’s also possible that with or without right-to-work, employment could spike in Illinois. For example, the state could take up large-scale hydraulic fracturing. But no matter the reasons that jobs appear, what is important is how the workers are valued.
By:Robert Bruno, Professor of Labor and Employment Relations at the University of Illinois at Urbana-Champaign; The National Memo, March 20, 2015
“Jeb Bush’s Minimum Wage Radicalism”: The Abolition Of A Federal Minimum Wage Of Any Sort Is Now A Mainstream Republican Position
Every so often I feel the need to write the column that says: The one thing our political system needs more than any other single feature is a strengthened moderate wing of the Republican Party. I say this of course as a liberal, whose party registration is Democratic, which means you might think I’d say we need more liberals; and while I think that, I believe without question that having a strong moderate faction within the GOP would do far more to change our politics for the better than—yes—even having more Americans who think exactly as I do!
Having more liberals would if anything merely deepen the intensity of our civil war and produce more stalemate. The presence of a more muscular moderate Republican wing, however, would change everything. Then, there would be pressure on Republicans to adopt some sensible moderate positions, instead of what we have today, which is unceasing pressure to play this game of one-upmanship to see who can take the most reactionary, ignorant, and borderline racist position imaginable. Then, you’d have some Republicans from blue districts and states who would find it to be in their electoral self-interest to compromise with Democrats and vote for a Democratic president’s bill once in a while. Then, our political culture really would change.
And, then, people like Jeb Bush, the alleged moderate in the GOP presidential field, wouldn’t say jaw-dropping things like this, about the minimum wage, which he said Tuesday in (where else, somehow) South Carolina:
“We need to leave it to the private sector. I think state minimum wages are fine. The federal government shouldn’t be doing this. This is one of those poll-driven deals. It polls well, I’m sure—I haven’t looked at the polling, but I’m sure on the surface without any conversation, without any digging into it, people say, ‘Yeah, everybody’s wages should be up.’ And in the case of Wal-Mart, they have raised wages because of supply and demand and that’s good.
“But the federal government doing this will make it harder and harder for the first rung of the ladder to be reached, particularly for young people, particularly for people that have less education.”
Now it’s great that Wal-Mart and McDonald’s and Target and the others are voluntarily raising their minimum wages. One might argue that we’ve come to a particularly sad pass when the Walton family is doing more for its beleaguered workers than Congress can rouse itself to, but however you want to spin it, good for Wal-Mart.
But to take this little boomlet from what is still a small number of employers (although of course they do employ millions of people) and say that’s it, we should now have no federal minimum wage, is logical sleight of hand, and it’s a very radical position. A little background.
We first got a minimum wage in 1935. Then the Supreme Court declared it unconstitutional (which could happen again, with this lot). Then it was passed again in 1938. We’ve had it ever since, although, as you probably know, it hasn’t gone up since 2009. That rise was the third and final phase of a 2007 law that raised the wage in increments. We haven’t had a new law to that effect in those eight years since.
It is true that in the 1980s, economists debated whether a federal minimum wage was desirable. Even The New York Times once editorialized against it, in 1987. At the time, economists thought it had deleterious effects on low-wage employment. Then, in the mid-1990s, the economists David Card and Alan Krueger studied this question in New Jersey and Pennsylvania (the former had increase its minimum wage, while the latter had not), and they found no employment impact.
That changed the academic consensus. An increase was passed in 1996. Some conservative economists continued to spoon out the “job-killer” Kool-Aid, as indeed they still do, but evidence continues to support the idea that there is no serious job-killing effect.
The parties disagreed strongly about how much the wage should be increased, but at least they agreed on increasing it—the 2007 increase, for example, passed the Senate 94-3, and the House by 233-82. John McCain, the GOP’s 2008 standard bearer, voted for the 2007 increase. And Mitt Romney, the 2012 nominee, ran on supporting a modest increase and even indexing the minimum wage to inflation, which Barack Obama also supported and which would prevent Congress from having to pass legislation on the question ever again—a pretty progressive position, really.
So the last two mainstream, establishment GOP candidates—the last three, counting George W. Bush—supported an increase. But now, the mainstream, establishment candidate is against it. And if the mainstream, establishment candidate is against it, where are the others going to line up?
And so, one more hard-right pirouette by a party that keeps finding new ways to radicalize itself. But this one is particularly shocking coming from Bush, because it means that the abolition of a federal minimum wage of any sort is now a mainstream Republican position. And remember: The minimum wage, if it had kept pace with inflation, would be around $13 today, so it’s already insanely low at $7.25.
Which brings me back to how I opened this column. If there were a moderate wing of the GOP, this is most certainly an issue on which we’d have bipartisan agreement. The position Bush has just embraced would be seen across party lines for exactly the radical pandering that it is. Indeed he would not have taken it. That would be a nice world, but the world we have is the one we have. And if Bush can take this position, completely out of step with his party’s conservative mainstream in recent history, then what else will he prove himself capable of?
By: Michael Tomasky, The Daily Beast, March 20, 2015
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