“Wage Boost Could Pay Democrats Dividends”: Republicans Blocking An Increase In The Federal Minimum Wage Do So At Their Own Peril
American liberalism and the Democratic Party — two partially overlapping but by no means identical institutions — have set themselves an unusually clear agenda for 2014: reducing economic inequality and boosting workers’ incomes. These are causes they can fight for on multiple fronts.
Raising the minimum wage should offer the course of least resistance. Although congressional Republicans may persist in blocking an increase in the federal minimum wage, they do so at their own peril. Raising the wage is one of the few issues in U.S. politics that commands across-the-board public support. A CBS News poll in November found that even 57 percent of Republicans support such an increase.
Democrats have concluded that they can turn Republican legislators’ opposition to raising the wage into an electoral issue by using state ballot measures. As states are free to set their own minimum-wage standards — though the rates take effect only when they exceed the federal minimum — Democrats are working to put wage-increase initiatives before voters in states that will have contested House and Senate races in 2014, including Arkansas, Alaska, South Dakota and New Mexico. Such ballot measures have proved an effective way to increase turnout of low-income and minority voters, which can translate into more ballots cast for Democratic candidates.
(Although economic libertarians object to the minimum wage on theoretical grounds, a look at the states that have refused to enact minimum-pay statutes suggests that the real opposition to the minimum wage is rooted in something else. Those states are Alabama, Louisiana, Mississippi, South Carolina and Tennessee — places where persistent racism and the heritage of slavery seem to me a far more likely cause of opposition to the minimum wage than any ideological infatuation with the works of Ayn Rand.)
Most efforts to raise the minimum wage this year are likely to come in blue states and cities. The recent leftward movement of U.S. cities, symbolized by the landslide election of Bill de Blasio as New York’s mayor, is an underappreciated factor in U.S. politics. Twenty years ago, six of the country’s dozen largest cities had Republican mayors. Today, none do, even when those cities — including Houston, Dallas and Phoenix — are nestled in red states. The transformation of major U.S. cities is rooted in demographics, as immigrants and young professionals — both preponderantly liberal constituencies — have clustered in urban areas.
In some states, cities have the power to raise the minimum wage above the state level. That’s how San Francisco was able to set its wage level above California’s and why Seattle is likely this year to raise its minimum wage well above that in the rest of Washington. New York City lacks that power, though it’s probable that de Blasio will try to persuade legislators in Albany that his city — one of the least affordable on the planet — should be given that freedom.
Whether they can raise their minimum wage or not, the nation’s ever-bluer cities have a range of other options to increase incomes. They could require developers that receive municipal tax breaks or other assistance to pay their employees a living wage above the minimum wage. They could enact paid sick leave or paid family leave requirements. They could reduce the local cost of living by requiring developers of luxury housing to build affordable housing as well.
At the federal level, too, Democrats can do more than battle for a higher minimum wage. They could call for an increase to the earned-income tax credit, an idea much loved by some conservatives (Ronald Reagan especially) that provides a federal supplement to the income of workers who fall below the poverty threshold. They could refuse to vote for the Trans-Pacific Partnership — a trade pact being negotiated with Pacific Rim nations, including such notably low-wage countries as Vietnam — or for the “fast-track” authority that would likely guarantee TPP passage unless the Congressional Budget Office can demonstrate that the measure won’t lower the wages of U.S. workers.
The ongoing efforts of fast-food workers and Wal-Mart employees to win higher pay will continue to remind both the public and legislators that millions of adults earn poverty-level wages in today’s United States. With the near-elimination of collective bargaining from the private sector, it will largely be up to Democrats in Congress, state legislatures and city halls to provide the wage boosts that unions once secured. That would help millions of Americans in their pocketbooks — and some Democratic candidates at the polls.
By: Harold Meyerson, Opinion Writer, The Washington Post, January 2, 2014
“Higher Profits, Smaller Paychecks”: Corporations Increasing Profits At The Expense Of Workers
Two cheers for the comeback of American manufacturing. Or maybe just one.
The manufacturing sector has experienced a modest renaissance since it hit bottom during the Great Recession. The number of manufacturing jobs is set to rise this year, as it has every year since 2010. Profits are soaring — in 2012, after-tax profits of manufacturing firms hit a record high of $289 billion. Share values have soared with them. The Standard & Poor’s 500 Industrials Index has risen 59 percent more than the overall 500-stock index since 2009, Bloomberg reported last month.
Wages, however, are falling. Although the average wage for all workers, adjusted for inflation, has declined by about 1 percent since May 2009, Bloomberg reported, it has declined by 3 percent for workers in the more-profitable-than- ever manufacturing sector.
Numbers like these explain the epic drama playing out in Washington’s Puget Sound region, from which Boeing, long the area’s dominant employer, has threatened to at least partially decamp. Several weeks ago, with the reluctant blessing of union leaders who feared the company might relocate production, Boeing presented its workers with an ultimatum: Either they had to agree that the new hires who would build the company’s new 777X passenger jetliner would have to work for 16 years, rather than the current norm of six, to bump up to full union scale, or Boeing would build the plane elsewhere. Instead of making roughly $28 an hour to build one of the world’s most sophisticated pieces of machinery, workers would make roughly $17 an hour, or less, until they’d put in a decade and a half on the job.
By a 2-to-1 margin, the workers rejected their leaders’ recommendation and voted down the offer. Boeing then initiated a bidding war to see how much in tax breaks it could wring from states that wanted the work. More than a half-dozen states have sent in bids, some with side agreements from local unions that members would work at reduced rates, some with no such agreements because unions barely exist in their states.
It’s not as if Boeing is a clothing manufacturer scrambling to meet the price competition of rivals that make their goods in Bangladesh. Boeing’s sole competitor in the large-scale passenger-plane market is Airbus, the European conglomerate whose workers’ wages are comparable to those in the United States. But Boeing has already located one major plant in South Carolina, where workers make about $10 an hour less than their Puget Sound counterparts. It’s through such moves, and the threat of further such changes, that U.S. manufacturers have increased their profits at the expense of their workers’ paychecks.
None of the workers at either end of Boeing’s pay scale makes anything like the federal minimum wage, but I suspect the anxiety instilled by these kinds of stories is one reason there is wide, and growing, support for raising the minimum wage. It takes no great imaginative leap to see a time in the not-too-distant future when the incomes of all but a fortunate, talented tenth of the U.S. workforce are reduced or held stagnant. Indeed, the median inflation-adjusted salary for American men is already lower today than it was in 1969. Tyler Cowen, a heterodox libertarian economist, has written that the U.S. economy is morphing into one in which 10 to 15 percent of the workforce will be wealthy and the remainder will resign themselves to making do with less. He foresees little likelihood that the eradication of the broad middle class will lead to a United States “torn by unrest.”
I am not sure that the docility of the American people can be so readily assumed. The adoption of minimum-wage increases and living-wage ordinances throughout increasingly liberal cities and blue states suggests that where workers have the capacity to rebalance the economy through legislation, they’ll do just that. With the near-elimination of unions from the private-sector economy, legislation remains the sole means available for workers to bargain for their fair share of their company’s revenue, particularly in sectors, such as retail, that can’t really relocate. That’s why the victories of those workers demonstrating at Wal-Mart and fast-food outlets have taken the form of legislated increases in local minimum wages, rather than resulting in union contracts.
The fight for higher minimum wages may be just the beginning of a long battle to rebalance the economy. If laws are not changed to enable workers to form unions without fear of being fired, the battle for higher median, not just minimum, wages will eventually be fought in the legislative arena as well. Profits that come at the expense of downwardly mobile workers may find little honor — or legislative support — in their own country.
By: Harol Meyerson, Opinion Writer, The Washington Post, December 13, 2013
“Yes, McDonald’s Can Do Better”: More Than Greed, Profitable Fast Food Companies Could Pay A Living Wage
When I was 18, I spent a year and change flipping burgers in one of those restaurants where customers eat from a tray balanced across their car windows. It was one of the three jobs I held at the time, affording a simple budget and enough left over to save up to go to college after a couple of years. I put in hard hours for my employer and it eventually worked out just fine for me. It also makes for a nice story, but one that is embarrassingly dated. The fast food industry in which I worked is not the fast food industry of America today—just ask the thousands of workers on the streets, standing up for same opportunity to get by and get ahead that built the American Dream.
For today’s fast food work force, erratic scheduling makes holding down more than one job impossible—you can’t commit to a second employer if you’re on call for the first. At the same time, low wages barely cover basic household needs, leaving millions of workers in poverty despite being employed, and making saving for the future impossible. And the 18-year-old serving your root beer float? Now she is 29, and likely to have been to college and have a family to support.
What else has changed since I was behind the counter? Oh yeah, fast food companies are making more money than ever.
In our report “A Higher Wage is Possible,” my co-author Amy Traub and I show how Wal-Mart could meet worker demands for a fair wage without passing costs onto consumers. Every year, Wal-Mart directs a portion of its profits to buying back its own public stock, consolidating ownership and increasing earnings per share. If they used that money to invest in their workforce instead, Wal-Mart could offer a raise of $5.83 per hour to all of its 825,000 low wage workers. In addition to pulling thousands of families out of poverty, Wal-Mart would see lower turnover and higher productivity and contribute to economic growth that benefits Wal-Mart, retail, and the economy overall.
Share repurchases have become an increasingly popular business strategy. Last year, McDonald’s Corp spent $2.6 billion on them. YUM! Brands Inc, which includes Taco Bell, KFC, and Pizza Hut, spent $965 million. But while the long term value of buying back shares accrue mainly to those executives whose compensation is tied to stock performance, using that money to invest in the workforce would have benefits that apply to all stakeholders—workers, customers, communities, and shareholders too.
A quick calculation shows that McDonald’s and Yum could give raises of $2 to $3 per hour to every U.S. worker at their restaurant locations using just the money they now spend buying back shares. Since the details of their corporate pay structures are not public record, that is a raise applied to even the workers already earning above the threshold of $15 demanded on the streets. If we broke out the low-wage workers, or added in the billions in additional money paid to dividends each year, that raise could go even higher—without costing customers a dime.
There are lots of good reasons why fast food employers should do better for their workforce. It’s a win-win situation for everyone with a stake in the economy—and that is everyone. Moreover, fast food can do better, by using the money now syphoned to the top to invest in their workers and grow the economy.
To people like me who made their way through jobs similar to those of the workers on the street yesterday, the cripplingly poor terms of employment in today’s fast food industry look like more than just greed. It looks like the end of opportunity and the exchange of performance on paper for the substance of the American Dream.
By: Catherine Ruetschlin, The American Prospect, December 6, 2013
“Better Pay Now”: Let’s Give It A Try For The Person On The Other Side Of The Cash Register
’Tis the season to be jolly — or, at any rate, to spend a lot of time in shopping malls. It is also, traditionally, a time to reflect on the plight of those less fortunate than oneself — for example, the person on the other side of that cash register.
The last few decades have been tough for many American workers, but especially hard on those employed in retail trade — a category that includes both the sales clerks at your local Walmart and the staff at your local McDonald’s. Despite the lingering effects of the financial crisis, America is a much richer country than it was 40 years ago. But the inflation-adjusted wages of nonsupervisory workers in retail trade — who weren’t particularly well paid to begin with — have fallen almost 30 percent since 1973.
So can anything be done to help these workers, many of whom depend on food stamps — if they can get them — to feed their families, and who depend on Medicaid — again, if they can get it — to provide essential health care? Yes. We can preserve and expand food stamps, not slash the program the way Republicans want. We can make health reform work, despite right-wing efforts to undermine the program.
And we can raise the minimum wage.
First, a few facts. Although the national minimum wage was raised a few years ago, it’s still very low by historical standards, having consistently lagged behind both inflation and average wage levels. Who gets paid this low minimum? By and large, it’s the man or woman behind the cash register: almost 60 percent of U.S. minimum-wage workers are in either food service or sales. This means, by the way, that one argument often invoked against any attempt to raise wages — the threat of foreign competition — won’t wash here: Americans won’t drive to China to pick up their burgers and fries.
Still, even if international competition isn’t an issue, can we really help workers simply by legislating a higher wage? Doesn’t that violate the law of supply and demand? Won’t the market gods smite us with their invisible hand? The answer is that we have a lot of evidence on what happens when you raise the minimum wage. And the evidence is overwhelmingly positive: hiking the minimum wage has little or no adverse effect on employment, while significantly increasing workers’ earnings.
It’s important to understand how good this evidence is. Normally, economic analysis is handicapped by the absence of controlled experiments. For example, we can look at what happened to the U.S. economy after the Obama stimulus went into effect, but we can’t observe an alternative universe in which there was no stimulus, and compare the results.
When it comes to the minimum wage, however, we have a number of cases in which a state raised its own minimum wage while a neighboring state did not. If there were anything to the notion that minimum wage increases have big negative effects on employment, that result should show up in state-to-state comparisons. It doesn’t.
So a minimum-wage increase would help low-paid workers, with few adverse side effects. And we’re talking about a lot of people. Early this year the Economic Policy Institute estimated that an increase in the national minimum wage to $10.10 from its current $7.25 would benefit 30 million workers. Most would benefit directly, because they are currently earning less than $10.10 an hour, but others would benefit indirectly, because their pay is in effect pegged to the minimum — for example, fast-food store managers who are paid slightly (but only slightly) more than the workers they manage.
Now, many economists have a visceral dislike of anything that sounds like price-fixing, even if the evidence strongly indicates that it would have positive effects. Some of these skeptics oppose doing anything to help low-wage workers. Others argue that we should subsidize, not regulate — in particular, that we should expand the Earned Income Tax Credit (E.I.T.C.), an existing program that does indeed provide significant aid to low-income working families. And for the record, I’m all for an expanded E.I.T.C.
But there are, it turns out, good technical reasons to regard the minimum wage and the E.I.T.C. as complements — mutually supportive policies, not substitutes. Both should be increased. Unfortunately, given the political realities, there is no chance whatsoever that a bill increasing aid to the working poor would pass Congress.
An increase in the minimum wage, on the other hand, just might happen, thanks to overwhelming public support. This support doesn’t come just from Democrats or even independents; strong majorities of Republicans (57 percent) and self-identified conservatives (59 percent) favor an increase.
In short, raising the minimum wage would help many Americans, and might actually be politically possible. Let’s give it a try.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 1, 2013
“The Engine Of American Inequality”: The Consequences Of A Free Wheeling, Unchecked Financial Industry
The past three decades have been a period of explosive growth for Wall Street and the financial industry. Meanwhile, a tiny slice of the population has claimed an ever-bigger share of this country’s economic rewards. The highest-earning one percent of Americans collected roughly 20 percent of total income last year; the top .01 percent – not enough people to fill a football stadium – had 5.5 percent of the income.
Could there be a connection here? Could our booming financial sector, which now generates an astonishing 30 percent of all corporate profits (more than double the figure of thirty years ago), help explain America’s rapid ascent to the highest level of economic inequality since the eve of the Great Depression, and the highest of any of the world’s rich nations? A growing number of economists and other authorities think the first trend may have more than a little something to do with the second.
The economic and political establishments long ago settled on a theory of rising inequality: technology and globalization, they told us, were carving a rift through the American labor force between those with and without the right kind of education and know-how. This idea was criticized from the start for ignoring a formidable corporate campaign to rewrite the rules of the U.S. economy at workers’ expense, and over time it has increasingly failed to account for the reality of who is getting ahead and who is falling behind.
In his 1991 book “The Work of Nations,” former (then future) Labor Secretary Robert Reich embraced a version of the “skills-gap” story. But in his recent film “Inequality for All,” Reich has more to say about discrepancies of power than of skill.
The longer this trend continues, in fact, the more it resembles the Occupy Movement’s picture of a soaring 1 percent and a lagging 99 percent. Out of every dollar of income growth between 1976 and 2007, the richest one percent of U.S. households collected 58 cents; and after taking a big hit in the financial crisis, they were soon back on track, capturing an extraordinary 95 percent of all the income gains between 2009 and 2012. To put it more plainly, since the beginning of the current economic “recovery,” the top 1 percent (who make upwards of $400,000 a year in household income) are pretty much the only ones who have recovered.
Within that small subset of Americans, executives, traders, fund managers and others associated with the financial sector loom large, comprising about a seventh of the one-percenters and accounting for about one fourth of their income gains over the past thirty-plus years. That’s not counting the many lawyers and consultants with financial sector clientele, or the growing number of executives of nonfinancial companies who seem to make most of their money these days through stock options and short-term financial plays. Together, corporate executives and financial sector employees account for well over half the post-1980 income growth of the top 1 percent and more than two-thirds of the even more remarkable gains of the top 0.1 percent.
Pinpointing the causes of an economic trend is a hard business. But there is global as well as historical evidence for a link between financial sector expansion and rising inequality. Studies of rich and relatively poor nations alike suggest that inequality goes up when societies tie their fortunes to a free-wheeling financial industry and the easy flow of global capital. There is also substantial research to suggest that much of the financial sector’s recent growth has come by extracting wealth from other areas of the economy, not by spurring innovation and opportunity for the society at large.
Several recent studies trace the industry’s pay-and-profit surge mostly to its success in the political and regulatory arenas. See, for example, this paper by Thomas Philippon and Ariell Reshef of New York University and the University of Virginia, who attribute between 30 and 50 percent of the financial sector’s recent gains to economic “rents.” That’s basically a polite way of describing the ability of many of today’s financial heavyweights to use their market clout, their inside knowledge and various explicit and implicit taxpayer subsidies to make money out of thin air.
Banking and finance were not always a road to fabulous riches in this country. As recently as the early 1980s – and throughout much of the 20th century – there was almost no pay differential between financial and non-financial professionals. Today, by contrast, financial workers make about 1.83 times as much as other white-collar workers. You’d have to go back to the Roaring Twenties, at the tail end of America’s original Gilded Age, to find another period when financial sector incomes and profits reached such conspicuous heights. That should tell us something.
In any case, these are pivotal questions for the country – and unavoidable questions for those seeking a path toward what President Obama has been calling a “middle-out” rather than a top-down economy. Broad prosperity, the president says, calls for greater public investment in education, infrastructure and other long-term needs, and for higher taxes on the wealthy to help pay for such things. That may be a worthy agenda. It has certainly proved to be a politically difficult agenda. But in a country that has let its financial sector become an engine of inequality, more will be required.
If we believe in our founding ideal of America as a land where children should start off on roughly the same footing regardless of history or ancestry, we will all have to screw up our courage and refocus on (among other challenges) the unfinished work of making sure we have a financial economy that serves the real economy, not the other way around.
By: Jim Lardner, U. S. News and World Report, October 11, 2013
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