minimum wage

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Reflections on the Election results

Let the dust settle.

Absorb the information embedded in the results.

Take a deep breath and avoid partisan primping.

First: this election was insanely expensive.  Candidates seeking election to Federal office spent an estimated $8.9 billion.  Their state level counterparts spent a further $7.8 billion.  

Second:  all that expenditure had little effect.  Sure, the House changed hands, but by the slimmest of margins, and for all the pre-election talk of various color waves the reality is that only 40 House seats were truly competitive — if by competitive we mean that the victory margin was  5% or less.  That means 90% of the election was decided before the starting gun.

Third: elections have thus become a major industry that produces little change.  America is, as one or two observers are now saying, is ossified.  It’s ability to produce major shifts in policy is, for the present, non-existent.  Trench warfare dominates a more mobile and responsive version of politics. 

Fourth: and expanding our lens, the working class is now solidly Republican — over 50% of voters making less than $50,000 voted GOP.  How come?  Because the Democrats are a party of the educated class and are more deeply concerned with non-economic issues.  The Democrats have accepted the neoliberal rules and are now simply focused on siloed social and cultural issues.  Voters notice.  Voters vote.  The reason that elections are so close on after another is that either party has broad appeal.  

Fifth: let’s dig more deeply into the moribund nature of the Democrats.  They have held the White House for twenty of the past thirty-two years.  But the minimum wage, something that has direct day-to-day impact on what was once a Democratic voter base, is the same as it was years ago.  The minimum wage is a living, breathing,  emblem of how far away from its working class supporters the Democrats have moved.  The abandonment of workers implied in the willingness of Democrats to do the bidding of corporate America — who else benefits from stagnant wages? — is a major cause of both the rise of Trump and the inability of the Democrats to have breakthrough election results. 

As the chart shows politicians of both parties have deliberately set out to impoverish low-wage workers since the Reagan revolution undermines the post-war social contract.  It is little wonder that low-wage workers have begun to abandon the Democrats.  Trump, for all his bombastic lunacy, at least recognized they exist.  And it’s no point in arguing that he then abandoned them.  He simply joins a long line that has more Democrats than Republicans in it.

Source: Economic Policy Institute

Sixth: adding insult to injury is the recent intervention by the White House in the railroad work and wage dispute.  Biden promotes himself as the most pro-labor president in decades.  Yet he is enforcing a settlement that fails, clearly, to accommodate worker demands.  Railroad workers will get precisely one — yes one — day per year of paid sick leave.  All they wanted was seven.  This is an industry that has cut its workforce by 30% in recent years, increasing profits by extraordinary amounts, and which imposes harsh work rules on its employees.  If ever there was a time to take a firm stand on behalf of workers this was it.  But no.  Biden gave in.  He gave in to an industry that routinely generates sufficient profits to splurge share buybacks on its shareholders.  Who’s side are the Democrats on?  Capital or labor?

Seventh: We all know the answer to that question.  It’s just uncomfortable admitting it.  Go back to the chart above.  Look at the two top lines.  They show what the minimum wage would have been under different circumstances.  What is worth pondering is the separation of those two top lines.  Had the minimum wage kept up with typical wages it would have been $11.62, not $7.25, per hour.  But think further.  Typical wages themselves had fallen way below the productivity related wage.  Had wages kept pace with productivity improvements — as the economics textbooks say they do — they would have been much higher, and the minimum wage would have been $19.33 per hour.  It takes no mathematical skill to realize that the difference b between $7.25 and $19.33 would have made a material difference in the lives of millions of workers.  Did Clinton realize this?  Did Obama?  Does Biden?  How Democrats can look at this chart and not feel embarrassed is hard to comprehend.  Again I ask: who benefits?  Capital or labor?  Where do Democrats stand?  Don’t ask. 

Eighth:  Of course the wage increases needed to keep wages in line with productivity improvements would have implied pressure on inflation.  One of the causes of the low inflation of the past few decades is not the cleverness of the Federal Reserve Board, but the deflationary impact of wage suppression.  And now what is the remedy being employed by the Fed as it attacks inflation?  What is the remedy being advocated by the  college educated legions of financial observers and analysts — many of whom have served dutifully in Democratic administrations?  Raise interest rates in order to induce unemployment and thus “relieve” pressure on wages.  In other words the policy is to impoverish workers by making some unemployed and warning the rest not to seek pay increases.  Who benefits?  Asset holders and corporate shareholders.  Workers are being targeted and are being asked to “take one for the team”.  Alternative policies to control inflation such as price controls are not even being discussed.  To discuss such a policy is heresy.  Even in the erstwhile party of the working class.  Why can’t shareholders “take open for the team”?  Don’t ask.  

So, let the dust settle.  If you’re Democrat you’re probably whooping it up.  You’re deep into explanations of the results that include protection of democracy, abortion, and the rejection of overt racism.  You’re probably not asking why the working class isn’t on your side anymore.  You might even be dismissing the worker voters who voted Republican as somehow “low bandwidth” or perhaps ill-informed.  

But that’s simple avoidance of the truth.  The Democrats, for all their language, are not the party of the working class.  For whatever reason, and surely money is prominent amongst the answers, the Democrats do not represent their old base.   And yet they rely on the unions for much of their electoral legwork.  At some point those unions have to ask why?  Why support a party that doesn’t reciprocate?

Building a broad coalition in order to win decisive electoral victories needs more work than simply making Harvard and Yale educated lawyers, doctors, accountants, or business leaders agree.  It needs more than hand-wringing over cultural inequities and ongoing biases.  It needs the rebuilding of that old alliance with workers.  You know, that two-thirds of the population you forgot about.  

So let the dust settle.  

But also absorb the information embedded in the result.   

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Inflation: Who Matters?

There are times when you really don’t need to say much.  The facts make the argument for you.  At such times all that matters is that the largest number of people are aware of those facts and that at least some of them speak to the issues raised.

So to is with a small snippet of news I saw this morning.

I came to it via the New York Times.  The original report being in Business Insider.

Apparently Wall Street bonuses have risen 1,217% since 1985.  Quite what the significance of 1985 is I cannot tell, but the number itself seems to have the right feel.  Having seen a few of those years first hand I can attest to the pace of increase from an anecdotal perspective.

More importantly, if we applied the same rate of increase to the minimum wage over a similar period it would stand at $44 per hour and not the current rather pathetic $7.25.

Imagine the hullabaloo were we to advocate bringing the minimum wage into line with the extraordinary levels of largesse Wall Street lavishes upon itself.  We would be treated to endless, not to mention outraged, articles from well known economists attesting to the disastrous impact such ridiculously undeserved amounts would have on the economy.  Just thinking about the inevitable inflation, and its undoubted undoing of the very heart of our social fabric, would throw numerous professors of economics into fits of feinting and hysteria.

I mean: how could workers even consider such an obviously destructive thought?  How could they be so vain as to think they deserved such outrageous compensation?  What, on the margin, could possibly justify such vertiginous increases?  Where oh where is the value added?  To what measure of economic gain do we turn to measure the worth of such a revolutionary change?

The recently passed economic relief package that managed to squeak through Congress by the narrowest of margins had, in its original form, an adjustment to the Federal minimum wage.  The proposal was to move it up from the $7.25 level to $15, at which point it would provide a subsistence wage more in keeping with modern lifestyles.   By my very rough reckoning the shift from $7.25 to $15 would bring it into line with Wall Street circa 1994, maybe 1995.

The asymmetry between the reaction to discussions about the minimum wage and other wage levels — e.g. those Wall Street bonuses — is astonishing.  The puritanical vindictiveness with which the lower end of our wage scale is treated compares badly with the way in which the top end is talked about.  The inflationary impact of the one is dissected and brooded over in minute detail, whereas the other drifts past with little or no attention.  Why aren’t Wall Street bankers criticized for their very obvious contributions to inflation?  Where are the right wing media discussions of all the wasteful things a Wall Street banker might be tempted to use those inflationary gains on?  We are constantly being told that low wage workers would simply “waste” the increase on something as useless as an iPhone.

Even some of my more left leaning friends have a hard time supporting moving the minimum wage up to a subsistence level.  They ask how all those small businesses that thrive on the $7.25 wage level would react.  They ponder on all the failures that might follow from having to pay a subsistence wage.  What, oh what, will the poor business owners do?

Well, for one thing, they ought not continue to exploit the low end of our workforce.  For another they might try to invent a business model that both made a modest profit for themselves and supported their workers at a subsistence level at the same time.  Clearly, if so many of them are doomed by paying a subsistence wage, we have far too many businesses existing only because we subsidize them by keeping wage levels so low.  Worse, by subsidizing these failing business models, and by allowing them to pass along the benefits of their low operating costs to their customers in the form of artificially low prices, we have also passed along the subsidy to, inter alia, Wall Street bankers who benefit from those low prices.

By crushing the supposed inflationary impact of wage increases at the low end, we have moderated the inflationary impact of the overly generous increases at the other.

Ultimately, of course, this has nothing to do with economics.  Most of the modern research has shown that increases in the minimum wage do not have the impact that the textbook suggests it will have.  So the economics is neutralized.  No, this discussion of minimum wages is a social question.  It revolves around our attitudes towards certain types of work and to our sense of social worth that certain activities ought, or ought not, have.  It is about the status of work.

Given that the current onrush of automation might augment, rather than diminish, the number of jobs that fall into the lower end category I think we need a social re-think as to the value of such work.  This is particularly true when we consider that the more marginalized sectors of our community have a disproportionate representation in low wage work.  We, in effect, are marginalizing them twice.

Think of the travails of the past year and the impact of the pandemic.  Low wage workers were in the front lines because so many of their jobs were deemed “essential”.  They had to travel to and from work and risk exposure to the virus.  They maintained our supermarkets, care facilities, and so on.  They were affected by COVID in large numbers.  Wall Streeters, by comparison, have done very well.  Financial business flourished event during the pandemic.  Bonuses are up bu about 10% on the year.  And quite a few Wall Streeters managed to escape to their second homes in the hills or countryside and so have been far less affected by the virus.  Wall Streeters were never deemed “essential”.  They aren’t.  But they have sure been paid as if they are.

The attempt at passing a minimum wage hike to $15 failed.  It was too much of a leap for some of the more conservative members of the Senate to stomach.  They were concerned about the disruption such a leap in wage might have on the small businesses in their various states.

I have yet to hear what they think the impact the Wall Street bonuses might have had.