Saturday, April 27, 2013

I have been hit between the eyes with an eighth-grade math insight aboutBloomberg's stop-and-frisk

I have been hit between the eyes with an eighth-grade math insight on how unbearably Bloomberg's stop-and-frisk intrudes into the free lives of Black and Hispanic males: 700,000 stops per year equal 7,000,000 over 10 years. Blacks and Hispanics make up 4 of 8 million city residents -- 2 million of whom are male -- about .5 million are of the 14-35 likely police stop age -- which averages out to 14 stops (and 7 frisks) over 10 years for every minority male if all stops were of Blacks and Hispanics -- let's drop that to 12 stops (and 6 frisks) every 10 years! 

Everything in the Bill of Rights -- the first ten amendments to the Constitution -- is in our DNA.  Basic human need creates our Fourth Amendment rights -- not the other way around.  Depriving people of their Fourth Amendment rights is truly ruining their lives -- their enjoyment of moving around the world like it belonged to them (don't we all want to feel that?). 

You can be racist (verb) without being a racist (noun).  Up until a couple of years ago, whenever I (frequently) saw young minority males pulled out of their autos here in Chicago with the usual deal, I figured: well, they are tough young boys (because they are young boys) and if minorities get the treatment a little more often (more like exclusively) they can handle a extra bit of rough stuff.

But, after looking at the constitutionally impossible to justify New York numbers: 4X less crime followed by 7 times as many stops = 28 times as many stops per reported crime -- and -- just now realizing the massive numerical intrusion upon what should be the equally free American lives of minority males  (even upon the youngest high school boys!) I realize that I was totally in the wrong.

Thursday, April 11, 2013

How illegal stop-and-frisk discourages school work

How does New York's brazenly unconstitutional stop-and-frisk policy further degrade the performance of  poorly performing schools?
Put this ...
Political scientist Martin Sanchez-Jankowski spent nine years on the ground in five poverty stricken New York and Los Angeles neighborhoods (and ten years before that researching street gangs).   He explains in his 2008 book Cracks in the Pavement that ghetto schools don't work mostly because students (and teachers!) don't expect jobs paying anything decent waiting for them in the labor market when they graduate and go to work -- so think school accomplishments not worth a heavy effort.

together with this ...
Noche Díaz -- describing the degradation minority youth suffer from unjustified stop-and-frisk: "... why is it that I have to look at these 15-year-olds in the playgrounds in the Bronx who tell me that if you’re not a white person in this world you don’t matter and you don’t mean anything?"

For what to do about poverty and crime see these two:
The "black hole theory" of the minimum wage
Open letter to Oakland Mayor Jean Quan

Sunday, April 7, 2013

[REPEAT] Open letter to Oakland mayor Jean Quan -- the only law that can end gun violence [REPEAT]

Open letter to Oakland mayor Jean Quan:
The only legislation that can realistically end gun violence in Oakland – and Chicago – is a labor law: doubling the minimum wage to $30,000/yr.  The Crips and the Bloods could not whip a decent paying Ronald McDonald.

Crackpot?  More than doubling the federal minimum wage from $7.25/hr to $15/hr ($600/wk) would cause less than 4% direct inflation:
$3.87/hr (half/average raise)  X  2080 hours (full work year) = $8,049/yr  X  70 million workers (half the workforce -- $15/hr is today’s median wage) = $563.4 billion.  (3.5 million workers at the minimum wage would get a full $16,020 raise may be left out to simplify eighth-grade math.)  Divide $563.4 billion by a $15.8 trillion GDP and we get 3.6% direct inflation (not counting leap frog pushups which may not add up to that much – LBJ’s median wage was only 25% higher than his minimum – high minimum wages often approach median level in other economies).

Oakland won’t educate its way out of poverty and crime.  Catch 22: political scientist Martin Sanchez-Jankowski, from neighboring UC Berkeley -- who spent nine years in five poor New York and Los Angeles neighborhoods (and ten years before that researching street gangs) -- explains in his 2008 book Cracks in the Pavement that ghetto schools don't work mostly because students (and teachers!) don't expect anything decent awaiting them in the labor market, and so think it hopeless to make the effort.

In 1956 majority leader LBJ steered an $8.50/hr ($1/hr nominally) minimum wage bill through the US Senate.  In 1968 (hourly increments and retail workers added in years between) president LBJ piloted a minimum wage of $10.50/hr ($1.60/hr nominally) into law -- per capita income having expanded 25% in the dozen years intervening.

Per capita income has doubled in the two generations since 1968.

There would be a dismal gap even between a minimum wage of  $15/hr, or $30,000/yr and a reality-based minimum needs (poverty) level for a family of three – and even between a median wage 25% higher of $18.75/hr, or $37,500/yr. 

A realistic poverty line for a family of three is $45,476 in 2012 dollars according to the 2001 Ms. Foundation book Raise the Floor (table 3-2 on p.44 -- includes $8,786 medical insurance cost).  Raise totals up from a comprehensive list of expenses, including taxes to get its figure.  (Raise provides extensive explanations for its minimum needs parameters in Appendix B, citing Solutions for Progress -- allots $3,000 to yearly medical expenses even if the family has insurance.)
$19,090, supposedly covers the minimum needs for a family of three under the 1955 era federal formula.  Both the Ms. and government formulas calculate about $6 per person/per day for food – the ancient federal methodology multiplies the cost of food three times and leaves it at that.  Which is why you won’t see the federal measure quoted much anywhere except as a formula multiple (2X, 3X, 4X).A wage even 50% higher than today’s median, of $22.75/hr or  $45,000/yr, would barely support a family of three.

"Since 1973 [note: the last year national income gains were shared across-the-board], productivity has grown roughly 80 percent while median hourly compensation improved by roughly 11 percent.”  Something more elemental than “raising the floor” needs to be prescribe.   

Anyone can work up a list ruses by which the average American’s interests are being hung out to dry these days.  I was just going to say the only thing not foisted upon us so far is foreign firms buying up local water rights and charging them back to us triple.

Then I remembered Chicago leasing its parking meter system for 75 years for $1.15 billion:


Up the road from Oakland City Hall – up College Avenue – on the UC of Berkeley campus labors as progressive a progressive economics faculty as anyone should wish.  They could you tell you, Madam Mayor, and tell everyone else at the same time [this essay may hopefully edge them in the latter direction] about a species of labor legislation that can potentially re-write the American social contract front to back, economic to political.
Legislation that has been tried and tested over half a century in the first world (Germany, France) moving to the second and third worlds (Argentina, Indonesia) as well as right next door (French Canada).  Legislation bringing to Americans a labor market setup devised – not by Karl Marx – but by post WW II German and other continental industrialists – not to empower labor -- but to stifle union wage races-to-the-top that would divert money from industrial bases rebuilding.  (England did not take this path which is why it fell behind – which I’m pretty sure I read in Berkeley’s, Barry Eichengreen’s 2008 The European Economy Since 1945.)

Europe's fabled welfare state was offered as a compensation for labor price moderation. Magic bullet: legally mandated, sector-wide collective bargaining – wherein everyone working the same category of job (e.g., retail clerk) in the same geographic locale (where applicable) works under one common contract with all employers – thwarts the race-to-the-bottom just as surely – just the right barraging balance.

The late David Broder, dean of the Washington press corps, said that, when he came to D.C. 50 years ago, all the lobbyists were union – which meant: naturally balanced campaign financing, someone minding the store on the average person’s interests, all backed by the majority of voters -- perfect democracy.

Your friendly economics faculty up the avenue can tell you all about all of this – but you’ll have to ask.

Denis Drew
Chicago  (sometimes Berkeley)

Friday, April 5, 2013

The black hole theory of the minimum wage

The black hole theory of the minimum wage: 
Physicists theorize that inside a black hole the laws of physics breakdown. When the minimum wage falls far enough below what the market would bear the laws of supply and demand breakdown.  Doubling today's federal minimum wage should lead to a disproportionate explosion of demand for the goods of minimum to median wage paying employers.

If we cut today's minimum to median wages in half that wouldn't help McDonald's or Wal-Mart, would it? 
This wage cut has already taken place when we would have to triple today's minimum wage to catch up with doubled productivity since 1968 (and almost quadruple the early 2007 minimum wage -- the median wage stagnated while productivity doubled too).
Elizabeth Warren: Minimum Wage Would Be $22 An Hour If It Had Kept Up With Productivity  

Doubling today's minimum wage to $15 an hour would add 50% to Wal-Mart wages but only 5% to Wal-Mart prices – 100% to McDonald's wages but 33% to McDonald's prices.  $15 an hour being the median wage half the workforce would get raises percentage multiples of pass through price increases.

This win-win effect could not go on forever. At $30,000 a year consumers will buy a lot more fast food and retail items than they will at $15,000 a year – hugely pent-up demand. Going from a $30,000 year minimum wage to $40,000 would raise prices (3% at Wal-Mart; 11% at McDonald's) but not much to demand – though some people would have more money to spend -- a wash? Somewhere in between is the edge of the black hole.

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The other day I was thinking that all the studies done on the minimum wage are about marginal increases when the minimum wage has shrunk one third while productivity has doubled -- making all the studies irrelevant to what might happen if any real catch up were attempted to what the minimum wage might conceivably be: doubled to add 43% to LJB'S 1968, $10.50/hr minimum -- tripled to catch up with doubling of productivity since 1968 if you ask Elizabeth Warren. Lawyers get paid twice as much in a doubly productive economy -- not because they doubled productivity but because the labor market can bear more.

Even the big anti-minimum wage book by Neumark and Wascher seems to admit upfront (haven't read the whole thing yet) that the results of the studies are close and could be upset by unseen factors.
Minimum Wages

So I came up with a thought experiment of what might happen if we doubled or tripled the minimum wage which is what we should desire to do -- and came up with this doozy.

Chained CPI ought to be called cascading CPI [the "Black Hole" theory of the minimum wage]

Chained CPI ought to be called cascading CPI because when we give people less money because they have substituted cheaper goods in their purchases (altering the basket of measured goods) -- then -- they substitute EVEN cheaper goods -- then -- we give them EVEN less money -- then -- they substitute EVEN cheaper goods, etc., etc.
* * * * * * * * * *
Reminds me of the Republican plan -- "hedonics"; should have been called "headonics" -- to give Social Security retirees less money to eat because they were getting a better deal every year on computers and such -- same overall value in their stipend (also same hidden value in the taxpayers' left over money, so no real unfairness).
 * * * * * * * * *
Want to get more money flowing into Social Security?  Get the labor market straightened out.

Double the minimum wage for starters -- instant flood of funding.  Doubling the minimum would boost half the paychecks -- doubling the minimum reaches today's median pay.

Realistic?  Actually we would have to *triple* today's minimum to catch up to *doubling* of productivity since 1968.  (Today's minimum is $1.25/.hr below 1956's minimum!) 
>Elizabeth Warren: Minimum Wage Would Be $22 An Hour If It Had Kept Up With Productivity 

Only 3.6% inflation from doubling the minimum: $70 million employees X $8,000 average raise = $560 billion.  Divide that by $15.8 trillion = 3.6%.

If we instead cut all wages from the median down in half would that help McDonald's and Wal-Mart?  No; and it is my contention that that is what we have effectively done just that by inaction (both minimum wage and lost unions) -- so doubling would only repair the damage to Mac and Wal.

Realistic?  Yes; because worker/consumers will buy a lot more fast food and retail goods at $30,000 then at $15,000 -- but not a lot more at $40,000 then $30,000 so no claim the boom to Mac and Wal-Mart will go up forever with increases in the minimum wage.  In the first round though employees (consumers) of half the country will get raises disproportionate to what their employers will have to raise prices to pass through. 

[Note: thought of this since I posted: I am going to call the above the "Black Hole" theory of the minimum wage -- where the wage has fallen so low that the normal rules of economics no longer apply -- where the higher you raise the minimum wage the more money minimum wage paying employers profit.  The edge of the "Black Hole" would seem to be between $30,000/yr and $40,000/yr -- between the two raising prices may leave profits more or less the same -- above that level the normal rules kick back in: keep raising wages and prices and you will lose business.  Pretty cool; no?  :-) ]

Also, no more gangs because people will be able to make an honest living.  Half of Chicago's gang age minority males (100,000) are in gangs because they wont work for jobs that have been effectively outsourced to Mexico and beyond.

Also, ghetto schools will begin to work -- schools don't work now because students (and teachers!) literally expect nothing sufficiently remunerative waiting for them in America's labor "sinkhole" when they graduate -- as reported by Berkley professor Martin Sanchez Jankowski who spent nine years on the ground in five poor New York and Los Angeles neighborhood (and previously spent ten years studying gangs).
Islands in the street: Gangs and American Urban Society
Cracks in the Pavement: Social Change and Resilience in Poor Neighborhoods

Even pulling half of us out of the pay and benefits sinkhole will not restore normal bargaining power and political muscle. Even those above 90 percentile -- whose pay has kept up with productivity -- lack political punch.  Only re-unionizing will accomplish that -- and the only stable, fair and balanced labor setup, tested beginning in continental Europe and then around the world is legally mandated, sector-wide labor agreements.  Be nice if our economic doctors would ever even discuss out loud the only fundamental cure for 140 million American patients.

Productivity doubles every two generations -- twice as fast as population -- so why any problem funding Social Security?  In the instant case it is because wages haven't nearly kept up: the (American) median stagnated over the last two generations (!), by early  2007 the minimum was almost cut in half.


Wednesday, April 3, 2013

If today's minimum and median wages were halved, would that help McDonald's and Wal-Mart?

Her to me: "
Thank you for your comments on the federal minimum wage and how raising it may affect the price of living.  There has been a great deal of research done on this topic with widely varying conclusions, and not all of this research supports the statistics you shared in your e-mail."

Thanks for (actually) responding.  :-)
Actually, even top progressive economists have yet to take the simple look (eighth-grade math is all it takes) that I did at whether a really big (doubling?) jump in the minimum wage would re-route even more income back to employers.  So conservative critics are not likely to have done that either.  Maybe my "Ph.D." in taxi driving gives me more real world worries to suggest thinking that through (30 years in NY, Chi and SF).

Bear with me for a tiny thought experiment.  Imagine both minimum and median wages were cut in half -- would that help McDonald's or Wal-Mart?  If we believe Massachusetts' junior senator -- adjusted for every increasing productivity -- worse has already happened!  "Elizabeth Warren: Minimum Wage Would be $22 An Hour If It Had Kept Up With Productivity"

It is curious that to catch up with doubling of productivity gains -- since 1968 when the minimum wage was $10.50/hr ($1.60 nominally) -- today's minimum wage would have to triple from $7.25/hr.  In early 2007 the minimum wage would have had to almost quadruple -- from $5.75/hr (nominally $5.15/hr).  Looking from that perspective my simple idea that doubling the minimum wage would add only 33% to fast food prices and 10% to retail prices while giving half the work force an average 50% raise -- win, win all around -- doesn't look so dumb.

To put it another way, as John Travolta might say, if an angel could have foretold to Americans of 1968 that by early 2007 the minimum wage would sink almost in half -- instead of doubling with the normally expected two-generation doubling of productivity -- they would have to have wondered what possibly was going to cause that: a comet strike, a small nuclear exchange, multiple outbreaks of plague, what?   ???  Apparently we all just fell asleep at the switch.

 If people know enough economics to know what the price of a quart of milk or a loaf of bread is (which the first George Bush didn't -- not to pick on) then they know enough to know that at $30,000 year wages people will buy a lot more fast food then they will at $15,000/yr.  And, the same doesn't hold when they go from $30,000/yr to $40,000/yr.

The equation of half (or more) of labor getting a bigger percentage wage increase than their employers' resulting pass along price increases doesn't hold up forever.  At a $40,000/yr minimum wage people wont want more burgers but the price of burgers will go up making an incentive to buy less -- but they will have more money to buy -- so maybe it would be a wash for employer profits.  ($5 fast food meal at $15,000/yr would go to $6.65 at $30,000/yr and $7.50 at $40,000/yr.) So at $30,000/yr we would have dug ourselves out of the -- for 1968 Americans -- unimaginable sinkhole. 

Of course so much more has gone wrong because of de-unionization which has robbed the middle-class, not to say the poor, of both their political and economic mojo -- assuming we were ever unionized the right way.  Some years ago I bumbled into the comparitively world-wide, as long as six decade old practice of legally mandated, sector-wide labor agreements -- where everybody employed in similar occupations (e.g., retail clerks) in the geographic locale (where applicable -- not airliner crews) works under a single, commonly negotiated contract.  No more Wal-Mart starts selling food and supermarket employees (new ones anyway) take a big pay cut. I've been trying to sneak up with the idea with this:

The reader may Google sector-wide practice here (mostly me):