Sunday, September 28, 2008

All comes to megalomaniacs who wait

I like the "inflate our way out of it" part of DeLong's comment on Eichengreen article...

...perfect timing with my megalo plan to shift 12.5% of overall income share from top 3 percentile incomes back to the lower 90 percentile incomes (2001 numbers; may be worse now) by what amounts to using inflation (plus some serious top taxing) -- by doubling the minimum wage and instituting sector-wide labor agreements in this, one of the last economies in the first world (or even second or third world) yet to institute it. With 40% of overall income now spent by the top 10 percentile (up from 27.5% over previous decades) there is plenty of headroom to carve share back -- and it would be providential if the usually feared inflation were actually doing double duty. All things come to he who is megalomaniac.

Thursday, September 25, 2008

The -- half century outdated -- card check

I support the card check bill as one -- outdated -- way to get around the obstacle course placed in the way of union organizing votes -- nobody should have to run the gauntlet just to vote on an political or economic level.

But why is the only proposal on the table an early twentieth century labor law -- retread -- that some smart labor lawyer luckily spotted a few years back -- suppose he hadn't spotted it; can't we think for ourselves?

The late twentieth century answer to the race to the bottom -- to Wal-Mart killing the pay scales of legitimate workplaces -- is SECTOR-WIDE labor agreements: where everybody doing the same job in the same geographic locale must under law work under a common collective bargaining contract even for different firms.

Wal-Mart just closed 88 big boxes in Germany because it could not make out paying the same wages and benefits as everyone else. Supermarket workers and airline employees here would kill for sector-wide agreements.

Germany has the most comprehensive version of sector-wide -- France has a "lite" version where nonunion firms must work under contracts negotiated by union firms. French-Canada has the latter. Our economy is almost the same as French-Canada -- it should be no trouble to incorporate sector-wide "lite" here.

Under German style sector-wide scabs should not exist because everybody must work under the same contract -- and scabs have no contract.

Argentina (second-world) uses sector-wide. Indonesia (third-world) uses sector-wide. Even if we get card check here, American labor law will still be behind the third-world. What are we fourth-world?

Sunday, September 21, 2008

Ramos and Compean: an improperly brought civil rights case

The federal prosecution of the two border guards, Ramos and Compean, began with the prosecution citing a constitutional decision written by Justice White which found an officer could have no authority to shoot a fleeing suspect if the officer did was not sure the suspect had a gun (Tennessee v. Garner, 471 US 1, 1985) – which Ramos and Compean honestly admitted they did not – which sole point is what making the shooting a federal civil right case hung upon.

The ruling was aimed at practices like Tennessee’s which routinely allowed officers to shoot fleeing suspects (an New York State’s not too much earlier – which had a rule that every police officer was to fire a warning shot over the head of every fleeing suspect and then shoot to kill – saw an example of this on a 1960ish episode of “Naked City”) which routinely allowed officers to shoot fleeing suspects.

The opinion of the Court was written specifically for a case of shooting a young teenage burglar who was climbing over a fence in the dark – and who had given the officer no cause to believe he was armed. In other words the opinion was written to do away with routine shooting of fleeing suspects (a then wide spread practice) – and was not nuanced as to the degree of danger facing the officer.

The border guard shot at a fleeing Mexican suspect who had marked himself as a drug dealer by seriously assaulting the officer’s partner (illegal immigrants never assault officers, ditto for coyotes), had abandoned a truck which likely therefore contained enough illegal drugs to put him behind bars for most of his life, and could be assumed to have a gun to protect said shipment: could therefore be plausibly feared to be willing to escape at any cost (A.K.A., armed and dangerous) – unlike a neighborhood teen climbing over a fence.

The Supreme Court decision specifically ruled out shooting if the officer was uncertain a fleeing suspect had a gun – but did not specify taking away the officer’s discretion to shoot without certain knowledge the suspect was gun armed where the totality of circumstances (clearly in this case) announced mortal danger to the officer’s life.

In a more perfect world the border guards' case would be an occasion for a more delineated precedent ("good luck").

Anti school corporal punishment – First attempts at viable equal protection and cruel punishment constitutional challenges -- NEW!

For a more comprehensive treatment click on: Corporal Punishment in Schools: Economic, Liable, Practical, Ethical, Constitutional?

Would we antis know how to answer this: Suppose Oliver had asked for more five times already this week (there isn’t any more to go around; “cannot” have kids constantly coming up front for no reason); suppose he had already been sanctioned with time outs; suppose now he was faced with enduring either two time outs or a beating – his choice. What could be wrong with that?

Answer: there is no compelling need to keep Oliver from coming back every day [or a school child from being tardy every day], as long as his actions did not lead all the other kids don’t start following him every day, making the lunch room impossible to operate [or repeated tardiness somehow making a school room impossible to operate].

No compelling need = no legitimate override of equal protection of the law from being beaten with a stick designed to inflict the maximum amount of unbearable pain.

If Oliver were bringing down the house or broke a bunch of plates or stalked and seriously beat a smaller boy the state (or private school) could arguably claim a compelling interest in corporal punishment. This is sort of the equivalent to justifiable defense (what physicists might call a unified theory).

Question of permanent damage: adults are protected from armed assault, without any need to claim permanent damage, but for the hellishness experience itself. Battered wives do not need to cite permanent damage.
Sovereignty: acting “in loco parentis” is just a legal mechanism to confer the ability to mange children. Acting “in loco parentis” does not confer the parent’s so-called sovereignty over the children to the teacher – does not reduce students to being virtual slaves who may be beaten at will (may even a parent legally spank a child for nothing?).

Even the parents’ sovereignty itself is a legal mechanism to protect families from untoward intrusion from the state (the teacher is the state – no one to protect from the state; if parents have sovereignty, how can the state’s extension of parental authority to the teacher lead to the teacher overriding the parents’ will not to beat the child?) – the child is never truly a “slave” per se.

If the parent or guardian who has (or is supposed to have) a supportive relationship with the child loses control, the child tends to think nobody cares about it and literally (!) stops caring about itself (easier to imagine with a badly neglected 12 year old than with a merely out of parents’ control 18 year old but just as true) – leaving it prey to every street temptation: robbery and burglary!

So, even if antis don’t approve of corporal punishment at home the state must stay out of it because the consequences of the parent losing control are literally catastrophic for the child. Anyway how many parents practice the ritual beatings done in schools (holes in the paddle!)? How many parents have a menu of swats for each offense like Winona, AK? How many kids have trouble sitting down come to school from home?!

Now, if parents can be liable to prosecution under normal assault statutes if they strap a child for nothing -- for instance, to mistakenly show the child they legally can -- then, teachers who beat a child for less than compelling need -- for instance, possessing tobacco --should be considered liable under normal assault statutes, even if the teacher has to confiscate tobacco from the same student every day, because while it is a nice rule – which may or may not accomplish anything –breaking the rule even every day never leads to catastrophic consequences. Give the student as many detentions as you please, but do not step over what would be a felony assault line with anyone who was not a minor student.

With the above, antis have a nice meaty legal topic for discussion on the talking head shows, not just bleeding hearts and bruised bottoms. Progressive talk shows would love to do the topic but they may have needed more material for discussion then the antis had up until now.

Allowing corporal punishment in schools can be argued as making an exception to equal protection – requiring a compelling state interest (we are talking what could otherwise be felony assault here) to override the protection?

To work out what might pass the compelling interest test, let us take an upside-down look at the Oliver scene (“More?”). We antis would not be nearly as horrified if Oliver had done something egregiously wrong, like cold bloodedly beating up a smaller kid or sneaking into the kitchen and breaking up a bunch of dishes. We mostly might not approve anyway – “find another punishment” – but most of us would not get worked up enough to organize against the sort.

To meet the test of compelling interest a student should either have done something egregious – being late repeatedly or smoking in the parking lot does not qualify as wrong-wrong; prevention of such hardly not qualify as a compelling state interest – or be doing something that is chronically and seriously damaging to himself or the school that therefore must be stopped.

The latter prescription might possibly be fulfilled by a seventh or eighth grader perpetually doing the “terrible twos” in the classroom, perpetually disrupting class and perpetually making impossible his own education – relatively rare instances are cited along with the supposed CP resolution. Ideally, law could allow one-time, limited punishment – only after a judicial hearing agreed that parameters are fulfilled. Courts are actually very well equipped to deal with just such questions – perhaps only in minutes. Leaving interpretation to the school would invite the kind of interpretation that cops chronically bring the Fourth Amendment, leaving students rights less than fully protected; and leaving the school open to criminal prosecution if it erred in punishing wrongly.

Ditto, for any application of corporal punishment in high school. To meet compelling interest it would have to be done only on a solely individual basis; no preset formula.
Let’s deal for a moment with the timing of the emotionally dependent stage in children, which has implications for both equal protection and cruel and unusual punishment aspects of the issue.

Boys are in the emotionally dependent stage, for all practical purposes as much as if they are 12 years old, until they reach 18 1/2 – at least in my observation – at which point their emotional dependent stage switches off like a light switch over one week’s time (from 12 to an adult) – again, as closely as I can observe. Girls should switch off a year or year and a half sooner – I don’t have enough personal observations to be exact.

My observations were related to juvenile delinquency. If a kid did not think anybody cared about him – wrong about half the time -- he literally did not care about himself – meaning no penalty could deter him from crime. Strangely enough boys who were merely out of control of weak but committed guardians (during what NYC police call the “pissing vinegar stage”) got every bit as hysterically alienated as the worst neglected kids. Oddly, again, 5 or 6 weeks of intensive attention would turn the craziest kid around (unlike the 2 or 3 decades of positive socialization needed to retire the paranoia underlying heroin or serious alcohol addiction) – no longer out of his own control – again, strangely, the change comes all in one day at the very end “invasion of the body snatchers “syndrome”) – just to make this practical discovery available to anyone reading this. After 18 1/2 they may have become I-don’t-want-to-work-aholics from a youth of no work or no school – cannot face life at hard labor.
Now for cruel and unusual punishment plain and simple. There are voluminous reports of early grammar school children being permanently damaged (permanently afraid to go to any school, “not the same kid”) after being beaten. For these kids the verdict is certainly cruel and unusual punishment – plain and simple.

Now for cruel and unusual punishment by proportionality. Most students who are whipped in school while in the emotionally dependent stage maintain very friendly attitudes toward the adult – as long as he is not usually going out of his way to be a bad guy. Post the emotionally dependent stage they may turn to resenting or even hating the teacher for life. They don’t think of the infraction as wrong-wrong (e.g., repeated lateness) in adult perspective – they don’t think of the infraction at all (it is so meager). All they very typically think of is of the person “who beat them like they were an animal.”

Many equate the beating to rape even immediately. Legions of parents are angrily up in arms over what they take for virtual “rape.” Many students who are never beaten themselves are profoundly upset over the beating of other students.
Here the subjective is objective.

If it is rape to you it is rape. It is a factor of innate social feelings like the switching off of the emotionally dependent stage.

I would go much further and speculate that most of the horror of corporal punishment in the school may come from the aspect of being beaten for nothing wrong-wrong – what makes it virtual “rape.”

Topsy-turvy (Oliver style) again: I speculate if a teacher needed to take three whacks to join the local volunteer-fireman’s fraternity, he wouldn’t fret over it, he could sleep the night before, he’d take his three shots of unbearable pain and bear it. But, if he had to take three whacks from the school administration (strain you imaginations please folks) for turning in his pay hours late too many times he would go out of his mind, couldn’t sleep the night before, feel ten times worse at the time he got hit and feel like he was “raped” for years after.

That’s what I think. I’m sure this feeling fits many and probably not most students (how horribly I would feel). I suspect the kid who doesn’t seem to take paddling seriously is the one who doesn’t feel the social aspect (meaning beating is mostly effective on those who feel "raped?").

In any case the never the same kid aspect for young grammar school students and the “rape” horror aspect for too many, probably most high school students raises the proportionality concept of the cruel and unusual constitutional prohibition – and makes the case for not “raping” students over what amounts to office management matters very convincingly I think, if only for a limited number of students (we have no way to tell who they are in advance) who will certainly be permanently traumatized a beating for doing nothing wrong-wrong.

If corporal punishment is "optional" as it is in many institutions, then, by definition there must be no COMPELLING need -- overriding equal protection rights (if not humane policy). If there is no compelling need in one constitution there is no compelling need in others.

Optional above was in quotes because (outside) circumstances can coerce a student into taking a beating they never would otherwise agree to. In a Tru video a girl reportedly asks for a break because she is sick and cannot do detention Friday afternoon and cannot do it Saturday or she will miss her Junior (I believe) prom -- and opts to take a beating she may never have been willing to otherwise. A boy needs to go to work and so takes a beating instead of Saturday detention.

Her reported "offense": being caught with a cigarette pack -- his: being barely late for class for the sixth time; on a large campus he took a little too long because he talked to a girl (notify Congress!). I read somewhere that she became class president the next year -- that doesn't sound like an infant terrible.

Don't believe that a beating does less damage than a suspension. Ten years from now, a three day suspension will not have any effect on your life. Spending four years in an institution in which you may be beaten for what amounts to "office management" purposes may plausibly permanently affect your outlook on life for the worse. Paddling supporters love to cite how it did permanently affect them -- usually amounting to adopting a more obsequious attitude towards authority; which can be read as being less confident and assertive about their place in the adult world, which is not where we want our precious children to go these days.


Friday, September 19, 2008

Imagine if Australia had a 1000 mile land border with China

Imagine that Australia had a 1000 mile land border with China -- not very well guarded in the tradition in the land of immigrants, the good old USA. Lacking a German style (“heavy”) sector-wide labor contracts setup (sometimes called de facto minimum wages), the only way to keep the price of Australian born low wage labor at the highest practicable level would be to mandate ownership to pay a sensible minimum wage. Ditto for today’s USA reality.

A sensible minimum wage target might be 50% of the "real" * average wage which is about $25/hr in 2008 – suggesting a doubling of today’s minimum wage to about $13/hr. ( * I divide 2/3 of GDP divided by working hours to get my “real” average – the gov averages for only about 1/2 of GDP, which is way short of all non-investment income).

LBJ's 1968 minimum wage was in the neighborhood of 66% (!) of the "real" 1968 average wage of $15/hr (fewer workers per capita, working fewer hours per capita, were divided into the per capita income then) – which was pushing it really hard. And that hard at a time when 12 million desperate immigrants were not vying for the lowest paying 10% of jobs – a time when just the normal pressures of the market were deemed to require a heavy counterbalance for workers with no other bargaining tool.

If a higher wage (or any kind of wage raise) causes job loss to lower skilled workers because higher skilled workers are no longer staying away from the same jobs in droves, then, the previous lower minimum wage may be deemed to have been under-pricing (higher skilled) labor – the new higher minimum wage should not be seen as overpricing (lower skilled) labor. Also, if “higher skilled” workers are still not available for fast food work under a higher minimum wage, then, employers may very well hire the “lower skilled” at the higher wage range.

One -- tragically unhealthy -- case of under-pricing is the new two-tier supermarket contracts against which supermarket unions fought so hard – and lost -- under the pressure of under paid Wal-Mart labor entering the retail food business. Ditto for under pricing minimum wage labor to the $5.15/hr extreme up to 2007, (equivalent to FDR's $4.50/hr minimum w/no tax in 1939) at which price point mostly Mexican born (or in San Francisco Chinese born) workers showed up.

While watching Moscow on the Hudson with Robin Williams I finally figured out the one thing that could compel me to work for $4/hr take home: staying in this country – and that only if I expected to move up; otherwise back to Russia or wherever.

Wednesday, September 17, 2008

SHOCK and SURPISE from a minimum wage study!?

Re: It's the wages, stupid! [A time magazine article]

Mostly on the minimum wage:
On the New Jersey study showing fast food jobs were NOT lost when the minimum wage was raised: SHOCK and SURPRISE (!); fast food restaurant labor costs are far higher (33%) higher than typical labor costs -- and use MOSTLY (2+X 33%) minimum pay labor. If fast food restaurants can handle a healthy minimum wage raise, any other business surely can.

Don’t become over anxious from stories of a few pockets of depressed employment that a higher minimum wage supposedly would keep going -- such are always going to occur in big economies and big nations change: can’t drag down the whole workforce’s wages for the inevitable few (Keynes -- in a possibly related situation -- showed that lowering wages in a depression actually keeps the downturn going) -- let them move to where wages are better; that’s economic history. When the mines play out or the steel mills move overseas (or farming goes mechanized) you can only move to where the action is.

If we were not discussing any immediate legislative action but just shooting the breeze abstractly, I think most might agree that IF the USA could pay a $400/wk (2008 dollars) minimum wage in 1968 (at half today’s average income yet), then, "probably" the USA could pay a minimum wage of $500/wk in 2008 without any strain. I say "probably" -- at the least very possibly.

If I can con you into "probably", then, I have conned you into agreeing that a great economic tragedy has "probably" -- at the least very possibly -- taken place (my "Great Wage Depression" which I thinks speaks better than mere "inequality" which sounds like the few taken advantage of by the many). We only have to look around to see that, exclusively in the USA, labor bargaining power has been allowed to deteriorate, to lapse to near zero (more a culture of complacency than exploitation) -- to make a good guess what the source of the wage depression "probably" -- or at least very possibly -- is.

Posted by: Denis Drew | Link to comment | September 17, 2008 at 09:23 AM

Sunday, September 14, 2008

Median Income Share Clearly Dropped

First, Census table shows per capita income (comparing apples to apples now) increased 100% from 1967 through 2007).

Census mean family income quintiles table show:
5th quintile mean grew 22.4% over the same span;
4th grew 31.4%;
3rd mean (effectively median) grew 47.3%;
2nd grew 64.6%;
1st (w/o adjusting for top coding) grew 95.8%.

If you play my little top coding adjustment game using per capita income for your overall growth gauge—as described above:
1st quintile income grew 175.4%. (I mis-remembered above that my adjustment supposedly doubled top quintile income—rather it approaches doubling income growth.)

From: 09.14.08 at 6:36 pm on Crooked Timber
PS. If you believe my top code adjustment, then, $262,000 (not $186,000) becomes the mind boggling average (!) income for a mindboggling top 20 percent of families. Look around you -- this stat isn't on the same planet with the same family's median income. Just look at your primary care provider who is struggling these days to make $150,000/yr for extra help figuring this out.

At some point every (asleep at the bargaining table) American (not European) must come to terms with the concept that top 1 percentile earners and especially .1 percentile earners are running away with much more income than can be justified by any concept of economic efficiency -- perhaps extremely the opposite: bottom 50 percentile earners who lost half of the (12.5%) shifted income share take home so little these days that it is stunts their education and for the poorer among them it can even stunt their socialization.

I'm not blaming top earners -- it is just a matter of bargaining pressure physics: if bottom 90 percentile American earners (not Europeans) fall asleep at the bargaining table (no unions or any gigantic interest in same -- 1939 minimum wage up til July last year), someone will take the income they don't want -- just a little no hate tag.

Friday, September 12, 2008

LINKS -- 9/12/08

A future for wind power?
by Chris Blattman

"Wind farms [also] tend to produce the most energy when it’s not needed—at night and in the spring and fall, when demand is low. The hottest, highest-demand days of the year are the days when wind’s contribution is likely to be near zero."

Thursday, September 11, 2008

Pres. McCain Felled By (heart attack, stroke, fell in bath tub?): Palin President!

I just read that North Korea's dictator has had a stroke. This reminds me of a seriously neglected implication of the Palin pick: McCain is 70 and could easily be incapacitated by any number of old age misfortunes. Meaning that in Palin we could more likely than usual be looking at our future president -- dumber (for the job) even than Bush. Achhhhhhh!

All we know about Palin at this point is that she is governor of a state that doesn't have a million people (Mayor Palin?) -- that has six men for every woman -- that has more the quality of an frontier outpost than civilization (don't leave home without your bear spray). Oh, and she avoids interviews.

Monday, September 8, 2008

CHARITY might cover a multitude of liberal agenda SINS? :-)

Political common denominator:
If you want "non-liberals" on your social agenda (I'm prolife and prowar myself) to vote in their own economic interests: IT MIGHT HELP IF YOU ACTED LIKE YOU WERE REALLY CONCERNED ABOUT THEIR ECONOMIC INTERESTS! Charity covers a multitude of sins (e.g., abortion?).

Double the minimum wage to $13/hr (a mere 30% over LJB's 1968 level; after a doubling of average income since -- LBJ's minimum apparently WAS about 75% of his median income which in those days was nearly identical to average income *) -- perhaps with inflation adjustment guarantees for incomes under $100,000 (not really needed as 100% increase in the minimum should result in only 3% inflation, spread over a few years).

Fully reconstitute unionization with the bargaining power booster shot used around the world (in first, second and even third world economies): sector-wide labor agreements (French-Canadian "lite" version?), under which everyone doing the same job in the same geographic locale works under a commonly negotiated contract even for different employers. Supermarket workers and airline employees would kill for sector-wide -- should be the easiest Democratic program to sell of all time.

I just found out looking at a chart in the State of Working America 2006/2007 (the new one should be in the mail) that the 1973 median wage $14.35/hr (in 2008 dollars) -- and the 2005 median wage as $15.75/hr.

Average income is $25/hr in 2008 (I believe we could make that closer to $30-35/hr if we larded in capital gains). Working backwards from 170% to 100%, AVERAGE income should have been (guess what?) in 1973: $14.75/hr -- virtually the same as 1973 MEDIAN income of $14.35/hr. So it seems (I never worked this out before) that average income and median income really can -- and should? -- be about the same.
*Looking at a chart in the State of Working America 2006/2007 (the new one should be in the mail) that the 1973 median wage was $14.35/hr (in 2008 dollars). Average wage ** in 2008 is about $25/hr (not counting capital gains). Working backwards from 170% down to 100%, average income in 1973 would have been (guess what?) in 1973: $14.75/hr -- virtually the same as 1973 median income of $14.35/hr (40 cents difference). So it seems that average income and median income really can be about the same. (Average income is now about $9/hr more than the median wage.)

All of which means we do not have to match LBJ's minimum wage by portion of median wage -- I'm talking about a median that is almost the same as today's average wage ($25/hr) in this mental rearranging of the labor market. It is intriguing though to think that LBJ steamrollered into law a minimum wage about 75% of the median (the ideal median) and the world did not end. Got to make you wonder what would happen if we tried it again. Since I am not likely to get elected dictator this may not happen soon. :-)

** I saw $25/hr somewhere -- probably not called average wage; don't remember what the $25/hr was officially designated. I know what is officially called the average wage is something like $16/hr. I divide the $14 trillion GDP by 2/3 to get income; divide the resulting $9.24 trillion by our 140 million person workforce to get $66,000/yr; divide that by 2000 hours to get $33/hr. Which solidly backs up my $25/hr which I saw somewhere. ???

I don't know where they get their $16/hr. I know the average wage part of my social security retirement calculation will only allow only 20% increase in counting my income of 1968 even though there has been a 100% increase in average income since.

Posted by: Denis Drew | Link to comment | September 08, 2008 at 10:00 AM

Saturday, September 6, 2008

3 Reasons 4 The Most Virulent Gangs

3 reasons 4 the most virulent street gangs:

One, love: a gang can represent an opportunity for belonging to kids being brought up without sufficient love and supervision at home – with weak or absent parents or grandparents or in foster or group homes.

Two (really number one, but it transitions perfectly into number three), money: thanks to American labor falling asleep at the wheel for decades the minimum wage as of June 2007 had been reduced to 1939 proportions ($4.50/hr in 2007 dollars w/no tax) -- and by the time the recent increase tops out it’s buying power will be about a dollar below the 1956 minimum ($8.00/hr in 2008 dollars at 40% of today's average income!).

As of last year a quarter of the American workforce was earning less than LBJ’s 1968 minimum wage of $10/hr – and not many of those earning at or near the $5.15 minimum were American born. American born workers will not even show up for that kind of money – which is where we came into this movie.

Your typical, drug selling ghetto gang could not whip a decent paying Ronald McDonald. Most street sellers are lucky to make $10/hr (with all the attendant risks).

And, now – the "big" new insight:

Three, a feeling of satisfaction from accomplishing work – no; not from selling drugs: I had this insight the other night while watching a documentary about the spread of the Crips to New York and New Jersey and about their obsessive brand of violence.

The satisfaction of accomplishment – substituting for the satisfaction of a real day’s work – may be what is sought from all the inter-gang rivalry, initiation rituals and defending “territory” mayhem (the latter apart from drug business). This connection is not usually made, I think, because the substitution is not a very close match.

Love is love and money is money – but the satisfaction gained from slicing someone’s face (rival gang or neutral) with a razor blade does not do much to replace the missing feeling of a real job well done. However in the vacuum of anything resembling realistic goals, human beings (young males most especially) may participate in pointless destructiveness if that is the only they can feel anything resembling accomplishing something important or significant – phony war substitutes for real life.

What is this insight worth? I may be worth a lot if it can be can convince some individuals they don’t really want to be involved in this behavior. It might be similar to explaining to gang bangers that, while if an outlaw biker gang won the lottery they would build a bigger clubhouse, half the Crips and the Bloods would go to college (perhaps making the point by exaggeration – which reminds they really don’t want to be in the criminal life. The latter insight may not talk anybody into actually quitting a street gang – not without a viable economic alternative* but it may remind them not to get TOO into it.

Ditto for preaching the former which may not talk anybody out of pointless destructive behavior but which even more precisely may target the mismanaged motivations behind it. Number three could give give gang bangers a clearer insight that they really do not really want to be involved in the street craziness and to not get TOO into it – again, while waiting for a viable economic alternative to gang life to show up in the American labor market*.

Nothing can be done to end the reign of street gangs until something is done to make work pay in American again – the way it paid 40 years ago, the way it would pay today if labor had not relaxed its bargaining guard (double the average income later!), the way it pays overseas. Ditto for chopping crime in general and making ghetto schools work again (schools wont work if the parents don’t).

For how to legislatively (re)impose a fair and balanced labor market, see this LINK.

Thursday, September 4, 2008

LINKS -- 9/4/08

How the US Middle Class Became 10 Percent Poorer
by Jacob Funk Kirkegaard, Peterson Institute

Contrast that with the situation in the United Kingdom, where evidently the inclusion of the financial sector of the city of London boosted “average middle-class incomes” by about a third. Either London’s bankers earn far more than Wall Street’s, or there are far more low-wage middle-class people in the United States than in the United Kingdom."

"The result of all this is that today, the richest middle class in the OECD is found in Britain. In 2006, an average single British middle-class worker earning the average wage, net of taxes, and in purchasing power parity (PPP) terms, had an income nearly 50 percent higher than his US counterpart—$35,000 compared to $25,000."

Wednesday, September 3, 2008

More Minimum Wage Action At Angry Bear

HERE IS MY VERY LATEST TAKE -- lifted from comments to be a post on ANGRY BEAR on 8/10/13: 

The bottom 50% of America’s workforce now takes 12% of overall income. It is hard to believe that the products and services produced by this half of America's workforce (70 million people!) would no longer be in demand over a few percent shift in overall income from the top 50% brought about by a $15/hr minimum wage (today's median wage).

Half the workforce, 70 million employees would receive an average $8,000/yr = $560 billion added to the cost of $15.8 trillion economic output = only 3.6% direct inflation.  Probably wouldn't lead to much additional inflation.  Economies with high minimum wages have median wages not much higher.  LBJ's 1968 median was only 25% higher than his approaching $11/hr minimum wage (at half today's per capita output!).

If the federal minimum wage were raised to $15/hr Wal-Mart wages would go up 50%; Wal-Mart prices would go up only 5% (retail wages 10% of costs) -- fast food wages would go up 107%; fast food prices would go up 35% (fast food 33%). 10-33% is pretty much the range of labor costs -- clustering close to 10% I believe.

With half the labor force getting percentage wage increases that are multiples of their employers' percentage price increases their employers should do better than ever.

Unrealistic? Wal-Mart supported the 2007 minimum wage increase from $5.15/hr to $7.25/hr so its customers would have more to spend.

Wal-Mart would not like a minimum wage of $15/hr. Wal-Mart had to close 88 big boxes in Germany because it could not compete paying the same as everyone else. Since the late 1940s, economies on the continent (and since, around the world) have instituted sector-wide collective bargaining: all employees doing the same work (e.g., retail clerk) in the same locale work under one commonly negotiated contract. Only way to reset middle class mojo here.

 * * * * * * * * * * * * * * * * * * * * * * * *

9/4The problem that has to be solved is the long term stagnation in lower to upper middle wages while average income grew 70%. See the best inequality chart I have ever seen:

I am looking at a chart in the State of Working America 2006/2007 (the new one should be in the mail) and it gives the 1973 median wage as $14.35/hr (in 2008 dollars) -- and the 2005 median wage as $15.75/hr.

Average income is $25/hr in 2008 (I believe we could make that closer to $35/hr if we larded in capital gains). Working backwards from 170% to 100%, AVERAGE income should have been (guess what?) in 1973: $14.75/hr -- virtually the same as 1973 MEDIAN income of $14.35/hr. So it seems (I never worked this out before) that average income and median income really can be about the same.

Over 35 years, 12.5% of income share was sucked up from the bottom 90 percentile to the top 3 percentile (the mid 90-97 percentile share holding even)...

...meaning it is not a matter of the better skilled people beating out the lesser in a higher tech economy: the top 3 percentile have always been highly skilled and educated -- but the top 1% now get 4X the 1973 share of income (meaning 7X the absolute amount -- given 70% average income gains in between) that they got 35 years ago for doing essentially the same level work (think CEOs, ballplayers and new anchors).

Which reduces the whole inequality problem (I prefer to call it the Great Wage Depression) in my mind to a simple matter of lost bargaining power.

Hence my emphasis on restoring same by forcing the market to pay what it would have paid anyway had American labor not fallen asleep at the labor market wheel, first, via a renormalized minimum wage (my proposal up ONLY 30% from 1968's $10/hr even though average income DOUBLED in that 40 year span) and, then, by reconstituting union power here through the modern, world-wide practice of sector-wide labor agreements (Wal-Mart just closed 88 big boxes in Germany where law forced it to pay the same rates negotiated with other firms).

* * * * * * * * * * * * * * * * * * * * * * * * * * * *You missed something:
If McDonalds raises its prices because of a minimum wage jump (and fast food is by far the highest user of labor -- 1/3 labor costs) guess who has EVEN more money to pay for the higher costs (3X multiplier effect for fast food -- more like 33X for most products)? Why minimum wage workers, of courese. This is actually one of the big arguments in favor of the minimum wage.

And, as coberly pointed out the other day, a minimum wage increase ties in much more efficiently with normal market processes than does the EITC because consumers wont buy products that they feel are too highly priced -- while raising the EITC on the same scale as a doubled minimum wage could have the government subsidizing whole industries.
Denis Drew | Homepage | 09.04.08 - 11:44 am | #* * * * * * * * * * * * * * * * * * * * * * * * * * * *

Agreed, the wealthy are not going to be impacted by higher prices at McDonalds, but, I see the wealthy as having go so far ahead because American labor forgot to keep up -- squeeze a toothpaste tube at the bottom and most of the way up (paralleling American labor just going into the labor market and taking whatever is offered) and it all comes out at the top. I don't even blame the top for taking what the bottom and middle didn't seem to want.

But, if you are worried about the bottom, then, doubling the minimum wage would be a practical place to start -- at least if, as I guess, the effect on prices would be hardly noticeable if not followed by other near bottom wages getting pushed up too (all for the good of course).

Then, there is renormalizing the unionizing scene (sector-wide). I see the totallity of all this "renormalizing" (bottom, near bottom, most of the way to the top) as tending to take away the froth that has been floating loosely to the top. If we don't do these things we will accomplish nothing.

Thing is, along with renormalizing unionization, the political power balance will shift completely in most people's direction and whatever needs to be done to renormalize top income will likely get done.

I see the whole (bottom, near bottom and most of the way to the top) move as chain-shifting income down from the tippy top. All of it should be done anyway just because it should have been done all along.
Denis Drew | Homepage | 09.04.08 - 12:46 pm | #
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I am coming in real late on this post: too late to read all the comments: almost collapsed from two days of emailing and posting.

Actually, the minimum wage was once as low as it was last year even though average income was never as high as it was last year: it was as low as 2007 as it was in (ready?)1939! Whence the minimum wage was .30/hr w/no taxes whatever -- or $4.50 untaxed in today's dollars. (I'm a little puzzled why Noni is using 1996 dollars, but I'm a "regular person" -- read, not reak, broken down old cab driver -- who may have been doing it a little bit longer: try Noni.)

I will shout the word "INSANE" in these scholarly quarters to describe the current state of the minimum wage. In this I am sure I will get full (if "ghostly") agreement from all the folks from 1939 who would have shouted "INSANE" if told that 70 years the minimum wage would still have the same buying power.

It should have taken 70 years of depression AND 70 years of no productivity growth to keep the minimum wage the same. All of which underscores my main point of just how out of whack American lower wages have become.

There is no other way to get back to normal income share than to raise the wages of those on the bottom the most and gradually less on the way up -- or maybe we should call it the wage share (since wages should be going up with productivity across the board). If we cannot face this we will be the only first world economy where labor gets paid less all the time.

Hopefully income share can "chain-shift" across the percentiles, ultimately leaving everyone in the lower 90 percentile better off (the bottom most especially), the mid 90-97 percentile with the same share, and the top 3 percentile with much depleted share (even if that take heavy taxes).

Hopefully the only businesses that get hurt will be those which used to sell to the top 3 percentile, while businesses that sell to mid 90-97 just keep pace, while businesses that sell to the bottom 90 do better. That is the overall aim -- no need to panic about higher wages hurting business -- the big picture is all about reshuffling.
Denis Drew | Homepage | 09.03.08 - 6:41 pm | #
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I really wish I could get going here but my poor old brain feels like it just climbed Mount Everest.

One more word on the so-called living wage. I am not looking for a welfare wage -- and neither was LBJ in 1968 ($10/hr minimum at half the average income). I am looking for all the traffic will bear! If we can squeeze the minimum up to $20/hr, fine!

Why? Because "greed" for want of a better phrase "is good" for labor too (authority: Teamsters local 804, where low tech, high school educated truck drivers and laborers just had their defined pension raised to $3600/mo BECAUSE THEY NEVER LET THEIR BARGAINING POWER DROP).
Denis Drew | Homepage | 09.03.08 - 6:51 pm | #
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Me again; "hopped up" on hamburger and caffeine-free Pepsi:

The practicality of shifting income share back to where it was 35 years ago comes down to this: in other first-world economies people at the bottom get paid more than they do here for doing the same thing -- and people at the tippy-top get paid much less for doing the same thing (the CEO of Mercedes-Benz's pay went from $3 million/yr to $12 million/yr when he picked up poor little Chrysler -- other German CEOs want to hook up with an American corp in hopes of similar).

Most people over there end up doing the same thing for different income share than they would get over here because of different labor bargaining power levels over there: shifting share to more equitable levels is perfectly doable -- they DO IT all over the first world.

Another supposed road block: a few points of higher unemployment over there.

Does anyone here want to adopt work rules that don't allow employers to fire anyone (making them reluctant to hire anyone)? Does anyone here want to adopt the automatic dole (you are out of work; you are on the dole -- mostly getting better pay and benefit combo than the minimum wage worker over here)?

Does anybody over here doubt that if we adopted both of the above that disaster would not strike: in the form of a few extra points of unemployment at least over here?
Denis Drew | Homepage | 09.03.08 - 7:59 pm | #   

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My minimum wage worksheet -- my easily-could-have-been minimum wage double-indexed for inflation and per capita income growth: 

yr  per capita    real    nominal  dbl-index  %-of 

68    15,473    10.74      (1.60)                    100%
69-70-71-72-73               [real, low point -- 8.41]
74    18,284      9.47      (2.00)     12.61          
75    18,313      9.11      (2.10)     12.61
76    18,945      9.44      (2.30)     13.04        72%
77                                                                 [8.86]
78     20,422     9.49      (2.65)      14.11
79     20,696     9.33      (2.90)      14.32 

80     20,236     8.78      (3.10)      14.00         
81     20,112     8.61      (3.35)      13.89        62%
82-83-84-85-86-87-88-89                             [6.31]
90     24,000     6.79      (3.80)      16.56  
91     23,540     7.29      (4.25)      16.24        44%
92-93-94-95                                                  [6.51]
96     25,887     7.07      (4.75)      17.85
97     26,884     7.49      (5.15)      19.02         39%
98-99-00-01-02-03-04-05-06                        [5.97]
07     29,075     6.59      (5.85)       20.09
08     28,166     7.10      (6.55)       19.45
09     27,819     7.89      (7.25)       19.42         40%
10-11-12                                                       [7.37] 
13    29,209?    7.25      (7.25)      20.20?     36%?

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An added thought: By the year 2013 some could speculate that a $20.20/hr minimum wage might not be a realistic expectation evidenced by double indexing alone because the fabric of the economy might have changed so radically over 45 years.  Might be an outside possibility, but, LBJ's 1968 minimum wage would have morphed to more than $14/hr with double indexing by only 1978.  Can anyone explain how the economic fabric might have changed sos radically in a mere 10 years?