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.

1 comment:

Owner Earnings said...

"The corporate tax question is like the death tax question in a way: if we reduce the corporate tax we have to raise the individual tax to make up for that -- just like if we don't take your money dead, we have to take more of it alive."

The government is not interested in running a balanced budget.

The death tax is designed to prevent 1 family from controlling the US. If Buffett passed his weath to his kids, and he kids doubled it, again and again, the Buffett's would control the US and the kid that ended up with the money would probably be incompetant.