Friday, May 22, 2009


15% of today's GDP goes to health care.

15% of overall income shifted from the bottom 90 percentile of earners to the top 1 percentile of earners between 1973 and today.

Anybody see a possible connection between the pressure of health expenses and the uniquely distorted (mostly because uniquely ignored) American labor market?
Does culture or genetic behavioral programming influence us the most? Actually the two can powerfully reinforce each other in a loop that can be nearly impossible to break -- for male "hunters" at least. I have found males to unbendingly unable to accept new pathways on more than one old issue.

I see males as so programmed to "check in" with what everybody else is thinking before they allow themselves to decide their what their own agenda will be that they will permanently freeze out what would be the most obvious practical approach in purely abstract terms. Prime example: the inability of America's progressive economic elite to pick up on the easy solution -- that could be even more easily sold -- to America's uniquely low labor pay: sector-wide labor agreements (I'm not the least bit kidding about any of this) -- American supermarket and airline workers would kill for legislated sector-wide agreements.

But males are programmed so heavily -- this was an all important survival mode -- to integrate their thoughts with everyone else in the group -- this is not the time for new ideas: the wild pig is getting away! -- that they are impervious to the most practical abstract innovations. When they are alone in the library at one in the morning they are still on the "hunt."

Meantime 20-25% of America's workforce is earning less than the minimum wage...
...of 1968! Meantime top one percentile income averaged $1.2 million in 2006 according to CBO* -- while our intellectual males (unconsciously) chase ever receding wild pigs.
20 years out average income should be 140% of today's by normal expectations. 26.7% of 140% equals 37%. 140% minus 37% leaves 103% in my eighth grade math to spend on everything else. Compares favorably with 85% today (100% minus 15% for health costs) to spend on everything else.

Almost 20% more income to spend on everything else -- along with 20 more years progress in medical care -- and who knows what amazing everything else (adjusted for inflation -- tech advance not usually reflected in inflation numbers -- no realistic way to measure it): sounds like a great time to be alive and amazingly healthy to me.

Want something to worry about? Imagine if 25% of the American workforce (not the typical OECD economy's workforce -- not them) were earning less than the minimum wage (with the income curve pretty flat most of the way to the top)...
...of 1968! That was the state of affairs as of a couple of years ago when the fed minimum was $5.50/hr (in today's money) compared to LBJ's $10/hr.

This impacts medical care too because the people who have all the money the rest of us did not get (CBO reports top one percentile households averaged $1.2 million in income in 2006*) don't have any more hearts and livers to fix even if they have the money to throw at fixing them -- and the rest of us may not be able to support the taxes to pay for adequate national insurance because we make less all the time.

The warped out of shape American labor market -- that is what to worry about.


Tuesday, May 5, 2009

More on the practicality of doubling today's minimum wage (at Thoma's)

>>>>And of course, that it wouldn't cause a spike in unemployment among minimum wage workers, including increases in teenage unemployment which wouldn't be so great for crime and poverty.<<<<

I almost don't know where to start -- but there are few teenage Mexicans working fast food in Chicago, nor many teenage Chinese working fast food in San Francisco, the other city I have recent experience in.

If the minimum wage were $500/wk (up all of $100 since 1968 -- TWICE the average income later) a lot of gang members would remember the desperate reason they joined a drug selling gang in the first place; and would not stick around long.

Recently, the Illinois minimum wage jumped all the way from $5.50/hr (in 2009 dollars) to $8.00/hr. I and other customers of my neighborhood Ronald have noticed a distinct uptick in business -- all in the third world end. IOW, a minimum wage increase feeds the pockets of minimum wage employees who are most likely to patronize a minimum wage business out of proportion.

Prices went up but not enough to keep anyone else out. Wouldn't you pay 1/3 more to go to Ronald's if you had to? Enough higher paid people would to keep Ronald going I am sure. But, if fast food is an overextended business dependent on low price Mexican labor to keep its market share then so be it -- let some Ronald stores close up. A few years ago Ronald closed 733 stores that were not making a profit -- nobody took notice -- not even Mexico.

Fast food price is 1/3 labor -- by far the highest of any business -- and a business that uses mostly minimum wage labor. If Ronald can survive doubling the minimum wage it should have little impact on any other business.

Ultimate effect to be hoped for: higher paid workers who have more bargaining power will get their inflation raises to cover the extra 2 1/2% inflation and less money overall will be left for the top 1% or earners to take home because American workers are too asleep to grab it before it percolates all the way up.

I'm not saying: For the want of a higher minimum wage everybody else is underpaid. "Everybody else" had better get in touch with something called sector-wide labor agreements -- and then the minimum wage earners and "everybody else" can squeeze back the 15% of overall income that percolated to the top 1% of earners since 1973 in our uniquely warped out of shape American labor market.

Evidence that doubling minimum wage would only cause 2 1/2% direct inflation? + low pay more about power than skills

What evidence the minimum wage would only add 2 1/2% to cost of GDP output and direct inflation? Just eighth grade math -- worked it out a couple of years ago as 3 1/2% to go from then minimum of $5.15/hr to $12.50/hr:

$12.50 was 40 percentile wage then meaning 54 million workers (.4 X 136 million) at half (average raise) + 6 million at minimum wage level (who get the full raise or another half raise) = 60 million half raises.

Half raise = $7500/yr (average raise or half-raise = $7.50/hr X 1000 hours -- 1000 hours being half a work year).

60 million workers X $7500 average raise = 45 million at $10,000 = $450 billion added to the cost of GDP output. GDP at the time was $12.5 trillion. $450 billion is about 3 1/2% of that year's GDP.

GDP last year -- and when output returns to normal -- was about $14 trillion; minimum wage is now $6.55/hr: so, I figure (without actually figuring) knock off 1% inflation for 2 1/2% direct inflation -- about how much we grow every couple of years.
How much "skill" does it take to be a taxi driver? The reason taxi drivers can no longer earn a living is that American labor has sleepily given up all power to protect itself in the market place.

In Chicago where I hacked for 20 years they allowed on 30 cent mileage raise over the 16 years (!!!) from 1981 to 1997 (at which point I was hacking in SF where they are so liberal they treat you like you have a union even if you don't) -- at which 1990 midpoint they started cutting the business in half with subways to both airports, unlimited limo licenses and (the shot in the head, not just the last straw) free trolleys between all the hot spots in the downtown -- AND at which 1990 midpoint the city began adding 40% more cabs (now on its way to 50% more as the city likes the money from selling the medallions).

Which is why I had to move 2000 miles to get a job driving a cab (while some drivers moved 10,000 miles to drive a cab in Chicago not Pakistan -- low pay outsourced my job to Pakistan and fast food jobs to Mexico). Not lack of skills the problem -- lack of power to maintain labor's fair share of the pie.

There is no reason any 2 unskilled people cannot earn $1000/wk working fast food -- with universal medical insurance. We are clearly that rich. Any 2 WOULD have earned $800/wk in 1968 (adjusted) -- at half today's average income. We are incredibly rich: why our top 1 percentile households can average $1.2 million/yr.

Posted by: Denis Drew | Link to comment | May 05, 2009 at 07:38 AM