Wednesday, July 6, 2011

Republicans have their minimum wage theory backwards

My comment on "Slate Magazine's" "Get A Job Kid" :

Republicans have their minimum wage theory backwards: that American teens are now missing out on minimum wage jobs because better skilled adults came running for them after 2007's "big raise" -- ROFL. After the "big raise" from $5.15 to $7.25 the federal minimum wage was still $1 short in buy power from what it was in 1956 (that's nineteen-fifty-six in case you think you read wrong) -- $1/hr nominally in 1956 being $8.19/hr adjusted.

But there's more -- as they say in those TV commercials. Average income in 1956 was 40% of what it is today. To put meat on those bones -- and mine -- when I was a kid in NYC we ate a lot of Hamburger Helper and a large variety of noodle casseroles, not because we were poor but because the economy simply put out a lot less per person back then. No dream in anyone's mind of stainless steel kitchens and de rigueur granite counter tops. :-)

Which brings up relative living standards. Americans on the minimum wage today -- if you can find any (recent parolees forced to take any job?) -- see the how the upper percentiles live on television and understand too well they are at the bottom of the 21st century standard of living barrel. McDonalds restaurants in Chicago are staffed almost exclusively by Mexicans. Higher skills than American teens? Worse English language skills. But no one else will work for Illinois' minimum wage of $8/hr.

LBJ was pushing the minimum wage pretty hard in both 1956 -- when as majority leader he snuck it through the US Senate seeing not enough conservatives present -- and in 1968 -- at 80% of the median wage. I guess there is so little money in that end of the economy that it does no harm.

America's greatest historical economic scandal: if the minimum had kept up only half speed with per capita income growth it would be $15/hr today. Today's American median wage (the average person's wage) is $15/hr. And 20% of our wage and salaried workforce is earning less than LBJ's minimum wage.

The welfare state in Europe was instituted after WWII as a compensation for something call LEGALLY MANDATED, SECTOR-WIDE LABOR AGREEMENTS which were designed to hold off the race-to-the-top by labor unions so more money could go to rebuilding -- which very same labor market system recently chased Wal-Mart out of Germany because they could not hang on there paying the same pay and benefits as everyone else. Every OECD labor market in which sector-wide is in place (e.g., Canada, Germany to take the lite and heavy versions) the economic well being of the average person is assured. Sector-wide bargaining prevents the race-to-the-bottom too.

Everywhere in the OECD sector-wide is not in place (e.g., Japan, Australia, America) labor is ever more screwed. Theoretically I cannot think of anything else that can reverse America's race to the bottom; can you?

1 comment:

Misaki said...

From September

The proper way to fix income inequality is not by raising the minimum wage. It is by reducing unemployment.