Thursday, June 14, 2012

A note on education to Chicago's Republi-crat mayor

Before Chicago’s Republi-crat mayor adds to many hours to public school days he might ponder what economist/political scientist Sánchez-Jankowski says about why ghetto schools don’t work in his book “Cracks in the Pavement” after spending nine years on the ground in five New York City and Los Angeles poverty neighborhoods: the schools there did not work because too many students – and teachers – did not expect the job market to pay them enough to work when they got out.  Ergo, many feel it not worth making extra effort.

What the good professor was unaware of and what the Chicago City Council is unlikely aware of – nobody else in America seems to know – is that, as average income doubled over the last two generations due to advancing technology and management skills, the federal minimum wage by now has sunk $3.28/hr from a high of $10.53/hr in 1968 ($1.60/hr nominally). 

It took more than inadequate teaching to put 100,000 gang members on Chicago streets (per Dean Renolds).  In my reading of Venkatesh’s American Project the Taylor Homes became gang infested hell only as the minimum wage dipped below 63% of LBJ’s minimum ($5.15 nominally) in 2000).

I am not expecting Chicago’s City council to straighten out what I call America’s “post apocalyptic” labor market.  I’m just trying to point out the deep labor market sickness at the bottom of most of America’s worst troubles.  Least of all do I expect a Republi-crat to care.
FWIW; jumping to a federal minimum wage to $15/hr would add about 4% direct inflation – easily computed:
[70 million (half the workforce); $3.75/hr average raise ($15 is today’s median wage, optimistically) X 2000 hours (work year)] + [3.5 million * extra half raises for those now at or below the minimum (2009) X $3.75 X 2000 hours] = $551.25 billion altogether -- out of a GDP of $14 trillion = 3.9% direct inflation.]  * 

If a McDonald’s union could hold out for double pay they would add 33% to the price of a burger: fast food labor costs being 33%.  If McDonald’s union could do that a Target union could hold out for a raise from $10/hr (don’t know exact figure) to $15 which would add only 5% to Target’s prices: most business labor costs being more like 10%.  If the minimum any American business paid was $15/hr (Germany’s 10 percentile wage last I looked years ago) half of America would get a raise to $30,000/yr and McDonalds would do fabulously.  Which gives you an idea how little money we are talking about in absolute terms in restoring pay levels in half the American labor market.

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