The first economic number everyone looks at every quarter is ...

 

The first economic number everyone looks at every quarter is the rate of GDP growth.  The last number anyone ever seems to cite when comparing today's wages to past decades' (especially the minimum wage) is economic growth -- like 180 quarters of mostly growth since 1968 never happened.

Time to get the growth eighth-grade math into our cultural DNA too, folks.
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Since 1974, the income share story has been that the top 97-98%, maybe 99% kept about full pace with per capita economic growth (per capita income, productivity, whatever) -- while the 50-90% kept up from not at all to fully, varied along that curve.  The top 1% glommed all the excess growth that _bottom_ 90% missed out on (or the _bottom_ 50% might have lost that they had before).

Since the 2007 recession, I keep seeing figures suggesting the top 1% now take in all the per capita growth.  We now have wheels within wheels of so-called "inequality" (I in my clunky way call it the "Great Wage Depression.)

I got my income share numbers (past tense, 6/24/2006), 18 comments down on Dean Baker's old blog (his comment).  Without these numbers I would have no idea at all of what is happening in the American labor market proportionately.  Be nice is these numbers (much updated) were widely available to non-economic types (like politicians and cab drivers). http://ontodayspagelinks.blogspot.com/2008/08/income-share.html http://beatthepress.blogspot.com/2006/06/minimum-wage-and-doctors-pay.html
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Harold Meyerson in his epic essay The 40-Year Slump, Nov 12, 2013 nears the end with: "Amassing the power to secure those remedies will require an extraordinary, sustained, and heroic political mobilization." http://prospect.org/article/40-year-slump

Balderdash!

He, like every other American progressive never says a word about the most appealing, ultimately easy to implement potential reform of the American labor market: legally mandated, centralized bargaining (all similar jobs in relevant locales under one contract) which would automatically reverse American labor's economic and political decline.  

This labor market alternative way is in use for decades around the world -- beginning on continental Europe, post-WWII (instituted by management).  American labor will kill for centralized bargaining if they ever heard about it (every American laborer I explain the setup to says it sounds like a good idea -- not because they are scared of me :-]).

Unlike most eras when the tradeoff to political do-gooding scared off over intelligent type presidents who are super smart about re-arranging the deck chairs --getting the best that can be had from the current consensus -- but unable to change the consensus (MLK changed the culture -- while JFK did his best to avoid civil rights) -- Obama has a unique opportunity to change the culture with only his deck rearranging skills.  
 
There is a reason the "zombie" party keeps neck and neck if not ahead of the progressive party in election after election.  Voters will tell you that the Democrats don't really do anything to substantially change their lives (health care a rare exception -- that most didn't need).  The core of economic life -- and most of human life -- is about pay and benefits and these forever drop even as the economy grows.  Try to restore labor's preeminence and the Democrats will restore their predominance even if they don't succeed!

Supermarket workers (I know, I talk to them) and airline workers would kill for centralized bargaining.  But the Harold Meyerson's of the world wont even broach the subject, no matter how tentatively ... .  ???  Even when there is no other labor market setup under the sun which could possibly create a fair and balanced labor market. 

The "blind process" of building and depleting the Social Security Trust Fund

First impressions count: I always assumed there was some rhyme or reason to the “Trust Fund” — Al Gore promising to put Social Security “in a lock box”, etc.

But as the TF and I both “matured” it began to strike me odd that the TF should be built up for 30+ years and then drawn down for 20+ years. Would sound reasonable for a person’s life — but whole populations go on forever — what’s the diff between the before and the after?  Why “save” for the future now and “deplete” for the present later — what’s so unimportant about the future of the future that _it_ doesn’t have to be saved for?

Especially when the TF bonds would have to be cashed by income tax instead of FICA, that’s all — especially within especially when the regressive tax will come early when per capita income will presumably (barring a comet strike) be lower and progressive tax will kick in when (barring a limited nuclear exchange) per capita income will be higher.

It is not like Congress specified some exact level for the TF to reach (for safety). The 1983 Congress just seems to have set in motion a blind process. Unless Congress was intelligent enough — I doubt it — to realize that the practical result of it all would be to relieve Congress of raising the FICA rate for maybe 60 years.

In any case, if anyone worries about the TF running out tell them: we can just print some more TF bonds and then go on printing the money to cash the TF bonds (they don’t imagine Congress will raise income tax if it wont raise FICA). If we are going to print the money we  may as well print the bonds.   :-)

E.I.T.C. v. "moderate" minimum wage = too little v. too late

According to minimum wage critic David Neumark, $55 billion is transferred yearly to poor families by the E.I.T.C. -- and that says it all. That represents about a third of one-percent of our $16 trillion economy.

That closely equates a minimum wage raise of $1 an hour -- which would shift about $40 billion out of our $16 trillion -- or about a quarter of one percent of overall income -- from the 85-90% who earn more than $8.25 an hour to the 10-15% below (I don't have exact figures here). 

The bottom 20% of earners now take 2% of overall income -- big help.  Neither path offers much hope of lifting working families out of poverty. The E.I.T.C. does not even pretend to help the single worker.

A $15 an hour minimum wage OTH would shift about $560 billion from the 55% who now take 90% of overall income to the 45% of Americans who take only 10% -- or about 4%. I don't foresee the 55% tellling the 45%: Stay home; we don't need your output anymore, over a 4% overall price increase.
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It occurred to me recently -- after reading a very pro-minimum wage raise piece in the NYT -- that most of of today's pro-raise pieces could have been written in January 1967, when the potential minimum was near $11 an hour (as we know from history) -- but when per-capita output was about h-a-l-f today's (to be precise, that would be if the minimum were $7.25 in 1967 January rather than $8.75).
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A $15 an hour minimum wage would not have been "feasible" in 1956 – when economic output per American was only 40% of what it is today – when (Senate Majority Leader) LBJ's minimum wage was $8.50 an hour. $100 an hour minimum wage should actually, literally be "feasible" ("feasible" is the operative word for this whole essay), in something like 100 years – if productivity goes on doubling every 40 or 50 years.

It was "feasible" to raise the federal minimum wage from $8.50 an hour in 1956 to almost $11 an hour in 1968 because overall productivity – not the minimum wage workers’ productivity – grew 25%. Barbers get paid more in France than barbers get paid in Poland because France has a lot more money to pay barbers with.

A $15 an hour federal minimum wage need not be sold on humanitarian – nor least of all welfare – grounds. It can be sold on the simple premise that the free market is ready and willing to bear it – on the simple basis that it is "feasible."

How do we hook up liberal politicians with the real world (us)?

It occurs to me that Obama not understanding what is wrong — up until now anyway; does he now finally understand “it’s the labor market, stupid”? — is not that much different from Mitt and Republicans not understanding anything is wrong.

His “bitter” “get into guns and religion” blurb is just a different stereotype from Mitt’s “47%” blurb for the same demographic.

To make a strange comparison of Obama’s top-down thinking: his opening attempts at bi-partisan dialogue with Republicans reminds me of Defense Secretary Robert McNamara trying to apply a “rational” graduated response strategy to North Vietnam. Had McNamara taken the time to know his opponent he would have understood that Ho Chi Minh an company were willing to kill everyone in Vietnam — or in the whole world — to get what they wanted. Ditto for understanding that the Republican legislators were under the strictest orders from their leaders not only not to listen to the presidents offers but to obstruct without examination every single thing he proposed.

(If we killed one million North Vietnamese troops in the South, then we killed or wounded three million — or just about every military age North Vietnamese male — North population 13 million. For what?!)

How do we connect up these guys with the everyday world?
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The following cut from Richard Mellor
Afscme Local 444, retired

“Barack Obama was out here on the West Coast in November spending time with supporters. Oh, you thought I meant you?

“Obama fit seven such [$30,000 a plate type] dinners in to a three-day period visiting Seattle, San Francisco and LA.

“The visit was productive as Obama raked in $6.5 million.”
http://weknowwhatsup.blogspot.com/2013/12/obamas-friends-on-west-coast-hand-over.html

He’s not going to grok us better hanging out with those folks.

Republicans need more precise formula by which to endlessly whittle down the federal minimum wage

Republicans need a more precise formula by which to whittle down the federal minimum wage in real terms, year after year -- if not quite as far as Republicans would like to see it whittled.  They can forget their old Republican bromide: Why not make the minimum wage $100 an hour? – Malthusian theory should become the Republican order of the day.

The 1968 federal minimum wage (adjusted for inflation) approached $11 an hour. But in 1968 there were only 200 million Americans to divide the economic pie. Now there are over 300 million Americans. Under classic Malthusian theory 300 million people must now divide the same output that previously supported 200 million.

Under this economic understanding today's federal minimum wage needs to be diluted -- because of simple physical limits -- down to two-thirds of what it was in 1968. In reality, by early 2007, he federal minimum wage had slipped to almost half that. 1968's $11 an hour minimum wage never needed to be reduced to lower than $7.26 an hour (two-thirds of $11).  And thanks to the more authentic Malthusian credentials of the Democratic Party, that is exactly where it stands today.

A skeptic of Democratic Party economic sophistication might worry that Malthus theorized before what later became known as the Industrial Revolution – back when land, crops, and farm animals were the basis of all production. The Lord made the earth and he was not making anymore, was what they used to say back in the day.
  
But, today, more people are able to make and run more factories – keeping economic output per person exactly the same over the decades – if that were all there were to it.

Actually factories get more efficient over time. I'm not talking about putting out better products with the same effort. Economists don't (know how to for the most part) keep track of better TVs now than back when I bought my first TV, 50 years ago (no way to put that into numbers). Economists do keep track of how many TVs the same number of persons can produce in the same number of work hours. Overall, workers in 2013 produce something like twice as much per work hour as they did in 1968, 45 years ago.

Every year, efficiency – productivity – goes up a couple of points, on average. For a giant jump; think Henry Ford creating the assembly line for the first time. Usually it's very gradual improvement. I read in BusinessWeek in 1990 that US firms had invested $1 trillion (in today's money) in computers by then without any increase in productivity. Only when a new technology matures, and become widespread does productivity leap. Over 50 years, productivity about doubles.

You get different figures – I'm not an economist – but had LBJ's 1968 minimum wage kept up with productivity gains, today it would be somewhere between $16.50 and $22 an hour.

$15 is about the 45 percentile wage. A $15 an hour minimum wage would shift something like 4% of overall income in the US from the 55% of folks who get 90% to the 45% of folks who get only 10%. I don't think the 55% are going to tell the 45% to stay home from work, we don't need you to work at Wal-Mart or McDonald's or anyplace else anymore – close them all down! – because they have to pay a little more (that they should have been paying all along – correction; in pure market terms, what they would have been willing to pay all along – this whole essay is all about "feasibility").

It would work like this: multiply 70 million workers (half the workforce) X the $8000 year average raise = $560 billion = 3.6% of our $15.8 trillion economy. (To the 45%, add 5% at the minimum wage who would get a double half-raise = 50% of 140 million workforce = 70 million.)

Obama's $9 an hour minimum wage hike – in yearly steps yet! – works out like this: $9 an hour is roughly the 20 percentile wage (will add 5% to get 25%). Multiply 37 million workers X and average $1000 a year raise = $37 billion = .0023417 or less than one quarter of one percent shift of overall income from to the 80% to the 20% …

… while productivity – and per capita income – grows an average 2% per year.

A $15 an hour minimum wage would not have been "feasible" in 1956 – when economic output per American was only 40% of what it is today – when (Senate Majority Leader) LBJ's minimum wage was $8.50 an hour. $100 an hour minimum wage should actually, literally be "feasible" (:"feasible" is the operative word for this whole essay), in something like 100 years – if productivity goes on doubling every 40 or 50 years.

It was "feasible" to raise the federal minimum wage from $8.50 an hour in 1956 to almost $11 an hour in 1968 because overall productivity – not the minimum wage workers’ productivity – grew 25%. Barbers get paid more in France than barbers get paid in Poland because France has a lot more money to pay barbers with.

A $15 an hour federal minimum wage need not be sold on humanitarian – nor least of all welfare – grounds. It can be sold on the simple premise that the free market is ready and willing to bear it – on the simple basis that it is "feasible."