Friday, January 15, 2016

Re: Is Vast Inequality Necessary?, Paul Krugman, JAN. 15, 2016

If the question is whether cutting rewards at the top will cut incentives for the most able to produce -- here is the final MOTIVATIONAL answer; look no further. The power of incentives are RELATIVE not ABSOLUTE -- in the way human nature works.

Relative, that is, to what we PERCEIVE to be the maximum capability of the economy (of our time and place) to reward us -- for our skill set.

Lately, I've been explaining why two sets of gangs -- Chicago street gangs which have something like half (100,000!) of our young, minority males and my old American born taxi driver gang -- refuse to work at jobs available: because the pay may be half of what they (we) are willing to work for (in our time and place). While we (our two gangs) might enthusiastically have been willing work for HALF OF THAT PAY -- in 1915 (100 years ago) if we perceived that that was the maximum (there's that word) that that much less productive economy was capable of rewarding us with, then.

Ditto for CEOs, QBs and TV anchors who now make 20X what their fellows made two generations ago even though US per capita income only doubled since.
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Meantime (back in the ghetto) the federal minimum wage is almost $4 an hour below what it was in 1968 -- er, uh, double the per capita income since. I personally see $800 a week as the norm for most low skill work (at firms like supermarkets with 10-15% labor costs) -- with the very minimum wage at $600 (for firms like fast food with 33% labor costs).

The beauty of collective bargaining is that we know we have extracted the maximum that the (ultimate) consumer (not the boss) is willing to fork over.

Unless I'm mistaken, labor racketeering does much less harm to the worker than outright union busting. Why is the later subject to no market warping felony? Especially since the latter makes any other form of democratic governance impossible.

1 comment:

Denis Drew said...

My response to:
Three Ways to Help the Working Class: ... In graduate school, I was once told that “people don’t have marginal products, jobs do.” What does this mean? ...

That's right ... You cannot make the retail clerk any more productive. That's talking about the people I care about: bus drivers (taxi drivers -- me :-]), home carers, janitors, etc. But, you can make the economy they inhabit more productive -- and then the economy can pay them more (not less every year!): why barbers in France get paid more than barbers in Poland (classic example).

US per capita income in 1968, $15,000. In 2016, $30,000.

Minimum wage nearly $4 an hour below what it was in 1968 (adjusted). Ditto for the price of US labor across the mid-to-lower board.

US mid-to-low labor price so extraordinarily low that half (HALF! -- 100,000!) of Chicago's gang age, minority males would rather join a street gang. Then there's my gang, Chicago's old (mostly retired) American born taxi drivers. Wouldn't get us into that job today for $500, if lucky, for 60 grueling hours.

The core American trouble isn't wages not keeping up with productivity per se (though that parallels); the core labor sickness is wages not even remotely approaching what the consumer (not the boss) might be very willing to pay.

We do not need to attract businesses that provide good jobs -- the jobs cannot be good if the pay is miserly. High wage opportunities don't happen -- they are made (ask Jimmy Hoffa).

Educational resources are not needed to help retail clerks reach their full potential. Good pay for retail clerks is needed to help Detroit's schools reach their full potential. Nationwide: poverty area schools don't work because students (and teachers!) don't feel it worth making the effort -- given the job market doesn't promise anything remunerative enough to strive for when it's time for them to go to work.

"I believe this is mainly due to differences in bargaining power." Which is mainly due to absurdly unenforceable labor laws in this country which -- uniquely in all markets -- allows one side in the labor market to bully the other side out of being able to meaningfully bargain. Simple enough solution: make union busting a felony (like every other kind of market warping -- try to take a movie in the movies and telling them you were only kidding).

The labor laws enabling collective bargaining have long been in place; the need for collective barraging presumably settled. So when are progressive states going to begin -- one state at a time; forget Congress -- to make these laws enforceable? Federal preemption means individual states cannot subtract from national law, but states may add. In Maryland for one, Democrats have a 33-17 edge in the State Senate and a 91-50 edge in the House. WA, OR, CA, IL, NY, anybody listening?

IS ANYBODY, ANYWHERE LISTENING?! Retail clerks (and their hungry families) desperately want to know.