The first (dumb) thought that occurs to me ...

The first (dumb) thought that occurs to me when I see a chart like the one below is that the top 1% of income may jump much faster and higher than the bottom 20% -- but (stupidly) that since they represent a much smaller fraction of the overall workforce that that shouldn't take much from the bottom. (Sounds so sensible if you don't think.)

Then, I wake up and remember that the top 1% of incomes represents 23% (and growing) of overall income while the bottom 20% are the ones who get the tiny fraction of income: less than 2% (and going down).

http://blog.nj.com/njv_guest_blog/2014/01/why_gov_chris_christies_advise.html
Sources: U.S. Congressional Budget Office, Center on Budget and Policy Priorities

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.
 * * * * * *
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).
 * * * * * *
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."

MY COMMENT ON: 
Krugman Does Not Share Labor's Share
Edward Lambert, 11/19/13,  on Angry Bear

Edward Lambert | November 19, 2013 9:05 am

- See more at: http://angrybearblog.com/2013/11/krugman-does-not-labor-share.html#comment-341438

Krugman does not share labor’s share

Edward Lambert | November 19, 2013 9:05 am

- See more at: http://angrybearblog.com/2013/11/krugman-does-not-labor-share.html#comment-341438

Krugman does not share labor’s share

Edward Lambert | November 19, 2013 9:05 am

- See more at: http://angrybearblog.com/2013/11/krugman-does-not-labor-share.html#comment-341438

Krugman does not share labor’s share

Edward Lambert | November 19, 2013 9:05 am

- See more at: http://angrybearblog.com/2013/11/krugman-does-not-labor-share.html#comment-341438

http://angrybearblog.com/2013/11/krugman-does-not-labor-share.html#comment-341438

I wondered about that labor market blindness myself. Right now the economy seems like a carburetor that is flooded with gas -- to much fuel for the amount of air available to burn it -- the end result of giving too much money to who the Republicans call the "job creators"; to people who (WONT) invest in new factories and new stores while old ones lay idle -- the fuel and the air both being made of the same things in economics (dollars).

Lately it has occurred to me that Democratic politicians could RAISE enormous POLITICAL CAPITAL by loudly hawking the $15 an hour minimum wage and re-unionizing America (via legally mandated, sector-wide labor agreements; start with supermarket and airline workers who would kill for that) even if they failed in to get the whole thing at once (initially).

But, the big barrier for our would be progressives (pols and profs) seems to be their failure to notice us poor working folks in the first place -- as you note!

This is especially wasteful because labor market reform today -- unlike civil rights in the 60s -- would have no down political side for progressive politicians.  I was just reading how JFK lost the needed votes of all the Southern Democrats on all his other progressive issues (Medicare, minimum wage) when he took on civil rights.

No disincentive of that kind exists here.  Most of the country will dive head first into doubling the minimum wage and legally establishing centralized collective bargaining (as it is called in Europe).  Even if the public cannot see going the whole way (at first) it will make them see Democratic politicians as their heroes (for the first time in a very long time). 

What we are talking here is a CULTURAL CHANGE in EXPECTATIONS of how society is supposed to perform -- something that is impossible for many good guys like JFK and the CLINTONS and Obama to achieve while holding high political office.  All these "good guys" seem to be skilled at is re-arranging the deck chairs on the Titanic -- not so true of some other good guys like TR, FDR and Truman; some got it, some don't. 

CULTURAL CHANGE often must be brought by non-politician Martin Luther King types who are not frozen in the old culture by fear of political tradeoffs somewhere else.

But reforming the American labor market today (by leaps and bounds and not deck chair arranging) would uniquely have no political trade off somewhere else (which today paralyzes the re-arranging set) but would be a CULTURAL CHANGE that practical politicians are actually in the best position to lead -- because it helps most people and would be popular even if most people did not buy into the whole package right away (though they well might!).

But first there is the Krugman, Obama core problem that you point out: they don't know -- notice that -- we exist.

$15 an hour minimum wage (and re-unionization) -- all noble cause and political plums -- where is Obama?

I have been reading Richard Reeve's President Kennedy: Profile of Power this week. JFK had not much faith in the progress of the civil rights movement because he was afraid opposition attitudes were too deep and too long ingrained.

He did not seem to grasp that things never would change if somebody did not finally dig in hard and fight. I've read elsewhere that he said supporting civil rights would gain him 5% and lose him 10% of the vote. To his credit he voiced willingness to take on civil rights after his reelection.

In comparison to Kennedy's dog pile of disincentives to take on civil rights, what in the world is holding back Obama on the $15 an hour minimum wage (and re-unionizing America -- legally mandated, sector wide labor agreements the only way to go as far as I can see)?

The great majority of the public supports a raise in the minimum wage – even if the question is not presented to them in terms $15 an hour. Even if he could not sell $15 an hour (having said that, the arguments on the simple logical and eighth grade math level seem quite compelling), he would not burn up any political capital trying.

Some of the minority who pose minimum wage increases could actually be swung over to a lesser increase – no votes lost there. A minority of the great majority who might not want to go all the way to $15 would not by any stretch of the imagination become disenchanted Obama voters and switch to the Republicans.

All noble (desperate!) cause and all political plums; whoever peoples the planet that Obama is living on?

Potter Stewart on sexting?

Potter Stewart famously said:
"I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description ["hard-core pornography"]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that."
—Justice Potter Stewart, concurring opinion in Jacobellis v. Ohio 378 U.S. 184 (1964), regarding possible obscenity in The Lovers.
http://en.wikipedia.org/wiki/I_know_it_when_I_see_it

Imagine that 30 years ago, before smart phones, a teenage girl took a picture of herself in front of a mirror with an old fashioned box camera – every three months – to keep track of how she was growing.  Imagine she showed other girls – or they trade pictorial notes.  Imagine she passed a picture on to a boy she could legally have sex with.

Would Potter Stewart have taken this for child pornography?

MY MINIMUM WAGE COMMENT ON THE AFL/CIO BLOG

 Re:  http://www.aflcio.org/Blog/Political-Action-Legislation/10-Not-So-Fun-Facts-About-the-Minimum-Wage

Small stat error -- BIG STAT MISSING: The minimum wage was $10.74 an hour 45 years ago, not 40; tiny -- AVERAGE INCOME (per capita economic output, productivity, whatever) DOUBLED since since 1968; giant omission.

If economic growth does not matter, why not go by the $4.25 an hour minimum wage of 1938, or the $7.25 an hour of 1950, or $8.50 an hour in 1956 instead? Did something happen between 1956 and 1968 that allowed the minimum wage to go to $10.75 an hour? It is something called growing productivity -- which is why the minimum wage could be $20+ now if you ask US Senator Elizabeth Warren. By 1978 the minimum wage would have reached $14.11 an hour -- if indexed for both inflation and per capita income growth (see table in comment just below). 

(Note: fast food workers did not have to get more productive -- they just had to live in a more productive economy that can pay them more -- will pay them more before they stop going to McDonalds. Barbers in France make more money than barbers in Poland because France has more ability to pay. Ditto for 2013 compared to 1968.)

This (giant) omission reminds me of the old Republican saw: "Why not make the minimum wage $100 an hour?" Same answer: ECONOMIC GROWTH! When output per person grows enough -- about five times today's -- we can do it. Since output per person doubles about every forty years, come back in about a hundred years. :-)

But, $15 should be a breeze.

* * * * * * 

My minimum wage worksheet -- my easily-could-have-been minimum wage double-indexed for inflation and per capita income growth:
yr  per capita    real     nominal  dbl-index   %-of
68    15,473    10.74      (1.60)     10.74      100%
69-70-71-72-73              [real, low point -- 8.41]
74    18,284      9.47      (2.00)     12.61          
75    18,313      9.11      (2.10)     12.61
76    18,945      9.44      (2.30)     13.04        72%
77                                                               [8.86]
78     20,422     9.49      (2.65)      14.11
79     20,696     9.33      (2.90)      14.32
80     20,236     8.78      (3.10)      14.00     
81     20,112     8.61      (3.35)      13.89        62%
82-83-84-85-86-87-88-89                          [6.31]
90     24,000     6.79      (3.80)      16.56  
91     23,540     7.29      (4.25)      16.24        44%
92-93-94-95                                                [6.51]
96     25,887     7.07      (4.75)      17.85
97     26,884     7.49      (5.15)      19.02        39%
98-99-00-01-02-03-04-05-06                      [5.97]
07     29,075     6.59      (5.85)       20.09
08     28,166     7.10      (6.55)       19.45
09     27,819     7.89      (7.25)       19.42        40%
10-11-12                                                      [7.37]  
13    29,209?    7.25      (7.25)      20.20?     36%?

Trickling down the trickle down -- US and California's very minimal minimum wage increases

If Obama gets his (not very fervent) wish to raise the federal minimum wage by $2 an hour over two years that should shift an incredibly small (almost unbelievably small) ONE-QUARTER OF ONE PERCENT per year of overall income in this country from the top 80 percentile to the bottom 20% …

… as per capita income grows TWO PERCENT, P-E-R Y-E-A-R*. Talk about-trickling the down the trickle-down.
*http://money.cnn.com/2013/08/29/news/economy/gdp-report/

Which is about what California’s raise from $8 an hour to $10 an hour spread over two years will also achieve. (California income numbers only 5% higher than national averages so the comparison should hold.)
http://www.cpec.ca.gov/FiscalData/50StateEconGraph.asp?Type=MedIncomeAverage&Gender=Total
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ABYSMAL ASSUMPTIONS:
$9 an hour is about the 15 percentile wage. 5% of work force at minimum wage. So 20% of national workforce gets a raise to $9 an hour. 

To do our average (half) raise math we will add 5% -- to account for the 5% at the minimum wage who get a full raise.

25% of the national workforce = 35 million people. Average pay raise (half the dollar per year raise) 50 cents an hour. Assume a 2000 hour work year.  35 million X average $1,000 raise = $35 billion out of a $15.8 trillion dollar economy = .0022151 = about one-quarter of one-percent price rise -- or shift of income from top to bottom per year.   

Nearby wages should be pushed up but not much.  In societies with high minimum wages (e.g., the US in 1968) even the median wage is not that much higher. 
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I AM  GETTING SO TICKED OFF AT PEOPLE WHO ARE SUPPOSED TO BE OUR FRIENDS ADVOCATING NOTHING BETTER THAN TRICKLING DOWN THE TRICKLE DOWN  -- STEP BY STEP, BY STEP, SNEAKING UP ON 1956 ($8.50 AN HOUR MINIMUM WAGE) OR ON 1968 (ALMOST $11 AN HOUR MINIMUM WAGE) THAT I AM GOING TO START CALLING ANY ELECTED REPRESENTATIVE WHO DOES THAT GOVERNOR STEPIN FETCHIT (BROWN) OR PRESIDENT STEPIN FETCHIT (OBAMA).  THEY MOVE STEP-BY-STEP-BY-STEP AND WE FETCH IT.

ANOTHER BIG MISTAKE THAT TOO MANY SUPPOSED FRIENDS MAKE -- ROBERT REICH MAKES IT HERE -- IS NOT TOUTING THE DOUBLING OF PER CAPITA INCOME SINCE 1968.  SEE THE WORKSHEET ABOVE -- IF THE MINIMUM WAGE WERE DOUBLE-INDEXED FOR INFLATION AND PER CAPITA INCOME GROWTH IT WOULD HAVE  GROWN TO $14+ AN HOUR BY 1978.  BARBERS IN FRANCE GET PAID MORE THAN BARBERS IN POLAND BECAUSE FRANCE HAS MORE TO PAY BARBERS WITH FOR THE SAME WORK.  HINT!!!!!!!!!!!!!!!!!!!