LA goes big on the min wg

May 22nd, 2015 at 7:51 am

Over at the WaPo…as per the minimum wage literature, it’s an “out-of-sample” increase, which means we’ll need to monitor its outcomes. It’s also a pretty inspiring development, if you ask me.

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7 comments in reply to "LA goes big on the min wg"

  1. Smith says:

    Lost in some debate is the fact it’s a good thing the minimum wage is different and locally enacted due to regional differences in cost of living, mostly having to do with cost of housing (I think), which really means real estate, and biding against the gentrifying classes, as well as ripple effects which affect cost of construction and everything including food. That’s not to say there shouldn’t be a higher national minimum indexed to prevailing wages. It’s also not to say there isn’t a problem of jobs moving to states which outbid tax giveaways, suppress unions, and shortchange government services including education. Minimally, large corporations need roadblocks to moving factories to lowest common denominator states and countries.

  2. spencer says:

    From 2006 to 2009 the US raised the minimum wage by 40%, or about 12% annually.

    The LA increase is for 66% but it is over five years, or about the same annual increase that the US had the last time it raised the national minimum wage.

  3. Smith says:

    Warren Buffett is truly a conservative as revealed by his support for EITC instead of raising the minimum wage, especially to $15/hour, due to claims it will cost jobs. Who agrees completely with this line of reasoning, both opposing minimum wage hikes and supporting EITC? Ronald Reagan though widely misquoted endorsing EITC, did in fact expand the program,, as did George W. Bush. EITC though is corporate welfare which supplements substandard wages with government money collected from the middle class.

    Buffett says “We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like.” One could not pick a better poster child for inequality than any one of these three.
    Ford’s battle with labor are legendary, and more recently
    Here’s apple shipping jobs overseas and breaking laws to suppress high skill wages in the US
    Here’s the debate about Walmart, they recently raised minimums to $9, no doubt the $1.75/hour raise intended to block the Federal drive for $10 and higher.

    If unproductive jobs disappear due to higher wage demands, so be it. The same argument of job loss could be used to cut the minimum wage in half or eliminate it to thereby increase employment. Instead, with a higher minimum one expects broader distribution of income to boost the economy and offset job loss. The same amount of money will need to be spent, but there will be more disposable income and a surplus of labor. It should create a virtuous cycle, and if not the government can step in with temporary Keynesian stimulus.

    Moreover, Buffett shows a complete lack of understanding how the economy works. He ignores the New Deal reforms and triumph of the labor movement, accomplished with strikes, militant organizing, and extra legal actions, and then reversed, starting with 1948’s Taft Hartley bill, up to the second Bush administration’s changes to the FLSA, and beyond.

    EITC also does nothing for the middle class (well it does, since they pay for it), while a $15 minimum has a huge ripple effect. Everyone’s wages are bound to go up because of the higher minimum and it’s indexing. The ripple may be far more important than the direct increase (for macro economic picture that is).
    “I may wish to have all jobs pay at least $15 an hour. But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty.

    The better answer is a major and carefully crafted expansion of the Earned Income Tax Credit (EITC), which currently goes to millions of low-income workers.”

    • Smith says:

      Buffett does mention the need to change EITC to monthly from annual, which I do support, and needs to be more automatic, vs. just the savvy low income earners or those able and willing to spend money on tax preparation.

    • Fred Donaldson says:

      EITC is nothing more than corporate welfare – paying employees who don’t earn a living wage from their employers. All the rest of the conversation is schmuck and mirrors. The Old South would have loved it if there was an EITC plan of that era – provide taxpayer money to each slave so they could buy their own food.

  4. Smith says:

    How much would a nationwide $15/hour minimum cost? For a ballpark, back of the envelope calculation take the median salary of every occupation below $30,000 and subtract, multiply by employees in that occupation and then total it up. $425 billion affecting 45 million people, about 1/3 of the workforce. Sounds like a lot. It’s 2.5% of our $17 trillion dollar economy. That doesn’t include ripple effects of those who would expect to make above the minimum. I’d argue that’s a feature, not a bug.
    For comparison, the 1% picked up over 10% of gains over the last 25 years, including over 2.5% between 2011 and 2012. see below
    “The income share of the top 1 percent of earners in 2012 returned to the same level as before both the Great Recession and the Great Depression: just greater than 20 percent. It jumped to about 22.5 percent in 2012 from 19.7 percent in 2011.”

    Arguing the other side by ignoring inflation and disallowing population adjustments:

    • Smith says:

      Whoops, by 10% of gains, I meant 10% more of GDP, more than doubling their share from below 10% to above 20%. So the 10% is valid figure to compare with the 2.5% phased in over many years. In terms of share of gains, the 1% has been taking 91% since 2009 for example. Things look better too when you consider productivity increases 1 to 2% per year. Take a moment and think about that. Take another.