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Guest Post: Income Disparity Solution: Restore The Minimum Wage To 1969 Levels
Submitted by Charles Hugh Smith from Of Two Minds
Income Disparity Solution: Restore the Minimum Wage to 1969 Levels
If we want to lessen income disparity, the solution is easy: restore the minimum wage to levels considered reasonable 43 years ago in 1969.
There is much hand-wringing about the vast income disparity in the U.S. between the top 5% and the bottom 25%, and precious little offered as a solution. Once again we are told the problem is "complex" and thus by inference, insoluble.
Actually, it's easily addressed with one simple act: restore the minimum wage to its 1969 level, and adjust it for the inflation that has been officially under-reported. If you go to the Bureau of Labor Statistics Inflation Calculator and plug in $1.60 (the minimum wage in 1969 when I started working summers in high school) and select the year 1969, you find that in 2012 dollars the minimum wage should be $10 per hour if it were to match the rate considered "reasonable" 43 years ago, when the nation was significantly less wealthy and much less productive.
The current Federal minimum wage is $7.25, though states can raise it at their discretion. State rates runs from $7.25 to $8.25, with Washington state the one outlier at $9.04/hour.
In 40 years of unparalleled wealth and income creation, the U.S. minimum wage has declined by roughly a third in real terms. "Official" measures of inflation have been gamed and massaged for decades to artificially lower the rate, for a variety of reasons: to mask the destructiveness to purchasing power of Federal Reserve policy, to lower the annual cost-of-living increases to Social Security recipients, and to generally make inept politicians look more competent than reality would allow.
The full extent of this gaming is open to debate, but let's assume inflation has been under-reported by about 1% per year for the past two decades. That would suggest the minimum wage should be adjusted upward by about 20%, from $10 to $12/hour.
All those claiming such an increase will destroy the nation (or equivalent hyperbole) need to explain how the nation survived the prosperous 1960s paying the equivalent of $10-$12/hour in minimum wage. Exactly what has weakened the economy such that the lowest paid workers must bear the brunt of wage cuts?
To understand the modest scale of such an increase in the context of total household income and wealth, consider these charts. Let's start by recalling that 38 Million Workers Made Less Than $10,000 in 2010-- Equal to California's Population. (Why the Middle Class Is Doomed April 17, 2012).
There are about 140 million jobs in the U.S., including part-time and temporary, and roughly 40 million workers earn less than $10,000 a year. This is the vast population earning minimum wage, and their earnings constitute a small share of total income.
The bottom 90% have seen their wages stagnate for 40 years, but the bottom layer earning minimum wage have seen their real earnings decline by roughly one-third (not counting entitlements they might qualify for as members of the "working poor.")
In the good old days of more widely distributed incomes, the bottom 20% who generally earn minimum wage actually saw significant increases in income. That has reversed in the financialization era.
Those earning minimum wage hold a tiny sliver of the nation's wealth.
Apologists for low wages claim we must "get competitive" with low-wage nations, as global wage arbitrage has cut wages everywhere. This claim overlooks the fact that the vast majority of minimum-wage positions are precisely the jobs that cannot be outsourced: cleaning offices, fast-food jobs, pizza delivery, agricultural work, and so on.
Other apologists claim that since these positions are "low productivity," they "deserve" lower wages. If we as a nation reckoned them worthy of $10-$12/hour 40 years ago, then why are low-productivity jobs less deserving now?
Still other apologists claim that raising the minimum wage would 1) destroy small businesses and 2) trigger painful increases in food and other prices.
The only way the minimum wage can hurt small business is if some small businesses are allowed to cheat and pay illegally low wages as a way of lowering the cost of their service. If the law were uniformly and aggressively enforced, for "black market" and above-market wages alike, then those cheating their employees would slowly be eliminated from the economy via heavy fines.
Once everyone is paying $10-$12/hour, even for informal work, the "playing field" will be leveled at a higher scale.
Given the modest share of the national income earned by low-paid workers, claims that costs would skyrocket are groundless. Yes, costs would rise, but not by enough to impoverish the nation.
What all those decrying restoration of a reasonable minimum wage overlook is that the working poor will spend most of their increased wages, and that will actually aid the economy where it counts. Aren't we tired yet of Federal Reserve policies that enable more skimming by the top 1% while giving nothing to the bottom 50%? The simple, straightforward way to correct the vast income imbalances is to restore the minimum wage to 1969 levels and adjust for under-reported inflation.
What about the wealthy? Shouldn't they pay more than the rest of us? Well, actually, they already do, for the most part: the top 25% of taxpayers--34 million workers out of a workforce of 140 million--pay almost 90% of all Federal income taxes. But we'll address that aspect of income disparity tomorrow.
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Leading the charge, right. Seeing is believing. Show me.
Like with health care, the gift that keeps on giving for the crony capitalists. Or financial reform; so untimely for JPMorgan to implode just before we were to get that hedginess exception in the Volcker Rule. The dude is nothing more than a mouthpiece.
CEO pay wasn't eleventy brazillian times worker average either. Outsourcing was good for business, right? Destroying our manufacturing base and shipping it to China was good for the country, right? Or just good for a handfull?
I won't argue about the quality of entry level workers these days. Bring back shop class. Not everybody was meant to be a doctor.
I have a solution. Make companies pay 50% of profits evenly back to every worker that participated in generating those profits.
Make that a law. So slave labor in China gets to share in the $1/2 trillion cash load at Apple.
It creates demand and rather than using the inefficiencies of gov't redistribution, it goes right to workers. And it goes to those that worked for it, not some parasite in society.
Also, if a company is not profitable, they won't be harmed. Only profitable companies will have to "give back".
There is already a way for employees to share in the money a company makes. It's called a "salary."
And they share that even if there is NO profit.
The problem is that there is no adjust in the economy for labor.
So yes, people get salaries, but if the company is making trillions in profits, well they are either fucking the workers or fucking the consumer.
Since 10-out-of-10 times the consumer is the labor, you solve this problem. When profits are out of proportion, the money goes back to the labor.
Why should capital have outrageous leverage on labor?
The problem stated is the gigantic wage differential, this is purely caused by leveraged labor, i.e. all the profits going to a few on the backs of labor.
This law would slant the economy the way it should be adjusted...for now.
A percentage of Cash profit per employee should be a way to get people back to when it was bad. It will never happen. People are too scared or People really just don't give a fuck anymore. I have watched the full development of the "fuck-you , I got mine" mentality in the last 32 years based on people spending money they didn't have that just happened to land in those outstretched hands of the greediest.
Families no longer take care of family members. Material wealth has been allowed to defined a person's worth to society regardless of whether it was earned or unearned income from another generation.
It's way over the line and there is no getting it back until the very wealthiest turn on each other after they have sucked the last out of the 90% below them. That's coming much sooner thean people think too.
The workers take no risks; therefore, their share of the rewards is minimal. If they don't like it, they can work somewhere else. Or not work. Fine by me.
Another parasite who wants to suck the blood of the risk-takers, the implementers and the originators.
A salary is the true dividing between shit at will workers and valued yes men and boot lickers who will become bosses of their own branch some day.
Well, why not put YOUR money on the line, start a company and do exactly this?
This is the stupidest post ever. A minimum wage of $10 or $12/hr, or even $100/hr, won't cure income disparity. That would require a universal wage where everyone makes exactly the same amount (regardless of their job, responsibilities, profession, experience, training, skills or title, etc).
Not even the most hard core socialist central planning boneheads would suggest that.
this is full of fail.
Another pseudo socialist idea - get the fricken goernment out of our lives!
Let the individual decide what he/she wants to get paid.
This is how it all starts - a "little bit" if government to try and tweek the system.
It is never a little, they always want more.
Get the fricken government out of trying to ?neutrilize": everything.
Bastards don't know how to run their own lives, damned if they should try and run mine.
Look at the jokers we elect - other than passing laws, they know how to do NOTHING!
Tar and feahter them all and drag them through every main street in the USA - now that would be a parade I would attend.
Cheers
Most small business isn't owned by the wealthy 1%. You're not going to be funneling money away from the rich you'll be putting mom and pop out of business. It's not a good idea. Not only that im sure large streamlined business would jack up prices to more than suck up the extra $ coming in.
Small businesses should be exempted from most regulation.
Small business growing into big business is what creates jobs.
Giving companies an incentive to stay small and not hire? Good luck with that.
Up to the point where the business becomes multinational and starts utilizing wage arbitrage and regulatory capture, and where they use propaganda to get the small businesses to fight for more deregulation when the regulation should be aimed at the big guys; at that point they are too big to benefit our economy.
Dumb ass.... A $10 minimum wage on top of Obamacare will just result in more jobs for the Chinease.
Right. As long as the crony capitalists are running the show with the interests of the multinationals above those of the sheeple, a rise in minimum wage amounts to "let them eat cake".
Q: If I can't afford to hire them at $7.25, how many could I hire at $10-$12?
A: Less than zero.
If you cannot afford workers, either do it yourself or bring in family to do it.
Get big enough until you can afford workers. Grow them like a tree until you have people to take care of the day to day for you.
Good God, can you pay yourself $7.25 a week much less an hour with that IQ?
Great idea. By forcing people out of the work force, their incomes will drop to zero, but they won't be counted in income statistics any more. Hooray for equality!
RM, let's revisit your chart and household NET WORTH.
If you subtract an equal per household amount just for the federal debt alone by dividing it into the 131,700,000 housing units you ( = $119,314) you see that in reality we have a negative household net worth as a nation.
More importantly, to be fair and exempt the first 20,000 of net worth from that fair share so that nobody is actually ruined by owing the federal debt, and since the bottom half of the households in the lower two quartiles have about 13k in net worth, all responsibility for our debt falls upon the upper half of the population to shoulder.
Now, add in state and local government debts.
And because corporate debt is not paid by companies that borrowed money but rather by the customers they sell goods and services to, or via bailouts because they are too big to fail, add several trillion more to the bill.
In the end you will see that for our economy and governmental systems to become debt free every household in the USA would have to be considered insolvent not just for years to come but for generations to come. In fact that would be just paying down principal over time in a ZIRP environment, if someone actually had to be paid interest for a "mortgage" on all that debt then we would mathematically never be able to repay it. At least not without some paradigm changing situation like free energy. And why should we pay interest to anyone on our own debts? They are not lending their wealth to us, they are creating a book entry of credit that they then lend at interest to us for using our own money.
And yet the solution is SO simple and will be forced upon the world any day now, starting in Spain or perhaps Greece or Ireland, and spreading from there. Go to the master accounts book and pull up the liabilities column and hit delete. Because that is what is coming.
And it will not be limited to a few insolvent eurozone members either, by the way, places like Spain are only insolvent in cash and credit, both invented interpretations of wealth. The reality is that Spain alone has priceless art and gold and historic venues and items enough to repay every fiat debt it has. But fiat and credit denominated in fiat are bogus weapons of popular slavery. Double entry bookkeeping rather than manacles are the slaveholders choice of chaining citizens now, and for the owners this is better because they are freed from the task of overseeing us, governments and banksters on payroll do that now, and this way it is not just a poor minority enslaved but everyone not in the ownership class (the top 0.01% AKA Romney's people). And the collapse has to happen any day now because the financial tower of debt like the Tower of Babel has become unstable, piled too high. And when one nation says that's it, I am bankrupt and owe nothing now, they will in effect be giving themselves a gift of everything they owed, to which the next nation over will say fuck this, if he can I can, why should I pay forever and never get clear of debt when all it takes is to say "I no longer owe it?"
At that point the people will either be locked into an Orwellian iron fisted police state as real and recognized debt slaves, or they will be freed. If the latter I think you will see the planet flower in it's freedom with real solutions to our now dangerously real problems, if the former you will see either civil war on a global scale, or the end of human civilization. Can you imagine a global war where nations are not fighting each other but where the whole world fights internal civil wars all at once?
Right, and the unregulated derivatives are the real problem. They are too complex for the regulators to evaluate and test, and with their reliance on estimates, can be massaged to say whatever the banksters want. Since the regulatory climate is one of trusting the financial masters of the universe, the fraud goes undetected. I see FINRA is still going to be self regulated. Hope they do better than the CFTC. If we can't afford to pay for the talent to police the banks (The two bigs should be paying us huge to do it), we need to make trading derivatives illegal. And unwind the Too Big To Regulate. Step one of a recovery.
And as far as jubilee, to make it fair I would give every citizen an equal payout, to be used first to pay down debt and then to be spent in the economy within a certain time frame, via a debit card. That should get things rolling. Might run into some inflation, but the dollar can take a hit at this point.
The government has no business telling a private enterprise how much they need to pay their employees. Period. Let the market dictate wages.
If increasing the minimum wage is the cure-all, then why not increase it to $60/hour?
Cept the market is owned by crony capitalists, so all the old economic theory is just an excuse for the 1% to continue looting our economy.
You've been crying on this thread all day. What is it that you propose?
I say no minimum wage laws, no subsidies (corporate or individual), no central banks, flat tax. That's about as fucking fair as it gets. You can succeed or fail on your own.
My purpose is to offset the neocon propaganda I see here. I am equally opposed to neolib propaganda, btw.
I have to wonder if you have any idea of what a neocon even is. How on earth does a faction of the Republican party who favor big government and government intervention at home and abroad have anything to do with the discusson here? The only people advocating government intervention are the lefties like yourself. If someone popped up and argued that we should cut the minimum wage so we can send more money to Israel or go monekying around somewhere else in the world you might have a point- but they have not and you do not.
You appear to be an idiot who wandered over from DKos or ThinkProgress. it certainlys eems that to you anyone who doesnt prattle on about 1% and 99% with interspersed variants of redistributionist nonsense is a neocon.
This makes you a moron. Why not start a business and implement what you advocate? I think the likely answer is that youre too damn lazy, and instead prefer to just tell everyone else what they should be doing in order to sustain you.
Neocons and neolibs are pretty hard to distinguish these days. D and R are both working with the same agenda, just using propaganda in different ways to suck in the sheeple.
Starting a business in this economic environment would mean throwing money away. The little guy can't compete.
The "market" is not the economy.
Actually, in a crony capitalist system, it is. Here, read up:
"In its lightest form, crony capitalism consists of collusion among market players."
http://en.wikipedia.org/wiki/Crony_capitalism
What is true of a part must be true of a whole.
Let's ignore that conceptually an economy and a market are as different as are an ecosystem and hormone-regulated bodily function.
So you would rather ignore that the economy is negatively effected by crony capitalism in the markets?
this article is complete crap, cant believe this is on ZH of all places. Did the author never take econ 101 or an AP econ course? Miniumum wage is a price floor and causes inefficiencies in supply and demand, and yes will ultimately "help" inflation destroying any real wage increase the worker was hoping to enjoy. I learned this when I was 16 in ap Econ for christ sakes
Jeez. Econ 101. So yesterday, dude. Have you been following Krugman v Keen?
Anyways, I would take a little inflation over a lotta unemployment.
A little inflation? Right now we're running about 10%. You should know that inflation kills the middle/lower classes.
If we had universal health care and subsidized/free higher education, the inflation would be more tolerable, believe me.
Of course, because the ever-expanding role of government in the health care and education industries has been working out wonderfully for the past few decades, right?
No, I don't think I'll just believe you on this one.
Only because efficiency and economy are not the goals, profits for special interests take precedance over affordable care. It will be even worse now that Obama has handed out even more opportunities for corporate profits to be extracted from health care resources.
This guy has got to be a troll.
Nope, just a disenfranchised progressive. Some libertarians are just as close minded as knee-jerk progressives.
Both are misguided. Keen is quite good on diagnostics, but then fails miserably and advocates centralized solution for everything.
No thanks.
"this article is complete crap, cant believe this is on ZH of all places."
Agreed.
For learning economics, you're better off at mises.org.
This took like 5 seconds to find there
http://wiki.mises.org/wiki/Minimum_wage
"A minimum wage law is compulsory unemployment... a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment... each 10 percent increase in a federal or state minimum wage decreased employment of white males by 2.5 percent; for Hispanic males, the figure is 1.2 percent. But among black males in this group, each 10 percent increase in the minimum wage decreased employment by 6.5 percent... a 10% increase in the minimum wage reduced teenage employment by 1% to 3%"
That is not fact, the contracts you imply would not be legal if they do not conform to minimum wage laws. I see the vast majority here are not in favor of any government, any law, any minimum wages etc. But, we have government and laws and minimum wages because there was a time when we did not and it was worse than miserable. Eight year olds dying of black lung in coal mines, a permanent underclass that was as bad off as slaves in the deep south ever were.
The world you all claim to want is not only dirty, dangerous, and just as expensive as this in a thousand other ways, it will be the only certain route to REAL communism because in a society of a third of a billion people the playing field will be leveled by somebody or the people will rise up and level it themselves, just as they did in Russia. The place you all describe over and over is a perfect description of Imperial Russia circa 1910.
Your first point is pure sophistry and I think you know it. When evaluating the effects of minimum wage laws on voluntary contracts it is intellectual laziness to simply state that the contracts in question would not be valid if minimum wage laws exist. That they should exist is what's being debated in the first place!
The rest of your screed you offer up without a bit of support. It's a collection of unproved assertions that you likely pieced together from a lifetime of public school. But at least we can thank our enlightened, progressive government for preventing a return to the "dirty, dangerous" world of yesteryear. Nope, nevermind.
http://www.laweekly.com/2010-03-06/news/black-lung-lofts/
The only way a playing field can be level is if the rules are the same for everyone. Thanks to the government's involvement in every facet of our lives, the playing field has never been more "unlevel" than it is at present. I cite the "honorable" Jon Corzine as my proof. The government is the problem, not the solution, just as it was in pre-revolutionary Russia. The Russian Revolution simply swapped the pigs at the top at the expense of the masses, (who by and large were not behind the revolutionaries, why do you think it was necessary to murder and imprison so many citizens as the revolution became progressively bloodier?)
I will try to put it so you can understand because CLEARLY you have no business law background, there is no contract public or private that violates any law, if it violates the law it is void/not a contract. You cannot contract with someone to work for less than minimum wage, such a contract would be null. This is particularly true where the contracts main clauses seek to evade the law intentionally.
I never said the playing field would be LEVEL, I said it would be leveled, and I understand your problem with the wording, I will clarify, the people will rise up and make it less UNLEVEL, is that better? Because no nation or economy has ever been or ever could be perfectly level, but they can all be more level. And I see we agree that it has never been more unlevel here, but I believe you are wrong about Russia. Millions and tens of millions starved even as a small middle class thrived, and an even smaller ruling class was fabulously wealthy, so much so that they owned 99% of the land and legally held half the nations as serfs (just another word for slaves). After the revolution yes there were pigs at the top, and commissars replaced the middle class, but the majority were freed of serfdom and virtually nobody starved, at least post WWII. Indeed most lived what many Russians today look at as a middle class life, sentiment that things were both better and fairer in the Soviet Union is large and growing. And the trigger for this growing sentiment is the extreme inequality in wealth.
No matter where you live or in what era you are there, there is a level of economic equality that works. Go too far outside that functioning level and it is going to be a bloodbath. This is why I caution people as I can that the GOP and especially the radical TeaBaggers will do far more harm than good, they will foment rebellion and bloodshed with their politics of greed which will not work anyway because they address symptoms not causes of the sickness.
By the way, I got my finance degree from a private university in Ohio.
Dr. Acula quoted: ""A minimum wage law is compulsory unemployment... a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment..."
To which you responded: "That is not fact, the contracts you imply would not be legal if they do not conform to minimum wage laws."
http://24.media.tumblr.com/tumblr_m3uaku3bpm1qilj9qo2_1280.png
Keep up your disingenuous garbage. It's especially telling how you leap to defend Russian Communism with yet more unsupported assertions. And yet you concede my point right at the beginning with, "yes there were pigs at the top, and commissars replaced the middle class..." You just forgot the part about imprisoning and slaughtering millions of people of all stripes. And those millions who starved will be glad to know it was only pre-WWII starvation, so it's all good.
You're a crappy apologist, communism is just government intervention of a different kind, and government intervention in market functioning is almost entirely to blame for our current economic problems. Two of the most very basic, legitimate functions of government, adjudication of contract law and prosecution of fraud, would end this economic insanity almost overnight and our government is doing everything but those two things. Just more and more debt to make the rich richer while those of us of lesser means get eaten by inflation. But you seem to have faith that they can institute just a little more economic equality. I don't, and I've got history to back me up.
Go find some GOPers to roll in the mud with. Partisan hacks, especially defenders of totalitarianism, make me queasy.
I do not defend communism and never have, I merely say that the more the right wingers push for ever more crony capitalism the closer the mobs get to communism/anarchy. And if I were to support a watered down version of communism, or socialism I would still say that it would be FAR better than the bullshit "capitalism" we have now, which is in fact a kleptocracy by a very small elite minority upon the vast majority. And, as bad as life was in the Soviet Union for the average man Ivan had it better than the millions and millions of Americans that though they work are still considered poor.
I would like to know how a 16 trillion dollar per year economy such as the USA has results in a median workers wages of 37k per year upon which he has to pay so much in taxes? There are roughly 120 million full time workers in this nation that produce ALL of that GDP. 16 tril/120 mil = $133,300 PER FULL TIME WORKER!!!!
So what happened to $ 96,300 per worker? An ironic number because it just happens to coincide with the hundreds of percent increases the already rich have been hauling down since Reagan started cutting taxes for them.
You accuse me of defending communism and I say oh no, it is you that defends the theft in this country of the largest amount of wealth from the people that has ever been dreamed of. And that theft is not only not getting better it is growing at an exponential rate so that the USA is doomed as it now is in less than 3 years.
"In 40 years of unparalleled wealth and income creation, the U.S. minimum wage has declined by roughly a third in real terms"
Lots of errors in your whole article but one glaring one here. I will gladly fix it for you...
"In 40 years of unparalleled wealth CONSUMPTION, the U.S. minimum wage has declined by roughly a third in real terms"
Take minimum wage back to 1969 level of $1.60 and leave it at $1.60 and you will see business explode here in the US like never before. Factories will open and manufacturing will leave China and Asia for the USA.
Throw in some glass beads, and I think we'll have a neoliberal bargain!
Liberty4ever.
Then who will buy the products that are made? Hint: Read up on Henry Ford and why he paid the salaries that he did.
So much stupid here it's hard to know where to begin. Henry Ford can suck his own cock for all I care.
For those in the know, the consumption by those with capital is usually what drives innovations. The people too poor to pay the added expense of innovative products just leech off the spendthrift rich.
Yeah, third world baby! Here we go!
How exactly does job destruction help income disparity?
What is the "correct" income distribution and what makes it "correct" (vs any different distribution that might be a little or a lot higher or lower) and who gets to determine what is "correct?"
Shouldn't income distribution be looked at on a global basis (why just country by country)??
Why not make minimum wage $40 per hour? Why not make minimum wage $4 per hour? How is the "correct" minimum wage determined and who gets to decide what is "correct?"
Why should income be looked at on a global scale? Are we supposed to be dragged down to third world levels to satisfy the 1%? Why do corporate heads and passive owners of capital get the outsized share of economic resources?
These kind of articles bring out all of the dopes on ZeroHedge. Minimum wages one way or another don't have a huge net impact on overall employment levels or wages in the US. Reasons that youth unemployment are so high currently in the US is multi-faceted with the biggest one simply being that most youth are simply not choosing to work & choosing to use their time on other activities.
I wish they would just link this to CPI and be done with it instead of wasting so much time and energy on what is really not that important of an economic topic. Instead it is just a partisan talking point filled with lots of cherry-picking and BS by both sides to make their selective points.
Yes, youth are lovin it livin in the parents basement after they graduate college. Clueless.
Minimum wage and raising it to $10 has little impact on college-graduates and their employment levels. Job openings/creation for them is a seperate issue.
Its certainly not enough, but its the least we can do in a crony capitalistic control fraud of an economy.
Well wage of workers isnt the only cost of business. I do realy want to see comparison of business conditions in 1969 vs 2012, taxes, bureaucracy, law/permission complience, enviromental complience, risk etc.
If these other business costs went up, it would explain why the minimum wage firms are willing to pay went down, they have to cut back somewhere.
I'm sure business costs are up for small businesses, who have to pay the price for one size fits all regulation in a multinational world. There should be thresholds for regulation. Those that are systemically important in size should be heavily regulated.
http://cdn.theatlantic.com/static/mt/assets/business/EPop2.png
You know when the recession began. That's the nose dive. And it's not hard to tell when the recession ended. That's when the nose dive stops. But what about the recovery? We never really got one. We got wiggles instead.
http://www.theatlantic.com/business/archive/2012/05/the-nose-dive-what-t...
It's almost funny to see the outrage and "reverse" math in these comments about giving a person a raise to something that would accommodate living slightly above the poverty limit which strangely enough hasn't been raised in quite sometime despite the inflation that has ravaged even a $10.00 per hour worker.
One claims raising the rate to 1969 levels will send more jobs to China without any evidence since most of the minimum wage jobs are in the physical touch service industries. Probably the most worrisome though in a economy that seems to pride itself on setting records for export deficits is the fact that what isn't counted is the imported labor that outsourcing has produced which would send the export deficit into the trillions and is the one single reason why this country will never recover.
Honestly, save the outrage. The job has been done and no minimum wage increase will ever correct it. What the very wealthy seem to have miscalculated in their prideful boasts of belonging to a global community is , once that crashes, the high leverage they are under will absolutely crush the majority of them. For those who remain, whats the use of billions of dollars if barter comes back and dollars are as a useful measurement of material wealth as tulips.
Charles, I have an idea lets ban sugary drinks, just certain sizes that will solve lots of problems.. Ohh, already done, well yeah lets just regulate labor, worked great in the USSR..
Retracts entire essay in 3,2,1..
I don't know how we could institute a fairer minimum wage without increasing the jobs lost overseas. We could do it through tax policy, but the oligarchs control that process so forget it.
All good things, min wage should be abolsihed. I am glad the COLA is far less than reality. Three cheers.
It won't really matter will it? You will either become an employee of government because this mess will leave them in charge or it will be so bad that there won't be any jobs at any wage minimums. Or there will be both...
I vote C: Both
Yes, I believe this has been the objective all along, dear comrades.
So you are saying the multinationals that own our government will finally outsource all jobs in the private economy?
Arguments in favor of minimum wage
From http://www.princeton.edu/~tleonard/papers/retrospectives.pdf
"Progressive economists, like their neoclassical critics, believed that binding minimum wages would cause job losses. However, the progressive economists also believed that the job loss induced by minimum wages was a social benefit, as it performed the eugenic service ridding the labor force of the “unemployable.
“It is much better to enact a minimum-wage law even if it deprives these unfortunates of work,” argued Meeker (1910, p. 554). “Better that the state should support the inefficient wholly and prevent the multiplication of the breed than subsidize incompetence and unthrift, enabling them to bring forth more of their kind.” A. B. Wolfe (1917, p. 278), an American progressive economist who would later become president of the AEA in 1943, also argued for the eugenic virtues of removing from employment those who “are a burden on society.
In his Principles of Economics, Frank Taussig (1921, pp. 332–333) asked rhetorically, “how to deal with the unemployable?” Taussig identified two classes of unemployable worker, distinguishing the aged, infirm and disabled from the “feebleminded . . . those saturated with alcohol or tainted with hereditary disease . . . [and] the irretrievable criminals and tramps. . . .” The latter class, Taussig proposed, “should simply be stamped out.” “We have not reached the stage,” Taussig allowed, “where we can proceed to chloroform them once and for all; but at least they can be segregated, shut up in refuges and asylums, and prevented from propagating their kind"
AND the Income Tax in 1969 was way higher!
I give Smith a lot of credit for being smart, but unfortunately I think he screwed the pooch on this one.
High minimum wage kills jobs, it's pretty well studied by the Austrians.
P.S. What is the single biggest difference between 1969 and now, besides the purchasing power of the Dollar?
All that the money that goes outside the country for all the things we buy that were once made here and by virtue of the multiple effect built Schools, Bridges, Roads & created more Jobs!!!
Jobs program! Infrastructure! Lets build more light rail to ease transportation expense, repair crumbling roads & bridges, etc. A jobs program that results in something more than extended unemployment benefits.
Everyone can already set their own minimum wage. For example, I refuse to work for less than $15 an hour.
But why do you need to control what everyone else sets their minimum wage at?
So that the multinationals can't finally succeed in bringing us down to a third world standard of living?
You must live in Jersey or something.
You dont need 15 an hour down in Miss.
Do supporters of minimum wage hate minorities?
From http://www.princeton.edu/~tleonard/papers/retrospectives.pdf
"Arguing that wages should be a matter of an appropriate standard of living opened the door... to the idea that “low-wage races” were biologically predisposed to low wages, or “under-living."
In his Races and Immigrants, the University of Wisconsin economist and social reformer John R. Commons argued that wage competition not only lowers wages, it also selects for the unfit races."
[meaning that minimum wage laws help keep "unfit races" out of the workforce]
If a minimum wage law lifts low-wage earners out of poverty why stop there? Why not set the minimum wage at $200 or even $500 per hour and make everyone rich? For thinking people the answer is obvious.
Why stop at only fixing wages, i.e. the price of labor?
We should also fix the price of loanable funds (Fed interest rate policy).
And the price of other goods. Like houses, potatoes, dentrifice, and Facebook stocks.
Why not use socialist masterminding in every aspect of life? It's the only way to make things fair.
The author made it, the sequences of the two articles and the reactions to them give valuable information.
Another genius post by CHS. My favorite rhetorical question:
"explain how the nation survived the prosperous 1960s paying the equivalent of $10-$12/hour in minimum wage."
Hmmmm, let's see, I'm going to go with, widespread, institutionalized discrimination against blacks, women, and, you know, every other minority. You know, well over 50% of the population. I'm going to guess that these super lucky groups didn't earn this magical minimum wage and instead, worked in a cash economy where they were lucky to get half that for their labor (you know, less than $7.25). But, this does give me a rather clever (if I do say so myself) idea to make this possible. Let's raise the minimum wage to $10-$12 an hour, then overtly and violently discriminate against hack writers and defunct economists and force them into humiliating positions. I'm thinking we'll have the hack writers write "I will not make idiotic suggestions" over and over again, and the defunct economists can construct the IS curve by hand and slide rule, each for, let's say, $0.10 an hour, for 80 hours a week.
Clearly, I am a genius.
This is truly a case of "Two Minds. In the late 1960s, America was economically unchallenged. In the 1970s and early 1980s, America almost failed due to inflation and resulting high interest rates.
Minimum wage comparison from the 1960s to today are bogus because the U.S. has moved from a society focused on production to a society focused on service. Service jobs have very low value added, production jobs have very high value added. We are just in the process of transitioning back to production, because the rest of the world has inflated away their wage advantages. Jacking the minimum wage only hurts the poor and only helps multi-nationals who can move their production off-shore.
Yes, great idea Charles Hugh Smith. Let's raise the minimum wage so that people with skills below that level remain unemployed. Raising the minimum wage does not create any more wealth. All it does is make it illegal for employers to hire people whose skills are below the minimum wage. Stop interfering with voluntary trade. If your idea of raising minimum wage is so great, why do you need to force businesses to do it?
Hey Tyler Durden - what are you doing letting this guy post crap like this?
To combat unemployment, we ought issue Mugger's licenses to those who can't find a job but are willing to sign a statement to the effect that they would accept a wage less than the minimum if it were offered. The license would give the holder the right to mug and rob people like Charles Hugh Smith who think it's OK to forcibly prevent people from earning a living.
I like this, but I would go even further...I have an even more radical idea, let labor capture more of the huge GDP/person the US still has...let's reduce work week for everyone to 30 hours for those on salary, with no reduction in salary allowed and for folks hiring people on hourly basis or hiring independent contractors, give everyone a one time 25 percent increase in hourly rate and let overtime rates and other benes kick in at over 30 hours.....companies will be forced to hire more people, and professional people only workin 30 hours a week will still demand enough pay for a middle class lifestyle...so there would be far less unemployed people, far less food stamp people etc...
What is so magic about a 40 hour work week anyways? Mexico makes there workers work 6 days a week, has that ever serioiusly improved their situation compared to US in last 70 years? So if 5 is okay, why not 4 days a week? We can get so much amazing consumer goods and food for so much less labor and costs than we once did. 150 years ago most of the country was busy growing food something like 85 percent, growing enough for themselves and little extra to trade with the 15 percent that werent farmers, leaving little left over to buy creature comforts, entertainment, etc. Now we have enormously productive technologies, why are we still working same amount of time as 50 years ago, when our GDP per person is still so high and there are so many unemployed?
Right now working people's taxes go to social safety net costs, so corporations get to play people against unemployed, scare them, they get pick of litter to only hire the best educated (who have pre-parid for their training, no need for company to invest in training), most produtive, or ultra cheapest workers...so corps keep gaining all the benefits of globalization and technology, and the resultatn unemployed, hungry, uninsured end up being paid for by working taxpayers. Let corporations, with so much wealth and profit, help foot the bill for the now excess, wasted able bodied workers that lay about collecting safety net from rest of us...let those folks have opportunities that are really incentivize work, let them pay taxes rather than take ataxes and like the 50s and 60s let more people have the diginity of working a job, making a decent middle class life even if there job isnt of great importance. So much social bad comes from people with no hope, people with no jobs..broken families, the social fabric of any city from Detriot to Liverpool goes bad when people of working age cant find jobs. Let there be jobs that can pay the basic bills for eveyone willing to work. It will reduce our social safety net costs, reduce crime etc
Yes there are some lazy people out there that dont want to work, drugees, alcoholics, messed up personalities etc, but for some reason in the 50s and 60s, when you could always easily get a job and a very nice middle class lifestyle with a HS education and factory work there were far less lay-abouts...and of the lazy now, even if they live with mom and scam a $1000 in SDI disability payments and $200 a month food stamps, and pick up some under the table cash work, wouldnt lots of those people prefer to work if they could make $40k a year working 30 hours a week?
For those that say this will crush our economy and make uncompetitive I give you Exhibit A - Germany. Their regular working folks make 20-30 percent more in wages than our working folks, and yet their businesses are globally competitive powerhouses, their high wage scale, high rate of unionization, good social safety net, strict environmental laws etc do not hold them back from being a world class exporter. And they get great value from their tax dollars, college education or technical trade school at no additional cost, no student loans, much better social safety net, pensions, maternity leave etc than we get...and still their businesses succeed.
And as to what this would do to domestic costs, yes, some things would cost more realtive, things that are labor intensive. Eating out might cost relatively more, other service related things that are highly labor intensive might go up in price relative to wage increases. Look at what is expensive in Norway for some ideas of how costs might shift. But is making labor expensive a bad thing in long run given it also makes consumers richer and poor and middle class spend there money quickly back into economy, much of it domestic? I expensive labor is not bad, if you can still be competitive globally (Germany, Japan and others prove you can) and can be good because expensive labor leads to innovation, elimination of druge, grueling labor jobs. When Ceasr Chavez movement caused price of ag labor up in US, then and only then were machines developed as an alternative, and so on.
Able-bodied people doing next to nothing, spending one to two years interviewing, networking, trying to find a job and barely surviving on social safety net is a waste, lets all collectively pay them to work by slightly increased relative costs of some services and by more of our GDP going to working folks than rich big businesses.
CHS: Closet socialist. Minimum wage blows their cover every time. Why can't he just say "abolish the abomination"?
GFN: Greedy Fucking Nazi... minimum wage blows their cover every time.
Oh CHS your true colors shine through. You correctly argue against the Fed often, then trot out a central planner liberal's wet dream in a piece like this. Minimum wage is a distortion in the free economy. If you raise it, sure you'll get some people's income to rise, but you'll get other people's to go to zero. In the end, it will be worse than if you removed minimum wage all together.
A simple example: I have two workers who make $8/hr each. If you force me to pay each $10/hr, I will either pay one $10/hr and layoff or cut the hours of the other one, or cut the hours of both of them. Making me as a small struggling business owner pay labor rates that I cannot afford does not create money out of thin air that I can bestow on my workers.
You correctly realize that the Fed + government + big corps being in bed together is the problem, however you and your ilk always seem to think even more government control is the answer. Wake up & smell the fascism.
Better idea, terminate the minimum wage and institute a maximum wage.
minimum wage and europe; its a long story and apparently CHS would like to import it to USA, where not only there is no minimum wage there is also minimum manufacture, maximum consumpton, and more than max. financial shenanigans in crony .1% companionship. Solve all your problems by cutting and pasting europe social structure to USa, without changing the political and financial set up is impossible.
The OLigarchy showed it hated welfare state of 60s wage structure of first world by EXPORTING all production to slave labour countries. That was the key to globalisation manipulation. And CHS would want them to not only bring back jobs but also to instill minimum wages in system.
Wow, FDR would envy his social urge. Why not instill FDR type fiscal structures as well with tax rates of 70-90% on revenues and corporate taxes of 40-50%. Then you would have the total middle class set up of the fifties; the golden age of USA!
Lets not be half hearted about change! Go the whole hog. Lol, I can imagine the chagrin of ZH forum. This is not libertarian decorum. No Ron Paulism there. But there is method in this madness and it has the class of european social euphoria. In an age of american dystopia. Would the pyramid be less Exeter and more Keops in new old America?
It's a no-brainer, but that is why it wont' happen. ALL the Uof Chicago, Harvard, Yale, Stnaford, AR devotees are all DEAD from the shoulders up. They won't be happy until full-fledged slavery is brought back... Freedom is just for the well-connected Ivy League Grads
I have a few issues with this analysis. The first is the concept of 'disparity'. I prefer 'mobility'. Disparity exists as a moment in time, and is very misleading. In 1985, I was in the lowest quintile. By 1997, I was in the highest. In the 15 years since, I have dropped in and out of the top quintile no less than 5 times. I'm willing to bet this is a relatively common experience for people, both in terms of moving up and in terms of shifting between quintiles, until they hit a particularly high level of job achievement. Therefore, the issue of 'disparity' isn't one I spend nights losing sleep over.
Secondly, having come from a rural area, I believe a national minimum wage level is a terrible idea, unless it is set so low that it can clear ALL markets. What do I mean by that? Well I live in NYC, the most expensive area in the US. So the Federal minimum wage won't go far in an area where gas is close to $3.79, you can't drive anyway so you use public transport, which is $4.50-$10.00 a day (an hour's work), your rent will run from $500 (if you share a room with friends) to $1000 a month, and you can't afford to eat anyway. Should minimum wage be higher here? Yeah, probably. Out in rural PA, where I came from, making the minimum wage is doing well for yourself. Gas is cheap(er), you don't really need to drive all that much (depending on where you live - I didn't), your rent is ridiculously low, etc. At the end of the day, if the Federal rate goes to $10.00, either jobs will be lost OR people won't be able to afford the stuff from companies that have minimum wage workers because prices will have to rise.
All in all, I'd argue that the wage level, now, is right where it should be, and areas that want it increased should be allowed to do it. The market sets a clearing level - let it do its job.
I'd add that if a minimum wage is a good idea, one which 'creates jobs' or at least doesn't lose them, and 'creates wealth', then why not just set a flat wage that pays everyone exactly the same high wage level? Let's call it $80,000 a year and no matter what you do, that's what you get.
We'd all be rich, we'd all work, and we'd all pay the same taxes. Problem solved, right?
The idiocy of the minimum wage is that it allows people who really think that's a good idea to step it back a notch and say "that's stupid - but you can craft a policy that does work, and we'll call it a "living wage"".
Sorry, all these wage ideas are broken. They make no sense whatsoever. Besides, the growth of wages on the top end are a result of one thing - money being printed at a furious rate with no where to go. So it creates its own jobs, moving money and buying assets (even if they are worthless), and those jobs pay very well. Creating money creates jobs and wealth, at least temporarily (see the Mississippi Bubble). So there's an idea - let's print more money!
There is another consideration I have not seen discussed, that is minimum and very low wage earners, at least those with dependents, have those wages supplemented with subsidized housing, food, energy, if the money spent by government to give those subsidies were instead paid in wages would we even have anything to talk about here? But of course when you get subsidies the government can then tell you where to live, when to move, what you can do in your own dwelling place, how much of what kinds of things you can buy at the market, etc. So the idea is to inflate inflate inflate without ever raising minimum wages, or COLA's on fixed incomes, and then put ever more now poor people on subsidy rather than pay them a living wage. This gives the government immense control over people in their private lives.
Like when my house burned down and the only place I had to go was to Mom's, but she was on SS and because that is about $900 per month in California she had HUD/section 8. We had to apply to HUD for permission for me to sleep at her house. In the meanwhile I had to sleep in a car in a park. 2 years of it.
From my point of view the minimum one can get by here in a single person household without being in poverty, is about $2,500 per month. $30k per year, below that and you are screwed. If you work 2000 hours per year to get that then your wages must be at least $15 per hour or you are in poverty. Mind you that is just to stay out of poverty, it is not middle class. There are about zero luxuries in that income.
Worst post I have ever seen in 2 years of ZH readership. Since when on ZH is minimum wage, or any price floor a good idea? Minimum wage doesn't force employers to pay workers more; it forces them to fire anyone whose skill is worth less than the min wage. So the most worthless workers will be the ones sitting in their meth-labs, living on gub-mint cheese, only emerging to vote for more gub-mint cheese. Meanwhile, the employer who still needs a $4/hr janitor will hire a border-jumping Mexican who is willing to work for a just wage. Get rid of minimum wage, AND welfare, and suddenly Americans will start doing those "jobs that Americans just won't do." And as an added bonus, the Mexicans will stay home.
After all these years of public education, at a cost of $11k per head per year, not many Americans have a good excuse for being an "unskilled" laborer.
Or was the point of the article just to tell us that government "adjustments" for inflation only cover their self-reported official inflation? Good point; it's hard to steal from people if you're always giving back to them...
Increase minimum wage laws??
F*%#*ing moron