Friday, September 21, 2018

Six Points Against a Higher Minimum Wage: How Do They Stand Up Almost Five Years Later?


On December 13, 2013 I published a post with the first half of the title above.  It has been read over 2,000 times and has drawn various comments.  Much has changed in the economy and the world since then.  How have these arguments held up?

The first point was that “not every low-paying job is with a large and very profitable company,” and in fact most such positions were and are with small, often struggling local concerns with little in common with the likes of McDonald’s and Walmart, and run real risks of being closed out if the business’s owners were forced to pay more.  Two comments implied that we could tie minimum pay to profitability, which sounds unwieldy but would indeed solve the Burger King-vs.-Joe’s-Bar-and-Grill problem here.  Another stated, correctly, that more money in circulation would help such businesses survive – it would, but in the great majority of cases would not approach being enough.

Second was that the country, then 19 million jobs short, was poorly placed to lose more to higher mandated wages.  Per the AJSN, that number is now 16.6 million, but that is not even a 15% reduction and still shows our surplus of people who would work if given the opportunity.  One commenter mentioned the increased money movement above – again positive, but far insufficient – and suggested that we could help that jobs deficiency with government infrastructure programs.  I heartily agree, as I have in the past – we will need to build, repair, and upgrade numerous bridges, roads, dams, airports, cellular towers, and much more sooner or later, and it may as well be sooner. 

My third point was that higher minimum wages would make employers pay more than they need to, that when they do not get the workers they require, or want to improve their quality and tendency to stay, they can and should raise their offers on their own.  That has been borne out by Walmart and other companies establishing internal minimums higher than the government requirement.  One observer said that the additional competition would be good for customers, which it could be, unless there is plenty as it is.  He also mentioned the problem of “a full time paycheque being less than your rent,” which would only apply to a small share of low-paid workers, as well over half are with parents, sharing living spaces, or have additional household income.

Fourth, I called “the largest inequality” the one between those working and unable to find jobs.  That is less true now than in 2013, but millions of those 16,600,000 would tell you that is how they see it.  No, this is not “fake news” – it isn’t real news or news at all, only my viewpoint – and is necessarily subjective anyway.  In business theory, income is known as a “hygiene factor,” which means that its appeal as it increases does not go up as a straight line but almost levels out.  Sure, $4.5 million or whatever per hour is farther from $15 than $15 is from $0, but a remarkable number of Americans would consider themselves halfway to being rich if they, indeed, earned $30,000 per year – and most people earning $1 million a year would see less change in their lives if their income increased 100-fold than if it went to zero.

Fifth was the limited ability of a higher minimum wage to lift people out of poverty.  That would only work for people experiencing that now who would not once their pay increased, even with no gain in the number of hours they are working.  Vastly more would need additional money or are not poor now, the latter most common among the 45% of minimum-wage workers who are under age 30.  “Increased consumerism” from people being paid more will not solve this problem by itself either. 

Last, our country contains vast variation in costs of living, and getting $7.25 per hour is not the same in Hawaii as in southern Texas.  Over the past five years, many states and cities, most with above-average living costs, have responded by raising the lowest pay themselves, a valid solution not inflicting prohibitively high minimums on others.  I add to that that there are huge individual variations in money wants and needs as well, and it would be an unmitigated loss if those able and willing to work for less than the minimum were legally forced to be unemployed instead. 

I finished with suggestions that, instead of penalizing businesses who need workers, we increase food stamps and unemployment compensation.  Our economy is better, and keeping them the same might be adequate now, but with that 16.6 million there is still no excuse for cutting them. 

One other thing has happened since I first posted here.  Guaranteed income, or universal basic income, has received a lot of attention and a few, usually fatally flawed, trials.  If it comes to pass, and I think it will before 2050, there will be no need for a minimum wage.  That would allow more interesting, fulfilling, and fun work opportunities to pay less, while, fittingly, having little effect on the dirtiest ones.  If everyone were assured of financial survival, I think we as a country could agree, after we had a guaranteed income in place, to abolish minimum wages completely.  Then, and only then, would everyone wanting to work be able to do that.  In the meantime, the ideas above are still valid – we need to let people earn. 

Friday, September 14, 2018

Seven Articles on Modern Employment, Three Clear Conclusions


What has been the underside of the decades-low official jobless rate and the recent 49-year low in unemployment claims?  A septet of widely varying pieces over the past 21 months tells us.

In “Struggling in NJ – 52 percent of all workers earn less than $20 an hour,” published in New Jersey 101.5 on January 16th, 2017, Dino Flammia introduced us to people he called ALICE, or “Asset Limited, Income Constrained, Employed,” or, to use an older and pithier expression, the working poor.  The real person he described, someone who, despite working full-time, seemingly got a car repossessed, “has begun putting several bills on credit cards,” and is “at risk of losing her home,” is hardly the worst off, and is one of millions. 

Next, we get to “Is freelancing the future of employment?” (The Conversation, August 15th, 2017), which discussed both sides of irregular work, not only the gig-economy Uber drivers and TaskRabbit short-propositioners but professionals working without being on regular payrolls.  For the latter, “freelancing is increasingly a choice that people make to escape the 9-to-5 workday,” and are closer to considering it “liberating, empowering, and even glamorous” than ordinary gig workers.  The share of American “freelancers” saying they made that choice from necessity came down from 47% in 2014 to 37% in 2017 and may be “a key visible indicator of the future of work,” though “full-time, company-based work is still the standard for employment in most Western countries.”  Small labor propositions, as I have described before, are still economically inferior goods, but opportunities for the likes of physicians to opt for less continuous employment are not.

We next saw a view, “Global Economy’s Stubborn Reality:  Plenty of Work, Not Enough Pay” (Peter S. Goodman and Jonathan Soble, The New York Times, October 7th), once again expressing surprise that, despite showy unemployment rates, wages are lagging.  When we are over 16 million jobs short due to latent demand, almost two-thirds of which comes from people not officially jobless, pay will stagnate.  As the article correctly points out, the ever-increasing ability of those in other countries, along with rising use of non-company employees as in the previous piece, are factors.  Weaker unions, though, are not a cause but a result, and there is no reason for same-job pay to increase more than inflation.  That also covers most of the subject matter of “The economy is hot, yet many U.S. workers feel left behind.  A new report sheds some light” (Andrew Van Dam, Washington Post, July 5th) – the rest is the insights that “even when Americans do find another job, their earnings don’t recover,” and “U.S. employment benefits provide less support in the first year of unemployment than those in any other country in the study.” 

On we go to a relatively ignored current work problem, that “Employers will do almost anything to find workers to fill jobs – except pay them more” (Michael Hiltzik, Los Angeles Times, July 10th).  Well, they will do something else – they will cry about a “skills gap,” and, per the article, complain that “labor is being paid first again” as, consequently, “shareholders get leftovers.”  Why business owners seem to think that paying market prices for workers is an undue hardship remains mysterious to me.

Much of the material here was put into a book, Temp, written by Cornell labor historian Louis Hyman and released last month, and reviewed by Jennifer Szalai in the August 22nd New York Times “How the ‘Temp’ Economy Became the New Normal.”  As well, Hyman, through Szalai, stunned us with “94 percent of American jobs created between 2005 and 2015 were for “alternative work,” and blamed “Manpower, the temporary staffing agency, and McKinsey, the management consulting company,” which “acted like a vise, with one supplying the labor and the other supplying the ideology.”

The seventh piece came out this week.  Matthew Desmond’s September 11th New York Times “Americans Want to Believe Jobs Are the Solution to Poverty.  They’re Not” spent most of its printed-out 19 pages telling us something we should know already with a sprawling anecdotal account of a woman trying to support herself and three children on a combination of 20 to 30 hours per week as a $10-$14 per hour home health aide and various off-and-on public assistance programs, contrasted with how “these days, we’re told that the American economy is strong.”  Desmond gave us plenty of erroneous reinforcement, such as the implication that wages should match productivity and that $7.25 per hour is a “poverty wage,” but more reasonably showed how this woman’s life is harder than, in a civilized society, it should be.

These articles offer three things we can take away.  First, due to a variety of national and worldwide economic factors, many jobs are low-paying.  Second, accordingly, we should not be cutting back the safety net, that, for example, food stamps and unemployment benefits should be consistently and easily available and, if anything, greater than they are now.  Third, though, we cannot require that all positions meet anyone’s “living wage” diktat, which in real life varies immensely from person to person, place to place, and situation to situation.  Personal choices still matter – if you doubt that, look over the Desmond article and tick off the bad ones the protagonist has made and still makes which affect her prosperity.  We are in Work’s New Age – we can no longer expect everything material our parents and even grandparents had – but we still need to govern ourselves as well as we can. 

Friday, September 7, 2018

Another Strong Jobs Month – AJSN Down 200,000 with Latent Demand for 16.6 Million More Available Positions


In this morning’s Bureau of Labor Statistics monthly Employment Situation Summary, one thing surprised me.  I had just commented that the projected number of net new nonfarm positions was usually too high, so wondered if, at 163,000, the official report would show we failed to cover our population increase. 

We did, though, easily.  The result was 201,000, about a third more than we need to sustain our growing number of adult residents.  The writeup was positive in other ways as well.  The count of those officially jobless was off 100,000 to 6.2 million, those out 27 weeks or longer fell the same amount to 1.3 million, and the total of people working part-time for economic reasons, or holding on to short hours while thus far unsuccessfully seeking full-time ones, dropped another 200,000 even after the previous month’s 100,000 loss, to 4.4 million.  Average private nonfarm payroll wages again increased more than inflation, up 10 cents per hour to $27.16. 

The headline adjusted unemployment rate did not improve, though, staying at 3.9%.  The unadjusted figure was the same, off 0.2% from July and showing August is a neutral seasonal month.  The two disappointing results were in the two figures indicating best how common it is for Americans to be working, the labor force participation rate and the employment-population ratio, each down 0.2% to reach 62.7% and 60.3% respectively.

The American Job Shortage Number or AJSN, which gives in one number how many additional, not-currently-available positions could be filled if all knew that getting one were as easy as getting a pizza, improved 217,000, as follows:



Outside the 324,000 improvement from those officially unemployed, 70,000 from those discouraged, and 33,000 from those pleading family responsibilities, though, the components got larger.  Most noteworthy was the 2 million gain in those claiming no interest in working, a huge jump for one month, adding 100,000 to the AJSN.  Other significant worseners were the number of people in school or training and those also wanting to work but not looking for it for the past year.  The changing outcomes in these three categories show that fewer people not technically counted as jobless tested the waters in August than in July, adding up to a real labor force shrinkage.

Compared with a year before, though, the AJSN is looking great.  The August 2017 figure was 17.6 million, over one million higher, mostly due to the difference in official unemployment.  The only significant gainer since then was those not wanting a job, with cuts in those in the armed forces, institutions, and off the grid and those not looking for the previous year helping the AJSN by about 100,000 apiece.  About 34.5% of the AJSN now comes from those unemployed, down from last month’s 36.1% and continuing a general long-term trend of more and more positions being filled by others.

So how good a month was it?  Although I’m concerned about the fallen participation percentages, and the corresponding increase in people staying on the shelf, it was positive.  There is nothing small about, month after month, our employment gains exceeding the needs of our additional population, or about the key and unheralded figures of long-term jobless and working part-time for economic reasons seeming to fall almost every month.  It is, relatively speaking, a fine economic time, and we’re still improving.  Accordingly, once again, the turtle took a small but clear step forward.