Minimum Wage is Pathetically Low

c27aMinimum Wage is Pathetically Low

You can read it below: last years banker’s bonuses were twice the entire income of all those making the minimum wage.

Certainly, this should be considered evidence that the minimum wage is set too low. A good argument can be made that the social utility of what minimum wage earners do is far superior in benefits for our larger society than investment banking and some of the practices of regular banking.

It’s important to think about fairness and just deserts when dealing with this issue. In this country, the game is tilted toward those with influence and power. The minimum wage workers hardly register on either of those scales.

It is for the rest of us to add to their voice, to sometimes be their voice. What isn’t fair for our fellow Americans is a part of our responsibility.

We are not individual atoms floating in some kind of cosmic vacuum. We live, work and thrive with other people and those connections are important and a big part of what we consider civilization.

James Pilant

New report: Bankers’ bonuses more than double full-time minimum wage workers’ pay –

The $26.7 billion spent on Wall Street bonuses last year was greater than the entire 2012 income of America’s full-time minimum wage workforce, according to a new report from the progressive Institute for Policy Studies.

Had that $26.7 billion instead gone to increased wages for the country’s 1,085,000 full-time minimum wage workers, writes report author Sarah Anderson, those workers’ wages ($15.1 billion total in 2012) would have more than doubled. Anderson estimates that such a raise for minimum wage workers would have done much more than bank bonuses to spur economic growth: In contrast to a $10.4 billion multiplier effect from the payouts to bankers, she calculates a $32.3 billion multiplier if the cash had gone into the pockets of those now making $7.25.

via New report: Bankers’ bonuses more than double full-time minimum wage workers’ pay –

From around the web.

From the web site, Arindrajit Dube.

So to take stock, if you consider the Sabia and Burkhauser simulation results  as “facts” you also are claiming that no worker reporting a wage below the old minimum will get a raise, and no one above the new minimum will get a raise. These are not very good assumptions, and they certainly are not facts.

Of course, you don’t have to make these assumptions. You could allow for spillovers. You could allow for wages to rise below the minimum. You could allow for measurement error in reported wages and other sources of income. But then you are not in a world where tabulating survey data gives you simple facts that are beyond reproach. You need to make additional assumptions to make causal claims. And we have not even begun to talk about behavioral effects—be they on labor demand side, or on labor supply side such worker search effort, etc. (And by the way those do not all go in the same direction.)  So you could add a lot more assumptions and continue with the simulation route, or you could use quasi-experimental approach used in almost all of applied micro-economics to empirically estimate the effect of minimum wages on poverty and other outcomes.  Of course, you would want to subject your identifying assumptions to specification checks and falsification tests to ensure you have reliable control groups; and you would account for possibly confounding policies such as state EITCs. And when you do all of that, and some more, you would probably end up with a paper like this one.

So where does this leave us?   As I said in my paper, policies like cash transfers, food stamps, and EITC are better targeted to help the poor, although even there minimum wages are better thought of as complements and not substitutes. More generally, however, motivations behind minimum wage policies go beyond reducing poverty. The popular support for minimum wages is in part fueled by a desire to raise earnings of low and moderate income families more broadly, and by fairness concerns that seek to limit the extent of wage inequality, or employers’ exercise of market power.  And the evidence suggests is that attaining such goals through increasing minimum wages is also consistent with a modest reduction in poverty, and moderate increases in family incomes at the bottom.

A Progressive Plan for Action

English: Depiction of the Senate vote on H.R. ...
English: Depiction of the Senate vote on H.R. 3590 (the Patient Protection and Affordable Care Act) on December 24, 2009, by state. Two Democratic yeas One Democratic yea, one Republican nay One Republican nay, one Republican not voting Two Republican nays (Photo credit: Wikipedia)





A Progressive Plan for Action


Michael Lind’s article, The South is Holding America Hostage, strikes me as compelling. Certainly, the history of the South and my personal experiences living in that part of the country provides support for that point of view. And he is also right that like an army on the offensive, they have their opposition constantly fumbling around trying to set up some kind of last minute, patchwork, cobbled together defense.


Lind offers a set of goals to put what he calls the “Southern Autonomy Project” on the defensive. I find many of them good choices.


I would like to add as goals, a nationwide system of high speed rail, a system of free college education and implied in that a total and complete end to the student load system and a repair of America’s failing infrastructure.


James Pilant


The South is holding America hostage


The Tea Party’s not crazy — they had a plan. Now liberals and progressives need one, too


Setting political difficulty aside, it is intellectually easy to set forth a grand national strategy that consists of coordinated federal policies to defeat the Southern Autonomy Project.


A federal living wage.  At one blow, a much higher federal minimum wage would cripple the ability of Southern states to lure companies from more generous states which supplement the too-low present federal minimum wage with higher local state or urban minimum wages.  (Strong national unions could do the same, but that is not a realistic option at present.)


Nationalization of social insurance.  Social insurance programs with both federal and state components, like Medicaid and the Affordable Care Act (“Obamacare”), allow Southern states to be stingier than many other states, creating more desperate workers who are more dependent on the mercy of employers and elite-dominated charities. Completely federalizing Medicaid (as President Ronald Reagan suggested!) and other hybrid federal-state social insurance programs would cripple the Southern Autonomy Project further.


Real voting rights.  Using the authority of the Fifteenth Amendment to the U.S. Constitution, Congress should completely federalize voting requirements for all federal, state and local elections, making it as easy as possible for U.S. citizens to vote — over the objections of kicking and screaming neo-Confederates.


Nonpartisan redistricting.  Partisan redistricting by majorities in state legislatures should be replaced by nonpartisan redistricting commissions, as in California, New Jersey and other states.  The redistricting commissions should be truly nonpartisan, not “bipartisan” arrangements in which incumbent Republicans and incumbent Democrats cut deals to protect their safe seats from competition. (Electoral reforms like instant run-off voting and proportional representation are struggles for a more distant future).


Abolish the Senate filibuster.  The filibuster is not part of the U.S. constitution. It has been used by Southern white conservatives from the nineteenth century to the twenty-first to preserve Southern white power and economic privilege. This relic of premodern  British parliamentary politics should be abolished. Democracy means majority rule. If the Southern Right loses a battle in Congress, it can try to round up allies and win next time. It should no longer be able to paralyze the Senate, the Congress or the federal government as a whole.


Abolish the federal debt ceiling completely.  The federal debt ceiling is another institution like the filibuster which has now been ruined by being abused by Southern conservatives. Now that the Southern right is trying to turn it into a recurrent tool of hostage-taking when it loses votes in Congress, the federal debt ceiling should be abolished. The federal government should be authorized to borrow any amount necessary to fund spending appropriated or authorized by Congress, if there is any shortfall in tax revenues.


From around the web.


From the web site,


The Progressive Liberal agenda has always

been about caring for and empowering the least among us (Matthew 25),

and setting a secure floor under our citizenry. Teddy Roosevelt’s Square

Deal: a living wage, a basic safety net; Franklin Roosevelt’s New Deal:

Social Security; Lyndon Johnson’s Great Society: the elimination of

poverty and racial injustice, and Medicare/Medicaid. It’s been about

building America from the ground up using government only for what is

absolutely necessary and providing a basic standing point: free public

education, free medical care, and care for the needy and elderly as in

all other developed countries in the world. And, yes, tax the wealthy

and very wealthy more than the middle class folks who

are just working every day. Why? Because the wealthy benefit more from

the commons and thus should pay a higher percentage of their income for



Every positive step forward in this

country has been brought by the Progressive Left… and the Right’s agenda

has been to say No. Progressives brought us the 50-hour work week, then

the 40-hour work week. The Right said No. Progressives brought us the

Minimum Wage. The Right said No. Progressives brought us the right to

unionize the workplace. The Right said No. Progressives brought us

worker safety laws so people don’t die in factories or offices which

used to be one of the leading causes of death in the US, but not

anymore. The Right said No.



Is Tipping Necessary?

005Is Tipping Necessary?

Political Animal – Why you should (still) tip generously: a response to Michael O’Hare

Yes, I agree that if tipping were suddenly banned, the likely result is that markets would adjust to some extent, via increases in restaurant wages and prices. Unlike Michael, though, I’m not so sanguine that labor market in the restaurant industry works well enough that workers would entirely make up in wages what they would lose in tips. In case you haven’t noticed, the magic of the market really is not working so well for most wage earners. Productivity continues to soar but nearly everyone’s wages are stagnating or declining, and low-wage earners like restaurant employees are doing worst of all. This economy is a catastrophe and workers, especially those at the lower end of wage spectrum, have precious little bargaining power.

If tips were banned, I have every expectation that employers would opportunistically enact the equivalent of wage cuts, by refusing to make up in wages what workers would lose in tips. After all, what would stop them? The all-powerful labor unions? The many strict, scrupulously enforced labor laws that workers in this country enjoy?

Political Animal – Why you should (still) tip generously: a response to Michael O’Hare


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The Minimum Wage Helps the Poor

063The Minimum Wage Helps the Poor

Political Animal – The minimum wage, part 2: Casey Mulligan fail edition; or, the $100 minimum wage gambit

The vague suggestion that perhaps that minimum wage really does not “confer benefits on the poor” teeters dangerously close to the “opinions on the shape of the earth differ” school of journalism. Let’s talk specifics here. The impact of the minimum wage, and particularly the impact of the minimum wage on employment, is, as economist John Schmitt has noted, one of the most studied topics in all of economics. The results are most definitely in, and contrary to the clear impression Mulligan is trying to give, there is little reason to believe that the outcome from the years 2007 through 2009 would be any different than the results we have from any other year before that. And contrary to the neoclassical dogma so beloved by University of Chicago types, the overwhelming body of the most rigorous empirical evidence shows little or no relationship between employment and the minimum wage. When there does seem to be a negative relationship, it tends to be extremely small.

A review of the literature, and a summary of various theories as to why Econ 101 minimum wage models don’t turn out to hold up in the real world, can be found in Schmitt’s excellent recent report for the Center for Economic and Policy Research. The reasons are complicated, and there are competing hypotheses, but basically what it comes down to is that the many of the assumptions required for perfect competition in the labor market don’t hold. I know, I know — try to recover from the shock.

Political Animal – The minimum wage, part 2: Casey Mulligan fail edition; or, the $100 minimum wage gambit


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