The fifteen dollar minimum wage movement seemed a distant idea. People, flipping burgers who never received raises were upset that they were stuck in dead end jobs. I never thought it would bleed into my life or affect me in any way. Other than irritating a few fast food CEO's I never thought that the movement would gain much traction aside from annoying protectors that exhibited the worst human behaviors to get their 'cause' attention.
Then, in the beginning of April my view of the world changed. Jerry Brown, the Govenor of California signed a piece of legislation making the $15 minimum wage a reality (http://www.sacbee.com/news/politics-government/capitol-alert/article69842317.html). I wasn't shocked so much that my state would be one of those "progressive" places that would sign on to risky legislation. Our state is notorious for leading the way in new ideas but I was shocked that something I considered a non-issue had actually become a reality. Even as he signed the bill Governor Brown remarked that, "This might not make sense economically but it makes sense morally." That launched a month long look into the economics behind Minimum Wage (when did such laws start), were minimum wage laws effective (no really), who came up with the arbitrary number of $15 as a living wage, why do these issues and movements keep popping up? Finally, how would it affect my life? The Minimum Wage The concept of the minimum wage is fairly old. The pioneers of the concept were New Zealand and Australia. In New Zealand the minimum wage was introduced in 1894 and in Australia in was implemented in 1896. Currently New Zealand has a tiered system for minimum wage. The first minimum wage is the "Starting Out" and "Training" minimum wage geared towards younger workers and people with less than six months on the job. The Starting Out minimum wage is $12.20 per hour. For those who are established employees the minimum wage is $15.25 per hour. (http://employment.govt.nz/er/pay/minimumwage/) The United States national Minimum Wage was forged during the bleak years of the Depression as part of FDR's sweeping changes in legislation. The minim wage was set in the Fair Labor Standards Act of 1938 (http://www.dol.gov/oasam/programs/history/flsa1938.htm). The historic bill outlawed child labor and instituted the United States first minimum wage. The original minimum wage was a startling twenty-five cents per hour! Interestingly, the minimum wage at the time of it's introduction was at a higher rate than the national standard due to factories in the South that employed women and children at very low wages. The minimum wage was to be determined by a number of factors: economic conditions, employment terms, productivity growth, labor costs, company operating costs, the trend regarding bankruptcies, economic freedom ratings, standard of living and prevailing average wage. According to Elizabeht Warren based on increases in the productivity of employees in the United States (one of the factors used to set the minimum wage) the current minimum wage should be $22.62 but we will get back to this in a moment (https://thesocietypages.org/socimages/2013/12/19/22-62hr-the-minimum-wage-if-it-had-risen-like-the-incomes-of-the-1/) A Living Wage The Wage for Fifteen movement started in the 1990's. The movement started in Baltimore by an organization called BUILD (Baltimorians United In Leadership Development) with the intent to require private companies with city contracts to pay a "Living Wage." (http://americamagazine.org/issue/378/article/living-wage-movement) The living wage is calculated differently than the factors taken into consideration for the minimum wage. In the UK and Switzerland it means that a person can pay for the basic amenities such as food, shelter but includes extras such as one educational course per year and the costs of child care. Idealistically, a Living Wage would allow people to not need the supplemental support of government assisted living such as Food stamps and housing assistance. When the movement first began it does not seem that they were seeking to raise the minimum wage but only ensure that certain segments of the economy were limited on what wages could be offered. In the case of Baltimore they wanted the companies that paid their employees well to have a level playing field when bidding for government contracts. The living wage appears to have originally set out to benefit companies that paid their employees more. Originally it was not to change the nations minimum wage to a "Living Wage." The Fight For $15 Organization The organization started out with primarily fast food workers. They started protesting to become a union and to change the wages of fast food workers. The Organization does not state on it's page why $15 an hour for every citizen of the United States is a good idea. They don't make any type of argument regarding the economic purpose behind their fight other than to state, "And we won't stop fighting until we turn every McJob into a REAL job." There isn't a definition regarding what they consider a "real" job or why they are seeking a new national minimum wage. The website does not even offer an explanation as to why they chose $15 as a the acceptable wage. Productivity Now, lets go back to how they set the original minimum wage. Minimum wage was supposed to be partly based on Worker Productivity. Elizabeth Warren calculated in 2013 that based on the increase in productivity the minimum wage should be over $22 an hour. A skilled job than should easily may $45-50 an hour. The implications are mind boggling when you consider such pay scales. To people who consider $20 a lot of money (myself, for example) the idea of making over twenty dollars an hour doesn't seem to calculate. How on Earth would anyone come to such a conclusion? Well, unlike the Fight for $15 people this number is based on an actual calculation and based on economic principals. Yes, it's far more than what we would imagine, the blow back from people thinking that $15 is a lot for a minim wage is bad enough! The issue is that for the last thirty years people have not seen an increase in the wages they receive. In fact, in some industries such as a line cook, their wages have actually dropped. Now, if we were looking at the economy and saw an overall economic slow down in every industry (including productivity- for example, the number of goods a company sells) the stagnate wages might makes sense. Yet, sadly, this country has been more productive than ever before! Companies are running more efficiently with fewer employees squeezing the staff they do have for every drop of effort that they can. Employees feel it as they gain larger work loads from those who have been laid off. Some people are bearing the workload of what would have been three separate positions just twenty years ago. Lawrence Mishel states in the conclusion of his remarkable paper, "Productivity grew 80.4% from 1973 to 2011 but the growth of the real hourly compensation of the median work grew far less, just 10.7%." I highly recommend that people take a look at this paper and the amazing graphs that Michel (2012) put together. The United States worker that is employed is fed up. Not to mention those who can't get jobs because one person is doing the job of there employees. We felt the first pang of the workers revolting with the Occupy Wall Street movement and the Fight for $15 is just the latest evolution of the common worker being fed up with current wages. What Happened in the 1970''s? When looking at the graphs regarding wages vs. productivity there is a startling place where the difference between productivity (and company profit) split from the wages that companies pay. This change occurred int he 1970's. A while back I saw a brilliant documentary by Robert Reich called "Inequality for All" that summed up the reason the citizens of the United States are just now coming to realize the gap between productivity (i.e. the profit that companies make) and wages. First, to compensate for the lack of wage increases mom left the house and joined the work force. This buoyed peoples income, even brought in a little extra money than what was needed to belong to the minimum wage. Next, the main income winner began working two jobs while his wife continued to work one. Finally, people began to use their homes like credit cards to finance the middle income lifestyle. However, the Great Recession of 2007 started when the housing market crashed. Suddenly, people couldn't use their homes for additional financing. Student Loans In the United States we have been told, at least in the Millennial Generation, that the only way to get a good job is to got to college. Our public education pushes into college and forces us to choose a major before we've cut our teeth on an actual job. Often, upon graduation, we have come to learn, there is not a job waiting for us. Instead, we end up in entry level positions with an enormous amount of student loan debt. I have no doubt that this is the reason that Bernie Sanders is doing so well with the younger generation. We were taught that if we went to College our future would be golden but once we emerged from the halls of those places of education we discovered it was not so easy to get a job and that a degree does not guarantee a place among the middle class. Perhaps, it is the weight of the Student Loan, mostly government backed and an obviously risky investment that has caused so many to be disillusioned. The amount of people who might default on those loans might be our next great economic bubble that will burst leaving the government empty handed. Further, College tuition in the US has outpaced inflation and has, as should be logically obvious at this point in this blog, out paced the rise in wages. (http://www.bloomberg.com/news/articles/2014-11-13/college-tuition-in-the-u-s-again-rises-faster-than-inflation) In other words, we are paying more for an education and if we are lucky enough to land a job we are being paid less. So, our costly education has far less value than it would have thirty years ago. Surely, this breeds frustration in the population. The 1% and 15% So, here we come to the crux of the issue. If the United States worker is not seeing an increase in their wages even though they are working harder than ever...who is? That pesky movement, Occupy Wall Street, taught us the terms- 1% and 10%. At the time, I had never heard of such a thing. What were they talking about and how did it really affect me? I thought the people protesting were spoiled idiots who were just getting in the way of the United States Industry. The issue, in truth, is that there is a huge divide in income. The median house hold (this includes the combination of two income households!) income, or the most common income in the United States is $51,939. In this country that is considered a very good income. In California the median income is a little higher at $61, 933. (http://www.census.gov/library/publications/2014/demo/p60-249.html) (http://www.deptofnumbers.com/income/california/) So, more than likely you're making somewhere around the median income of $51,939. Strangely, one one would think that the Middle Class would be defined by this Median (or middle) income. However, our wonderful political leaders include people who make $250,000 among the middle class. This is a hotly debated idea. The decision to reject people who make $250,000 as being middle class has been gaining more traction as more people realize that this huge number most definitely does not represent the middle class or even average income of a United States citizen! The gap between those who make the median combined household income of $51,939 and those who make $250,000 is obvious. In fact, while we talk about the 1% who make trillions....only 5% of the population make more than $250,000. (http://www.nytimes.com/2015/12/28/opinion/campaign-stops/250000-a-year-is-not-middle-class.html?_r=0) So where did that increase in profit thanks to the American worker being more productive go? Well, primarily, Occupy Wall Street is correct. That profit went to the financial investors on Wall Street. The movers and shakers in the Stock Market pocketed the result of the increase of blood, sweat and tears of the average American workers. We received none of the benefit of our hard work and our increase in productivity. Even worse, those investors on Wall Street don't seem to be reinvesting that money in new ventures here in the United States. In fact, they haven't even put the money into savings accounts to accumulate interest because the Federal Bank has kept the interests rates low to encourage the average American to continue taking out loans. A lot of that money has left the United Statese, going into international investments and hidden bank accounts that have been revealed in the Panama Papers. Instead, as any good investor knows...they let their money make more money by reinvesting their money elsewhere. American workers are putting an extra effort just to make the rich richer and the data is absolutely obvious when one looks at the economy. There is a one way cycle that puts money into the hands of 1-10% of the population that do not invest simply for retirement. Why The Minimum Wage Rise Will Not Help Here in is the rub. While the Average American worker is earning the same income people did in their jobs back int he 1970's our law makers are considering people in an income range far beyond that to try and justify that the Middle Class still exists. Further, when you factor in that minimum wage income of $30,000 you see the gap between the very poorest of America creep towards that of the true Middle Class of $51, 939. The idea that companies will simply absorb the cost of labor increase is nonsensical. The Investors on Wall Street want their profits to increase not decrease. Companies will not choose to ignore the steep cut the labor cost will have on their profits. Prices on goods will rise so they can maintain their profit level and continue to increase their profit to make investors happy. The minimum wage increase will only make the true Middle Class poorer. The line between the Median income and the poverty level will be far less than the price of a new car. Only $20,000 will be the difference between the poor and the Middle Class. When you see the numbers you can't continue living in the fantasy land that there is a Middle Class. The Middle Class has been wiped out in this country. The death of the Middle Class happened long ago and it is dream that we still hold onto to justify why we are better than the people surviving off of Food Stamps. Business As Usual The idea of using the Minimum Wage to increase the quality of life of the United State Citizen is a false one. The minimum wage is an idea that is over a hundred and twenty years old. After a hundred years we have data and experience telling us that raising the minimum wage will not bring people out of poverty. The increase will not truly be a "Living Wage" because the people making that amount will still need government assistance to pay for the increase in the cost of goods. In fact, it will only negatively impact the people who were making a little bit more than that in their job. Their jobs, suddenly, will be valued at a lot less and it's doubtful that companies will dig deep enough to raise the wages of the people with median income so that there continues to be a significant difference between skilled and unskilled workers. This will lead to the 90% of the citizens of the United States being dissatisfied with their jobs and the economy. So, if, as we have seen, the one hundred and twenty year old idea of raising the Minimum Wage doesn't solve the problem how are we going to find a solution? We have to look outside the box of what we have been taught. We have to look outside the box of the disciplines we were taught. We have to think like a business person, like an investor, and wonder....how can we appeal to them to change their ways? The problem where the increase in profit due to productivity only go to the 1% isn't a legislative problem. The government doesn't have a tool in their known tool box that will make a company increase wages for their employees by 15% across the board. We can't expect businesses to be anything but what they are....they exist for the sole purpose of making profit. When the profit is for some investor who is so removed from the American Workers from which that profit comes that they are only distant statistics on a spreadsheet in his high rise office. Tax Incentive To Raise Wages The only tool in the Governments arsenal against this issue is Taxes. The only thing that will influence the typical business and Wall Street is money. Right now, our government is taxing the daylights out of the corporations. The only way to see an appropriate increase in wages is to offer a Tax Incentive to companies...that is the government needs to speak the business language of profit. Companies that show and prove that they have increased the wages of their employees a certain percentage to compensate for the changes in minimum wage, inflation and cost of living get a significant tax break. That will be the only way that we will see wages go up across the industries in an appropriate matter. Don't worry about the top 5% with their $250,000 and up incomes. I'm sure the Actors and Actresses in Hollywood won't see an increase in their standard of living if a middle class is re-created. Further, the way that Wall Street is taxed does need to change. Taxes that pretty much deter the top 1% in just growing their money in the stock market wouldn't be a terrible idea. Since many of those people live off the interest of their investments it is safe to say that they can pay a good percentage of taxes on money that was earned only with their own money...and hardly feel a pinch. One Time Tax Incentive To Leave The Stock Market Finally, as I have harped on before it is the abuse of the Stock Market that has lead to this issue. This had lead companies to invest more effort in securing profit for their investors that re-investing in their employees. This has led to the demise of the pension and the rise of the 401k where we worship the stock market as some powerful slot machine that may one day pay out a fortune to the average worker. Sadly, that is not how the system works or how it was meant to work. Buying back stocks to go back to being a private company is difficult. That's one of the reasons why there needs to be a tax incentive to do so. That is the only way that power is going to be taken back by individual companies from the investors. The Stock Market is supposed to be a tool to secure investors. Once a company as investors they reinvest and grow their companies. However, there comes a time when companies reach market saturation and can grow no further. International trade has allowed this Market Saturation limit to be passed but that has played out for the larger companies. Eventually, companies have to buy other companies in order to expand and increase profit which has essentially led to monopolies that are not so obvious as the newly acquired companies retain their original names confusing the consumer. By offering an incentive to leave the stock market the government will also ease the amount of companies that buy up other companies leading to more competition which will be beneficial to everyone and drive down costs. Finally, what will change this American toil turned into pocket change for stock market investors....is an incentive for companies to leave the Stock Market. Once a company has hit market saturation the government should offer an incentive to get out of the market. This will spur investors to spend money on newer ventures and allow aged companies to reinvest money that would have gone to investors back into their work force. A Tax Break For Those of The Median Income And Lower Finally, given the razors edge that the median household income walks there should be significant tax breaks for that group. This tax break would allow people to spend money that they actually have instead of taking out loans that they may or may not be able to pay back. Conclusion - The True State of the Nation There is as problem in the United States. There is a reason that the average American worker is disgruntled, dissatisfied with the economy and with the government. This problem seems to baffle analysts, it baffles Washington D.C. and the top five person who make more than $250,000. These people are so far removed from the paycheck to paycheck life style that they are completely unaware of why there is unrest among the rest of the 90% of the population. This is why the majority of people in D.C. do not resonate with the average United States citizen. The minimum wage is a concept that is over a hundred and twenty years old introduced by New Zealand and Australia far before FDR put it into place in response to the Great Depression. The Stock Market is a concept equally old and has not faced any form of reorganization or scrutiny from the general population of the United States. Both of these ideas have years of history and we can see in graphs the obvious timing of when the wealth of the United States left the United States. The true middle class United States Citizen makes a median income of $51,939. That's how much money that the average household income in the United States makes per year. That hasn't changed much since the 1980's and during that age it was good money. Houses cost around $27,000. The American Dream of owning a house, having a car and comfortably raising a family was well within reach for the American family during that era. In the 70's we saw a change. Investors took the profit created by the Untied States and place it elsewhere. They became global citizens and left the rest of the United Citizens in the dust. They took their profit and invested it in growing economies. The United Sates citizen has not seen an increase in their wages since the 1970's and in some industries (line cook, for example, which were filled with undocumented immigrants) went down. Then, as prices increased to adjust for this financial windfall of the 1970's mom had to leave the home. She went and began earning a income just slightly lower than her husband. This allowed the American Dream to continue uninterrupted and we experienced a boom in the 1980's. Then, there was an adjustment in the nineties, and people began to depend heavily on credit and took out interest on their burgeoning home values to continue the American Dream. With the Great Recession of 2008 that tactic to keep up the American Dream came to an end. Portions of Generation X were able to achieve the American Dream by taking advantage of the boom of the 90's. The bulk of Millennials do not have the opportunity to achieve the American Dream. With wages being the same (when adjusted for inflation) as they were in the 1970's they are emerging from college in their mid-twenties in debt. They are pushing back the time when they can have children to their thirty's in the hope that by that time they will have developed a decent career somewhere in middle management. There is a problem. The middle management jobs have been cut out during the Great Recession. The productivity and the profit of the United States companies are at an all time high. Yet, the jobs that once appealed to people fresh out of college have been removed from the economy. They are being outsourced to India and other countries where people will work for less money. Further, the millennial already has an outstanding debt that they must pay back. Some never enter the workforce, others end up at an entry level job making minimum wage hoping that a mid-level management job will eventually open up. Pensions in non-government jobs are non-existent so those Millennials who do secure a job are dependent upon 401k's and the stock market for their retirement...no one even considers the paltry amount they have been told they will never receive from Social Security because that government program is doomed to fail. The Baby Boomer generation stubbornly refuse to retire. There is yet another problem that has compounded the issues already facing the Millennials. Big business did some projections, they analyzed the data and they realized there was going to be a labor shortage. The labor shortage was predicted to begin in 2010. At that time the amount of retired Baby Boomers would outweigh the amount of working citizens leaving great gulfs in the labor supply. Companies began actively outsourcing jobs and bringing in immigrants to do the work that these shortages were supposed to provide. These immigrants were supposed to fill in the labor at the bottom of the wages but that hasn't happened. Instead, they are competing with Millennials that are unable to put their degrees to work for the same minimum wage job and the rest of the immigrants are working under the table while collecting Food Stamps. There are industries that are experiencing labor shortages, Construction, but the Millennials with degrees have no interest in working manual labor (that's why they went to college right?) and the immigrants are showing that they have little to no interest in the jobs either. Meanwhile, the general population watches as those who were Millionaires became Billionaires, and then Trillionaires. Companies keep looking at their Year over Year profits and in so doing there is no reason to increase the wages of their workers. Meanwhile, companies wonder why sales are down, people wonder why the economy continues to be sluggish and the Recession has never left 90% of the population that are struggling to get by. Mom working is no longer making up for the stagnate wages, credit cards can no longer fill the gap (it has become popular not to use credit if possible in day to day life), and an overwhelming amount of the population that now have a college education are living at home with mom and dad wishing they could afford a place of their own. Meanwhile, the government continues to use Quantitative Easing keeping the interest rates low so that these Millennials can't even make money off of their savings accounts. The problem is that we are still waiting for the next FDR and the next restructuring of the United States in response to our knowledge thanks to the Great Recession. Using ideas that are over a hundred years old, such as the Minimum Wage, isn't working. Further, we are not even adjusting minimum wage to keep up with the productivity United States as it was meant to be used. Letting Wall Street operate the same way they did a hundred years ago and for the last forty years isn't working. We need someone who will prompt companies to reinvest in the United States and bring that wealth home so that the average United States citizen can enjoy it- not just the top 5% investor class who make $250,000 and more. The best way to do this, in my opinion, is a three fold strategy. Lowering the taxes on the average United States Citizen who is just barely doing better than the people earning minimum wage. This is the bulk of the population- at 90%. This at least, for a time should give the economy a boost as Generation X and the Millennials (people in their late twenties, thirties, and forties- in other words the working age) can spend some money and get the economy going. Next, companies need to be given an incentive to give back to their employees that have been working their butts off the last thirty years. This comes into a generous one time tax break from the government based on a percentage wage increase for all of the companies employees, the pledge to add middle management positions earning 70k-120k back into their companies and a pledge to keep those percentage of those positions and those wages permanently.
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Brave Soul! May Your Journey On The Path Of The Seeker Bring You Joy and Peace! I'm currently posting every Saturday. With a new addition the family I have pre-scheduled most posts through December 2022. Full Moon Posts will contain up-to-date content when I can get to them. Thank you so much for your support and understanding! This is a place where you can encounter new spiritual ideas that have helped me develop as an Individual On The Path of the Seeker. Take or Leave this information as you see fit. Archives
April 2024
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