Terrance Heath

Minimal Wages for All

Filed By Terrance Heath | October 20, 2010 3:00 PM | comments

Filed in: Politics
Tags: conservative politics, minimum wage, political theory, working class

Here’s another reason to vote in the mid-term elections this November: Conservatives think you need a pay cut. As I’ve said once or twice before, conservatives’ bottom line message is simple: America has economic problems because too many people have had it good for too long; minimum-wage.jpgand when they’re worse off again, the nation and its economy will be better off. The people they think had it too good for too long are you and me, and almost anyone who punches a clock to pull a paycheck.

Of course, right now they’re focused on people who earn minimum wage; Republican candidates like Alaska senate hopeful Joe Miller and West VA Senate wannabe John Raese want to abolish the minimum wage because they say it’s unconstitutional, while Connecticut Senate candidate Linda McMahon can’t make up her mind.

Never mind that the constitutional arguments are apparently due to conservatives constitutional inability to comprehend the constitution. Never mind that it seems they want to turn back time to 1787 when the constitution was ratified, or 1792 when the Bill of Rights was ratified. Never mind that, according to their logic they should shut down their campaigns, because even though the Constitution establishes Congress as a legislative body, it doesn’t give congress anything to do since it can’t do anything that the constitution doesn’t literally include. That is, it has to literally “say” the words — like “minimum wage” — or we’re limited to only those solutions and ideas that existed in 1987.

Never mind that two thirds of Americans support raising the minimum wage, which hasn’t kept pace with inflation for years.

Never mind the obvious insanity of all that. Their economic reasons for wanting to abolish minimum wage don’t add up either. Both Miller and Raese claim that abolishing minimum wage will create jobs, presumably because businesses will be spurred to hire more workers because they can pay them (even) less. Reality is actually quite the opposite.

And that’s where the rest of us come in. First, they’re coming for the paychecks of minimum wage orders. But yours and mine are next.

Even if we earn less than the minimum wage — like servers in the food industry, for example — conservatives like Minnesota candidate for governor Tom Emmer want to make sure we earn less, by even abolishing tips.

Seriously.

Even if we earn far more than minimum wage, conservatives believe you and I earn way more than we should. They rarely say so, but everyone in a while of them tests the water by saying thins like what Bloomberg columnist Kevin Hassett did recently: “Your fat paycheck is keeping your neighbor unemployed.”

Seriously.

So here comes the leap into ice-cold water: The biggest problem with the labor market right now is that wages are too high. As Washington again turns to government spending as a cure for unemployment, some against-the-grain thinking is in order.

Economics teaches that full employment would be reached if wages adjust downward, to a level that better reflects current circumstances. At lower wages, employers would desire more workers. Labor markets generate persistent unemployment only if wages are sticky, failing to fall as demand declines.

A number of reasons help explain why wages don't and won't drop, beginning with federal and state minimum-wage laws.

Never mind that millions of Americans have already had their wages reduced though unpaid furloughs and reduced working hours.

Meanwhile, wage growth among people who have jobs has just about stopped. The Economic Policy Institute reports that between 2006 and 2008, wages grew at an annualized rate of 4.0%; by contrast, over the past three months annual wage growth has plummeted to just 0.7%. At the same time, furloughs — requiring workers to take unpaid vacations — are on the rise: recent surveys show 17% of companies imposing them. More than 20% of companies have suspended their contributions to 401(k)s and similar pension plans.

So why isn’t the media screaming? Partly because these job and wage losses are not, for the most part, falling on the segment of our population most visible to the media. They’re falling overwhelmingly on the middle class and the poor. Unemployment among those who have been in the top 10 percent of earnings is closer to 5 percent, and their earnings continue to climb — although, to be sure, much more slowly than before the meltdown.

Never mind that wages for working Americans have stagnated for decades while the wealthiest Americans saw their income skyrocket.

Many of those who are lucky enough to still have work have seen their hours and benefits cut back, or have been forced to take unpaid furloughs. Twenty percent of companies have suspended their contributions to 401(k) plans or other pensions.

And wages are stagnant, and have been for some time.

Going all the way back to 2000, wages have grown less than 1 percent a year, adjusted for inflation, according to the Economic Policy Institute.

Meantime, the richest Americans have seen their wealth skyrocket, so much so that now we have widest gap between the rich and the poor since 1929.

Never mind that companies long ago figured out they can increase productivity without hiring, by increasing productivity without increasing wages — provided that workers are desperate enough to kept their job and they paychecks no matter how little they make in comparison to how hard they work.

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960′s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

Never mind that corporations have found that layoffs can even pay for executive bonuses.

Corporate America. CEOs in one company after another are throwing workers onto the unemployment rolls and dodging taxes to boost short-term profits and fatten their own paychecks. They are shifting the burden of a poor economy onto the public purse — while continuing to line their own pockets.

According to a new report by the Institute for Policy Studies, CEOs from the 50 firms that have laid off 3,000 or more workers since the onset of the crisis took home nearly $12 million on average in 2009. That's 42 percent more than the average for CEOs of S&P 500 firms as a whole.

On this side of the looking glass, what the rest of us call “reality,” corporations and businesses are sitting on tons of capitalsome $1.8 trillion in cash, at present.

But anyone looking closely at the American economy today would see this is nonsense. American corporations have an unprecedented $1.8 trillion of cash. The Fed, meanwhile, has slashed interest rates to essentially zero - a record low - and is still holding over $2 trillion in securities that it said last week it will keep from shrinking. And a Federal Reserve survey released earlier this week showed that banks have been making it easier for businesses of all sizes to get loans. Credit standards for small firms have been loosened for the first time since late 2006.

In other words, businesses have all the capital they need. They're sitting on it or can borrow it more cheaply than ever. But they aren't using it to create jobs.

Why not? Because there's not enough demand for their products or services. Consumers aren't buying.

They’re using it to their give executives bonuses instead of investing in their businesses or hiring more workers.

Corporate executives, in reality, are not suffering at all. Their pay, to be sure, dipped on average in 2009 from 2008 levels, just as their pay in 2008, the first Great Recession year, dipped somewhat from 2007. But executive pay overall remains far above inflation-adjusted levels of years past. In fact, after adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century.

American workers, by contrast, are taking home less in real weekly wages than they took home in the 1970s. Back in those years, precious few top executives made over 30 times what their workers made. In 2009, we calculate in the 17th annual Executive Excess, CEOs of major U.S. corporations averaged 263 times the average compensation of American workers. CEOs are clearly not hurting.

It’s clear enough that wage cuts don’t help boost unemployment, because lack of capital isn’t what’s keeping corporations from hiring. In fact, wage cuts will likely make them even less likely to hire, if workers are desperate to hold on to their jobs at any cost, in the midst of record-high unemployment.

Companies don’t hire because they have extra money lying around. They hire because demand for their products and services rise, and they need more workers to meet that demand with an adequate supply. Wage cuts, for those making minimum wage and above, will only serve to further reduce demand, because it takes money out of the pockets of people who are more likely to spend it.

Conservatives, on the other hand, want to put more money in the hands of people who probably won’t spend it.

Give the wealthiest Americans a tax cut and history suggests they will save the money rather than spend it.

Tax cuts in 2001 and 2003 under President George W. Bush were followed by increases in the saving rate among the rich, according to data from Moody's Analytics Inc. When taxes were raised under Bill Clinton, the saving rate fell.

…When tax legislation was signed by Clinton in 1993 – raising the top tax rate to 39.6 percent from 31 percent — the saving rate fell from 12.1 percent in the second quarter to 9.5 percent in the first quarter of 1994. The Standard & Poor's 500 Index rose 1.9 percent from July through September, after little change the previous three months.

When the first Bush tax cuts were signed into law in June 2001, pushing the top rate down to 35 percent, the wealthy boosted savings. The saving rate climbed to 2.8 percent in the first quarter of 2002 from minus 2 percent in the second quarter of 2001. The increased savings coincided with a 1.1 percent decline in the S&P 500 index.

Maybe that’s why they fought so hard to protect bonuses and compensation for Wall Street banksters. They will likely fight as hard to reduce your paycheck and mine as they did to protect Wall Steet’s excesses.

It’s not hard to figure out why.

It’s not just that conservatives are opposed to minimum wage. It’s like with Social Security. It’s not that conservatives are opposed to Social Security, the program. They are, of course. It’s that their really opposed to the idea of social security (with a small “s”) for any American who work for a living and make less and a few $100K a year, at least. What they’re in favor of is social security only for those whose bank statements prove they deserve it.

It’s not that conservatives are opposed to a minimum wage. They are, of course. What they’re in favor of minimal wages for everyone. Or almost everyone, anyway.


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Thank you so much for this Terrance!

Angela Brightfeather | October 20, 2010 3:48 PM

I have only one thng to say about this. I'll go along with no minimum wage, if they go along with wage caps on the rich and famous.
That means all those fat cat ball players out there making 40M or more a year, the corporate fat cats that are making 1 B a year and so on.

When they are willing to cap what they make, I'll say they can cap what I make.

Rick Sutton | October 20, 2010 4:35 PM

Mr. Heath you are rockin' my world. Testify.

It's a Halliburton Dog World honey, and we're all wearing Milk Bone suits.

Unless, of course...we're willing to answer phones in a foreign land for $2 an hour.

Ahhh...customer "service" and a whorish ruling class. Bingo! No wonder George W. Bush reigned for eight years. Our economy was on autopilot, its stewards resigned to Cheneyesque machinations. God help us all.

Paige Listerud | October 20, 2010 8:56 PM

Go, Terrance!

They want to end minimum wage? I already can't live independently on what I make. And, my guess is, they won't start supporting social welfare. Hungry people are angry people. What are they trying to start?

And hell yeah, businesses are sitting on capital. I work at a grocery store where the management was just switched out. They've cut hours, but had to call people in every day. Of course, new ad campaigns are still being changed every three to six weeks with all their costly posters hanging in the aisles and stickers on the registers that customers don't notice.

Bill Perdue Bill Perdue | October 21, 2010 2:50 AM

Republicans are badass rightwing anti-union scabs. That's not exactly news.

So is Obama and so are the Democrats.

The most serious blow to the income of workers in decades was Obama's vicious attack on the UAW. The wage and benefit concessions he forced on the UAW will reverberate throughout the economy because the UAWs auto contracts are the model for other industries. It was a green light for a national offensive against workers and unions. GM and Chrysler were forced into bankruptcy and Obama demanded tens of thousands of layoffs and huge wage cuts before he'd push for loans to bailout the looter class's auto assets.

The Obama administrations decisive role in increasing profits by cutting wages is highlighted by its assault on the UAW and by the Democrats and Republicans absolute refusal to invest trillions in job growth to green the economy and infrastructure.

Obama's goal, and the goal of managers and owners is permanent large scale unemployment, a situation that could be easily remedied by taking back the handouts to the rich and using them to green the US economy. The formula is simplicity itself - high unemployment equals low wages.

That reactionary goal - permanent long term unemployment to encourage deep wage cuts - is the reason that corporate profits are increasing at during the current Depression. Companies. for their part are hoarding cash and refusing to hire. Read the Wall Street Journal analysis of 2010 corporate profits, reported in Propelling the Profit Comeback: Retooling, Downsizing.” Monday, October 18th, 2010.

The same combination of handouts to the rich and wage cuts for working people produced riots in Greece and now in France, which is experiencing a repeat of much of Mai 1968 but with unions and people of color taking the lead. Those events will be repeated here in one form or another as the shock of mass unemployment, homelessness and the pauperization of workers is replaced by rage.

http://www.csmonitor.com/USA/Politics/2010/1020/Like-France-will-US-soon-move-to-boost-retirement-age

http://www.csmonitor.com/World/Latest-News-Wires/2010/1020/France-riots-continue-protesters-block-airports

Hannah, "Hungry people are angry people" King Louis XVI and Mari Anntoinnete can attest to that, they were beheaded.

The more money that comes out of the pockets of the middle class and lower income folks, the more the fat cats that feed those politicians are able to keep in their own pockets. They seem much more agreeable to "donating" (read: buying off) to politicians and judges.

There has to be away to get congress to start involving the public on what they are voting on and actually being the voice they are desginated to being. Yea, yea, yea, don't vote them in next elections, but by then the damage is done and it is to hard to reverse. Honestly, breach of contract, failiure to fulfil job requirement, brand them as traitors, SOMETHING. Anyone who says america is a democratic nation is just ingnoring the facts.
oh yea and GO TERRENCE GOOD STORY

I started a comment on this but it got too long a rant so I deleted it. I will say however that economies like water find their own level unless something is in place to prevent that from happening. So look at the worst economy in the world. We are heading to a point between where we were at and where they are at now. Our government has set us on that path, and it is unlikely that can be changed now. The problem in their thinking in regard to "Globalization" is they did not factor in what killing off much of the buying power in the United States would do by their action. After all this country consumes a great deal. Granted we should slow that down but it will already take decades to replace the jobs lost and the drop in demand seen by their actions now.

Add in the comments from the Ultra-right wing News pun-dents telling us we are drifting too far to the left, so people believe our problems are the result of our government being too liberal, added with turning a blind eye toward cheap undocumented workers, the minimum wage will have to go down along with everyone's wages in time. They also cry about taxing the rich because they create jobs not because it is all true but they do not want to get stuck with the bill for trying rebuild the mess they helped create by buying the law makers to tailor the policies of the government so they could profit from them. Throw in less work hours, less benefits, and create an economic environment like that of pre-New Deal when the robber barons roamed is their goal in the long run. That is the goal they seem to seek. The question really becomes will enough people in the country buy into their idea of how the world should be run?