The Unfinished March Toward a Decent Minimum Wage
It was fifty years ago the March on Washington for Jobs and Freedom took place. The demand for a higher minimum wage was part of a package of demands seeking economic justice for workers through government intervention in the labor market. At that time, the wage floor was $1.15 and marchers were demanding a raise to $2.00. Today, that 50 year old demand would be worth about $13.39 when adjusted for price changes.
“To Work with Dignity” with my co-author Steven Pitts is the first in a series titled “The Unfinished March” that the Economic Policy Institute is releasing to review the demands, analyze the progress made, and determine the unfinished steps necessary to fully achieve each of the goals of the 1963 March.
Labor Department Should Crack Down on Illegal Unpaid Internships
Juliet Lapidos had a nice editorial in The New York Times on Saturday that took on the issue of unpaid internships—based on the recent news about Sheryl Sandberg’s Lean In foundation using Facebook to find a “part-time, unpaid” intern “with editorial and social chops” as well as “Web skills.” Lapidos reports that the ensuing uproar made the foundation reconsider and promise to pay the rather skilled employee they were looking for. Given that an estimated two-thirds of unpaid interns are women, and given that unpaid internships on average lead to much poorer employment prospects than do paid internships (fewer job offers and much lower salary offers), Lean In’s attempt to exploit this sketchy alternative to paid employment was embarrassing. The way to help young women get ahead is to pay them for their work, for their “editorial chops” and for their web skills, not to exploit them.
Lapidos made an important point about what’s needed to change the culture that makes this exploitation seem OK. A recent spate of lawsuits has brought the law to the attention of many employers for the first time, and it is dawning on some of them that there is a risk to cheating young workers out of the minimum wage. But interns looking for references for their resumes are unlikely to sue, and most cases–even if meritorious–don’t involve enough back pay to be worth a private lawyer’s time. What’s needed is energetic enforcement by the U.S. Department of Labor and the various state departments of labor. Very little effort would be required to make a difference. If investigators scanned Craigslist they could find plenty of cases to prosecute, and with appropriate publicity and media attention it wouldn’t take long for employers to catch on and clean up their act.
As Lapidos put it, “proper enforcement of labor law shouldn’t depend on exploited interns’ willingness to suffer through courtroom ordeals.” That’s what we pay government lawyers for.
Fifty Years Later: How Far Have We Marched?
The March on Washington fifty years ago was the first of many marches I would make: for civil rights; against one war, then another; against poverty; for women’s rights; for gun control; for the environment; and now back to celebrate the first.
They merge a bit in my memory. I’m not totally sure who all was with me at which event. I definitely remember sweltering in a suit and tie to help bring a white middle-class look to that first March for Jobs and Freedom.
I was inspired by King’s speech. But I was also inspired by practically everyone who spoke that day. To my young earnest policy wonk mind others seemed to be more on the specific agenda message than he was. Certainly I had no sense that his speech would be so historic. Nor that the March would be.
I was a volunteer foot soldier in Dr. King’s army: registering black voters in Virginia, picketing against discrimination in housing and hiring practices, helping get white faces to meetings and rallies. In 1965, I joined the march from Selma to Montgomery Alabama, where unlike the earlier Washington march, real fear walked with us.
This activism didn’t come naturally. I came from a family of white working poor—mostly indifferent to the oppression of the “Negroes.” We had our own problems paying the rent and putting food on the table. And, at least subconsciously, we were vaguely aware that the subjugation of black people kept us from joining them at the absolute bottom of the economic ladder.
Ignoring Cheap Ways to Boost Middle-Class Living Standards
David Autor and David Dorn had an op-ed in the NYT this weekend, outlining their case that technology has been the primary headwind for middle-class living standards over the past generation. We tend to have a different view; we think that the cumulative effect of economic policy decisions made over this time-span has been the real barrier to decent growth in middle-class living standards.
The first question lots of people have upon hearing this dispute is “does it actually matter?” Autor and Dorn accept (and document) just how rough a go it has been for middle-wage/middle-income workers and clearly accept that the rise in inequality that has seen rewards flow away from the middle-class is a problem that needs to be rectified. Who cares why they think it happened if they’re on-board with attempts to fix it?
The answer to this is simple and important: the diagnosis matters because it implies a prescription. In Autor and Dorn’s NYT piece, the only real policy solution they nod to is boosting the share of workers with higher education, noting that “the payoff for college and professional degrees has soared.” And if one believes that technology is boosting demand for high-skill workers and that’s why middle-wage jobs are suffering, this policy solution does make sense. But in fact, the payoff to a college degree has actually been pretty flat for more than a decade now. Wages for those with an advanced degree have done better, but this group is just over 10 percent of the workforce—which is a key reason why Autor and Dorn note that boosting the share of workers with college or advanced degrees can’t be a “comprehensive solution to our labor market problems.”
What We Read Today
Here are a few articles we read recently. What did you read today?
- Should White House interns be paid? (The Week)
- Unfinished Work: Walter Reuther and the March on Washington (Dissent)
- The Socialists Who Made the March on Washington (The American Prospect)
- No More Second Chances for Larry Summers (The Nation)
- Professor Pants-on-Fire (The Nation)
- Five speakers to pay attention to at Jackson Hole (MarketWatch)
Slow Wage-Growth Just One More Sign of How Big a Problem the Profit-Biased Recovery Is
On Wednesday, Larry Mishel and Heidi Shierholz released a paper tracking wage-growth over the past decade. It’s familiar but still sad news—the vast majority of American workers have seen essentially stagnant or worse wage-growth over that time.
One angle on poor wage-growth over the past couple of years deserves some attention: the vastly disproportionate share of income-growth that has flowed to corporate profits (and other forms of capital income) rather to wages and (and other forms of labor income).
The figure below shows the share of total corporate sector income claimed by capital income – data that allows for the clearest measure of how much this capital income growth (profits, essentially) has crowded-out labor income growth (wages, essentially). This is the cleanest cut at this issue because in the corporate sector, all income is classified as either labor or capital income. (In the rest of the economy, categories like proprietors’ incomes that are a mix of capital and labor incomes muddy the waters a bit.)
Cato Study Distorts the Truth on Welfare and Work
The Cato Institute recently released a wildly misleading report by Michael Tanner and Charles Hughes, which essentially claims that what low-wage workers and their families can expect to receive from “welfare” dwarfs the wages they can expect from working. Using state-level figures, their paper implies that single mothers with two children are living pretty well relying just on government assistance, with Cato’s “total welfare benefit package” ranging from $16,984 in Mississippi to $49,175 in Hawaii. They then calculate the pretax wage equivalents in annual and hourly terms and compare them to the median salaries in each state and to the official federal poverty level. Tanner and Hughes find that welfare benefits exceed what a minimum wage job would provide in 35 states, and suggest that welfare pays more than the salary for a first year teacher or the starting wage for a secretary in many states.
So what makes this so misleading?
For one, Tanner and Hughes make the assumption that these families receive simultaneous assistance from all of the following programs: Temporary Assistance for Needy Families (TANF), Supplement Nutrition Assistance Program (SNAP), Medicaid, Housing Assistance Payments, Low Income Home Energy Assistance Program (LIHEAP), Women, Infants, and Children Program (WIC), and The Emergency Food Assistance Program (TEFAP). It is this simultaneous assistance from multiple sources that lets the entire “welfare benefits package” identified by Cato add up to serious money. But it’s absurd to assume that someone would receive every one of these benefits, simultaneously.
Another Week, Another Ill-Considered Attempt To Undercut Regulations
No week seems to go by without an imbalanced attack on regulatory protections by a trade association, a “think-tank,” a member of Congress, or a journalist. These attacks frequently feature a reference to the growth in the Code of Federal Regulations, even though it is a meaningless measure of whether we’re overregulated. In offering another bill to diminish regulation, Sen. Angus King, for example, wrote yesterday that, “According to a recent study by the Progressive Policy Institute, the number of pages of federal regulations has increased by 138 percent since 1975, from 71,224 pages to 163,301 in 2011.”
That might sound like a lot of pages, but if you’re not using methylene chloride, polyvinyl chloride or hexavalent chromium, the hundreds of pages devoted to regulating those chemicals have no effect on you or your business. The same goes for IRS transfer pricing regulations, the Department of Agriculture’s beef slaughtering regulations, or OSHA’s crane safety regulations. No one in a small retail business, the tourism industry, or Maine’s lobster industry cares about or need worry about any of them.
Like most of his colleagues, Sen. King denounces “excessive and unnecessary regulations” without identifying examples. If he has a legitimate example, he should let the secretary of the appropriate agency know about it, or work to repeal it legislatively.
Instead, he and his colleague, Sen. Roy Blunt, propose the creation of a 9 member commission that would identify regulations “in need of streamlining or repeal.” The commission would report their recommendations to Congress in the form of a bill that would be “fast-tracked” (protected from many of the normal motions and procedures) and that could not be amended. This proposal is flawed in a number of ways.
Education Investment (Not Low Taxes) is Key to State Prosperity
A new paper released today by EARN (the Economic Analysis and Research Network) looks at what states can do to create strong state economies that support high wage jobs for their people. Is it low taxes, well educated workers, or something else?
When we look at data from across the country, two clear conclusions emerge:
- There is no correlation between the overall level of taxation in a state and the ability of the economy to support high wage jobs (see figure A in this post);
- There is a very strong correlation between how well educated a state workforce is and the ability of the economy to support high wage jobs (see figure B).
Looking at this graph of overall tax levels and median earnings (a measure of wages that includes both hourly and salaried employees) one might suspect that there are just too many differences between states to see a clear correlation on any one variable.
There is no significant correlation between overall tax levels and high-wage economies: Median hourly wage, and state and local taxes as a share of state personal income, by state, 2010
| State | State and local tax revenue as a share of state personal income | Median Hourly Wage (2012 dollars) |
|---|---|---|
| WY | 0.13590238 | $16.97 |
| AR | 0.10037558 | $14.42 |
| NV | 0.10475355 | $15.76 |
| MS | 0.097939908 | $14.16 |
| LA | 0.09574187 | $15.38 |
| WV | 0.10971793 | $16.17 |
| IN | 0.10564875 | $15.70 |
| KY | 0.097442473 | $15.19 |
| OH | 0.10470439 | $15.97 |
| SD | 0.079988074 | $14.96 |
| ID | 0.087547352 | $15.10 |
| OK | 0.08531404 | $15.51 |
| UT | 0.093340332 | $16.17 |
| AK | 0.1974031 | $18.69 |
| SC | 0.088154942 | $15.65 |
| AL | 0.082354177 | $15.19 |
| TX | 0.089617786 | $15.14 |
| TN | 0.081749962 | $14.53 |
| IA | 0.10341089 | $15.82 |
| AZ | 0.09064911 | $16.31 |
| NC | 0.098868851 | $15.71 |
| MT | 0.094412722 | $14.69 |
| WI | 0.11274396 | $17.19 |
| MI | 0.1053127 | $16.75 |
| NE | 0.10207951 | $15.59 |
| MO | 0.086906169 | $15.95 |
| FL | 0.091142418 | $16.65 |
| ME | 0.12008039 | $16.04 |
| PA | 0.10247088 | $17.23 |
| NM | 0.096224878 | $15.98 |
| HI | 0.11820127 | $16.81 |
| ND | 0.12142884 | $15.75 |
| GA | 0.089791357 | $16.82 |
| US | 0.1031523 | $16.85 |
| DE | 0.10092502 | $18.31 |
| OR | 0.095232536 | $16.61 |
| RI | 0.10883045 | $17.88 |
| CA | 0.11036228 | $17.83 |
| WA | 0.094482239 | $19.30 |
| MN | 0.10786811 | $18.48 |
| KS | 0.10357631 | $15.77 |
| VT | 0.11876957 | $17.09 |
| IL | 0.099506408 | $17.07 |
| NH | 0.086699291 | $18.96 |
| NY | 0.1430054 | $18.39 |
| VA | 0.088036271 | $18.78 |
| CO | 0.096436107 | $18.73 |
| NJ | 0.11515426 | $20.26 |
| MD | 0.099771245 | $19.93 |
| CT | 0.1080529 | $21.03 |
| MA | 0.099847735 | $20.88 |
Source: Authors' analysis of Current Population Survey Outgoing Rotation Group microdata and Tax Policy Center's Tax Facts data
Bankruptcy Judge Should Respect Michigan’s Constitution Even If Michigan Governor Rick Snyder Doesn’t
Gov. Rick Snyder is corrupting Detroit’s recovery even before it begins. By ignoring the state’s constitution and its protection for accrued public employee pensions, Snyder is undermining the rule of law and adopting the kind of “ends justify the means” reasoning that usually precedes violations of public trust. Snyder has violated his oath to uphold and defend the state’s constitution by asking a federal court to reduce the pensions of Detroit’s public employees, including many who risked their lives for years in service of the city.
The Michigan constitution is unambiguous. Section 24 states:
“The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.”
Yet, Gov. Snyder has set in motion a bankruptcy process whose aim is to do exactly what the constitution forbids – to diminish that contractual obligation and pay Detroit’s pensioners and retirees less than the full financial benefits they earned.
One can only hope that U.S. Bankruptcy Court Judge Steven Rhodes will rule, instead, that Emergency Manager Kevyn Orr and Gov. Snyder did not have the authority to file a bankruptcy petition that would unconstitutionally impair the city’s pension obligations.