Media clips
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As Obama follows up on a State of the Union speech Tuesday that focused on increasing economic opportunity, census tracts at opposite ends of the spectrum help paint the picture. Data from 2010 showed a median family income of just $8,831 in the Napier-Sudekum area. In Belle Meade, the median family income was more than 20 times higher at $183,047.
The same stories can be found across the state. Incomes for the bottom 20 percent of Tennessee households fell by 12 percent over the course of nearly a decade, a 2012 report by the Center on Budget and Policy Priorities and the Economic Policy Institute found.
USA Today January 30, 2014 -
Account holders would be able to make hardship withdrawals without facing significant tax penalties. And while the plan is aimed at low-income people, anyone in a household earning up to $191,000 a year is eligible to invest.
“The plan has the advantage that it helps people who do not have the ability right now to save easily through payroll deduction,” said David C. John, a senior policy advisor at AARP who added that it steers people around financial institutions that discourage investors with small accounts. “It helps get people into the habit of saving.”
But others said Obama’s new initiative is so modest that it does nothing to address the larger problem of eroding retirement security for Americans.
“At best, it is a distraction from the bigger issue of what we need to do to shore up retirement,” said Monique Morrissey, an economist at the Economic Policy Institute. “It is a very, very modest tweak, and it is not likely to have much of a substantive impact.”
The Washington Post January 30, 2014 -
The plan, as the President outlined it in his address and the White House fleshed out a bit more Wednesday, aims to give lower-income workers a way to start building retirement nest eggs in tax-deferred accounts, through regular payroll deductions made by their employers. The employers would have to agree to offer the service to employees.
The accounts would be available to those earning less than $191,000, but the minimum initial contribution would be $25 and subsequent contributions could be as little as $5.
The money would be invested in a government-backed bond with a yield pegged to the Government Securities Investment Fund offered to federal employees through the government’s Thrift Savings Plan, a retirement program. That low-risk, low-return fund yielded 1.47% over the last year and an average 2.24% over the last three years. Like Series EE savings bonds, the myRA bonds wouldn’t lose face value, which means the investments would be protected from market losses. But with such low yields they might barely keep up with inflation.
Once the accounts reach $15,000 in value, they would have to be rolled over into a conventional Individual Investment Account. That’s a sop to the financial services industry, which makes billions from managing IRAS. And that’s bad news, says economist Monique Morrissey of the Economic Policy Institute. “The president’s plan may serve to channel more savings into a high-risk, high-fee system without first addressing its failings,” she wrote on EPI’s blog.
Los Angeles Times January 30, 2014 -
Lawrence Mishel, the president of the Economic Policy Institute, responded to my email asking for his take on Piketty:
“We’d take the perspective that this phenomenon is related to the suppression of wage growth so that policies which generate broad-based wage growth are an antidote. The political economy is such that the political power to enact those taxes also requires a mobilized citizenry and institutional power, such as a robust labor movement.”
The New York Times January 29, 2014 -
Many owners who supported a wage hike say they don’t believe their workers can live on minimum wage and already pay them more. About 95% of respondents agreed that $7.25 is not a living wage and only 7% said they pay any of their workers that hourly rate or the minimum set by their state, which can be higher.
But more than 20% said they pay some employees between $7.25 and $10.10 an hour. That means if a federal wage hike is passed, these small business owners would have to raise wages for employees in that range.
There are currently 1.6 million workers who earn the federal minimum wage, according to the Congressional Research Service. And the liberal-leaning Economic Policy Institute estimates that an additional 17 million make between $7.25 and $10.10 and would see wages increase as well.
CNNMoney January 29, 2014 -
It’s about time to raise the minimum wage, at least according to 600 economists.
The group, which includes seven Nobel laureates, attached their name to a letter released earlier this month by the Economic Policy Institute urging lawmakers to raise the minimum wage to $10.10 an hour. In the two weeks since the left-leaning think tank first published the letter, the list of signatories has grown from 75 to more than 600.
President Obama is expected to push for an increase in the minimum wage during his State of the Union address Tuesday. In his speech last year, Obama called on Congress to boost the federal minimum wage from $7.25 an hour to $9 an hour. Senate Democrats proposed increasing the minimum wage to $10.10 — a measure Obama later said he backed — but the bill is still stalled in Congress.
The Huffington Post January 29, 2014 -
The simple economic theory of wage formation would argue that workers must be getting increasingly unproductive. That is, if you’ve studied this corner of economics, you may recall the assertion that your hourly wage is equal to your “marginal product,” meaning the dollar value your work adds to the firm’s output. Now, this theory applies to the average worker, so it entertains differences in real wage trends across the wage scale, explaining them by referring to differences in the marginal product of the losers versus the winners.
But there are a lot of problems with the theory. First, even at the average, in recent years real compensation has grown more slowly than productivity. This dynamic, by the way, is behind the historically large decline in labor’s share of national income, a trend that is wholly inconsistent with conventional marginal product theory (which assumes constant income shares for labor and capital or profits).
Second, as the Economic Policy Institute recently pointed out — and it has carefully tracked the “real” wage story for decades — even in the lowest fifth of the wage scale, workers have become more highly educated. The institute’s analysis reveals that since the late 1960s, the share of low-wage workers with at least some college has increased from 17 percent to 46 percent.
The New York Times January 29, 2014 -
Labor advocates are agitating for a boost to that lower wage, but they’re facing off against a more influential restaurant lobby, which paints a pretty bleak picture of the impact a wage hike would have on its industry. According to the National Restaurant Association, an increase in the subminimum wage would raise menu prices and cause restaurants to cut service jobs. Plus, the group says a pay raise couldn’t come at a worse time as businesses struggle to recover from the recession.
But there is evidence—from states that don’t have a separate, lower wage for tip-earning workers—that the restaurant owners are wrong to make such a dire and definitive case.
Seven states—Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington—don’t have a tipped wage at all: The minimum wage is the minimum wage for everyone. (Nineteen states follow the federal subminimum wage, and the rest are somewhere in between).
“You can … look anecdotally to the experiences of California and Washington and Oregon, where the restaurant industry is doing very well, even though those states don’t even have a tipped minimum wage,” said David Cooper, an economic analyst at the left-leaning Economic Policy Institute.
National Journal January 29, 2014 -
The unemployment rate drastically understates the weakness of job opportunities, because it does not include “missing workers,” who are neither employed nor looking for work because of scarce job openings, according to the liberal-leaning Economic Policy Institute in Washington, D.C.
McClatchy January 29, 2014 -
“Using the deficit for something like unemployment insurance—that’s a multiplier—is a good thing,” says Josh Bivens, the director of research and policy at the Economic Policy Institute. “They’re shock absorbers, not bad things.” Unemployment benefits tend to get spent right away on needs like groceries, for example.
Mother Jones January 29, 2014