Posts Tagged ‘government’

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A couple of weeks ago, I published a guest post, by minimum-wage expert Dale Belman, about a controversial study of the effects of an earlier decision in Seattle to raise the local minimum wage to a level much higher than the federal minimum wage of $7.25 an hour.

Now, in Trump’s America, we’re seeing exactly the opposite: an attempt, on the part of the Republican-controlled Missouri legislature, to roll back local minimum wages to levels that are no higher than the state minimum of $7.40 an hour.

Of course, that’s already happened in other places, such as Ohio and Alabama, which affected minimum-wage workers in Cleveland and Birmingham. And, in all these places, Republican legislatures have used the arguments mainstream economists—but not most empirical studies—have offered them: higher minimum wages might seem to be the best way of helping low-wage workers but, since they lead to a loss of employment (either though dismissals or automation), workers earning at or just above the existing minimum wage are actually hurt.

Well, I’ve dealt with that argument many times on this blog, including a post I did in July of last year, in which I argued that employers’ profits were the real obstacle:

The fact is, when employers threaten to let workers go (or not hire additional workers) if the minimum wage is increased (or mainstream economists make the argument for them), they’re attempting to protect their bottom line. If they kept their existing workers, so the argument goes, their profits would fall; and if they wanted to maintain their current level of profits, they’d have to fire some of their workers and replace them with one or another form of automation. It’s all about pumping out the maximum profits from their employees.

Profits also enter the story in a second way. Private employers see the possibility of compensating for minimum-wage-related job losses—by offering workers public relief and by creating new jobs through public programs—as a challenge to their existing control over workers, jobs, and ultimately profits. That’s the second reason they oppose an increase in minimum wage, because they know full well society has the means to make up for their willingness to eliminate jobs. But then their own role in the economy and the profits that come from that role are called into question.

For both those reasons—the threat to fire workers and the threat to their monopoly as employers—profits are the real obstacle to raising the minimum wage.

Republicans and business groups in Missouri, as elsewhere around the country, are doing all they can to push back on the wave of municipal minimum-wage increases in order to safeguard those profits—with the same boiler-plate rhetoric:

“We can’t let the biggest economic engine in the state, St. Louis, become an island that employers avoid due to higher labor costs,” Missouri Chamber of Commerce & Industry President Daniel Mehan said in an interview Friday. Elevated city minimum wages would cost workers jobs, encourage businesses to automate, and create confusion along city borders, he said.

What makes Missouri unique is the higher minimum wage in St. Louis, of $10 an hour, had already been in effect for months before the state pre-emption law kicked in. And workers were already experiencing the benefits:

Bettie Douglas, a worker at a St. Louis McDonald’s restaurant, expects to take a pay cut this week, though she said her manager hasn’t informed her of a new rate. Before May, the 59-year-old received $7.90 an hour, she said. Ms. Douglas, an activist seeking higher minimum wages nationwide, earned about $63 more a week because of the higher wage floor, money she said allowed her to have her water turned back on and buy school supplies for her teenage son.

“It’s made a big difference,” she said Friday. “It’s still a struggle, but I had a little extra to pay my bills.”

Some employers will of course take advantage of the new law and roll back their workers’ wages. But others aren’t convinced it’s a good idea:

“People would be angry and then they wouldn’t do a good job and they’d be resentful,” said Harman Moseley, whose STL Cinemas operates four local theaters, including the Chase Park Plaza, Moolah Theatre and MX Movies.

Of course, workers are going to be angry and resentful—and perhaps even more.

There are, I think, a couple of lessons here: First, working-class movements to improve their lot can in fact succeed, making it difficult—but, of course, not impossible—to roll them back. Second, there’s a reason why working-class Americans are suspicious not only of their employers, but also of politicians and the government. That’s particularly true when politicians are so closely aligned with their employers.

My guess is both of those lessons will be put to the test even more in Trump’s America.

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Federal government jobs are a pretty good deal, especially for workers without a professional degree or doctorate.

According to a recent study by the Congressional Budget Office (pdf), wages for federal workers with a high-school diploma or less are 34-percent higher than comparable workers in the private sector. And, when you include benefits (especially defined-benefit retirement plans), their total compensation is 53-percent higher. For federal workers with a bachelor’s degree, the numbers are 5 percent (for wages) and 21 percent (for total compensation). Only federal workers with a professional degree or doctorate are paid less than their private-sector counterparts (by 24 percent), resulting in a total compensation that is also less (by 18 percent).

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The problem is, it’s not easy to get those jobs. In contrast to what many people think (my students included), federal employment (excluding the U.S. Postal Service) makes up only 1.4 percent of civilian employment in the United States—just a bit higher than before the Second Great Depression (when it stood at 1.3 percent) but far below what it was in the late 1960s (when it was 2.8 percent).

So, to all those who complain about the growth of the “government bureaucracy,” they should be reminded of the small percentage of total employment represented by federal workers—and the fact that most federal employees (60 percent) work in just three departments in the executive branch: Defense, Veterans Affairs, and Homeland Security.

And for those who argue that federal employees are compensated better than their private-sector counterparts, there’s an easy solution: raise the pay of private-sector workers and improve their benefits!