Posts Tagged ‘wages’

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Until recently, we were certain what would happen with an increase in the minimum wage—and that would be the reason to oppose any and all such attempts. Now, it’s a guessing game—and that uncertainty about its possible effects has become reason enough to oppose increasing the minimum wage.

What the hell is going on?

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First, the certainty: neoclassical economists confidently asserted that the minimum wage caused unemployment (because it meant, at a wage above the equilibrium wage, the quantity supplied of labor would be created than the quantity demanded). Therefore, any increase in the minimum wage would cause more unemployment and, despite the best intentions of people who wanted to raise the minimum wage, it would actually hurt the poor, since many would lose their jobs.

But, of course, theoretically, the neoclassical labor-market model was missing all kinds of other effects, from wage efficiencies (e.g., higher wages might reduce labor turnover and increase productivity) to market spillovers (e.g., higher wages might lead to more spending, which would in turn increase the demand for labor). If you take those into account, the effects of increasing the minimum wage became more uncertain: it might or might not lead to some workers losing their jobs but those same workers might get jobs elsewhere as economic activity picked up precisely because workers who kept their jobs might be more productive and spend more of their higher earnings.

And that’s precisely what the new empirical studies have concluded: some have find a little less employment, others a bit more employment. In the end, the employment effects are pretty much a wash—and workers are receiving higher wages.

But that’s mostly for small increases in the minimum wage. What if the increase were larger—say, from $7.25 to $10, $12, or $15 an hour?

Well, we just don’t know. All we can do is guess what the effects might be at the local, state, or national level. But conservatives (like David Brooks, big surprise!) are seizing on that uncertainty to oppose increasing the minimum wage.

And that’s what I find interesting: uncertainty, which was at one time (e.g., for conservatives like economist Frank Knight) the spur to action, is now taken to be the reason for inaction. And those who oppose increasing the minimum wage are now choosing the certainty of further misery for minimum-wage workers over the uncertainty of attempting to improve their lot.

Addendum

They want less of a guessing game?

Then, let’s make the effects of raising the minimum wage more certain. Why not increase government expenditures in areas where raising the minimum wage represents a dramatic increase for workers? Or mandate that employers can’t fire any of the low-wage workers once the minimum wage is increased? Or, if an employer chooses to close an enterprise rather than pay workers more, hand the enterprise over to the workers themselves? Any or all of those measures would increase the certainty of seeing positive effects for the working poor of raising the minimum wage.

But then we’re talking about a different game—of capital versus labor, of profits versus wages. And we know, with a high degree of certainty, the choices neoclassical economists and conservative pundits make in that game.

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As usual, the Wall Street Journal gets only part of the story: German exporters have certainly benefited from the euro.

The relative weakness of the euro versus a hypothetical Deutschmark is an advantage for Germany. In addition to the fiscal orderliness of Germany, the currency union also includes countries like Italy, Spain, France and Greece all of which haven’t been as successful as Germany in recent years.

This weighs on the euro’s strength, which helps German exporters. As is well known, exports are a key driver of Germany’s economy. A stronger currency would almost certainly make life harder for German exporters by making products more expensive on a global market.

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But then they forget the other part of the story: the role of wage repression in helping German exporting enterprises. The decline of real wages for German workers has massively increased German price-competitiveness in comparison to its Eurozone trading partners and has thus boosted exports—including, of course, to Greece.

It’s the combination of domestic wage repression and fixed exchange rates within Europe that have made German exports competitive and led to the spectacular growth of the trade surplus Germany has enjoyed during the past decade and a half.

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While much of the discussion of austerity has recently been about Greece, the United States has been enduring its own version of austerity: through declines in public-sector employment.

As the Economic Policy Institute explains,

public sector jobs are still nearly half a million down from where they were before the recession began. Moreover, this fails to account for the fact that we would have expected these jobs to grow with the population–taking that into consideration, the economy is short 1.8 million public sector jobs.

This shortfall in public sector jobs not only removes the multiplier effect on private sector demand, it also swells the ranks of the unemployed and underemployed, thereby increasing the downward pressure on workers’ wages.

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“Summer time and the livin’ is easy.” Except for Americans, who are burned out and overworked.

According to a recent study by Staples Advantage and WorkPlaceTrends [ht: ja],  more than half of office workers say they are suffering from burnout as a result of the hours they work.

half of all office workers in the United States and Canada now work more than eight hours a day. One in four workers say they usually work from home after their standard working day and 40 percent are working over the weekend at least once a month.

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And, according to both employers and staff (although, not surprisingly, more staff than employers) believe burnout is a key factor contributing to poor productivity.

Millions of those office workers are not eligible for overtime pay (although that may change if Obama succeeds in raising the salary threshold from its current level of $23,660 to $50,440 for workers to automatically receive time-and-a-half pay after working 40 hours in a week).

But that’s not going to alleviate the burnout from overwork. Nor is the fact that the United States has no minimum paid vacation period (in contrast to the country from which I just returned, where 22 days are mandatory) or that American workers only take half of their paid time off.

Employees only use 51% of their eligible paid vacation time and paid time off, according to a recent survey of 2,300 workers who receive paid vacation. The survey was carried out by research firm Harris Interactive for the careers website Glassdoor. What’s more, 61% of Americans work while they’re on vacation, despite complaints from family members; one-in-four report being contacted by a colleague about a work-related matter while taking time off, while one-in-five have been contacted by their boss.

Workers appear to be getting more skittish when it comes to asking for time off. Although this is the first time Glassdoor asked questions about paid vacation and time off, a separate survey, “Vacation Deprivation,” carried out by Harris Interactive for travel site Expedia, shows that Americans left four days on the table within the past year, twice as many as in the previous year. That’s the equivalent of over 500 million lost vacation days a year.

Some 40% of Americans will leave vacation time on the table, a separate study released Tuesday found, citing a post-recession “work martyr complex” among worker who feel tied to their desk. The study by GfK Public Affairs and Corporate Communications and the U.S. Travel Association — which obviously has a vested interest in workers using up all their paid vacation time — found that one-third of the 1,000-plus respondents say they cannot afford to take their time, 40% fear returning to a mountain of work and 35% believe no one else can do their work.

It’s pretty clear that, as long as American workers have no say in the places where they work and live in a country where mainstream economists and business owners celebrate work-rules “flexibility,” they will continue to be burned out and overworked.

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