A few months back, in Dystopia in Seattle and the Perverse Productivity Effect, I described the logical flaws on both sides of the $15 minimum wage debate:
Developments related to Seattle’s recent decision to raise the minimum wage to $15 per hour epitomize the ineptitude of our political discourse from both the right and the left, and reveal a dangerous disconnect from reality.
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Those on the right are sort of “upside down Luddites.” I say this because they implicitly have a negative view of breakthroughs in productivity. They project that McDonald’s workers should be made to suffer with the introduction of kiosks to replace cashiers. In their worldview, the cashiers should be paid poorly enough to forestall the use of kiosks.
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And those on the left? They may have an equally unrealistic worldview. The principle that guides their fight for a $15 per hour minimum wage — that we should not have working poor in America — is unassailable. But the underlying vision — that we can continue to generate jobs at the pace we have in previous decades — is delusional. In the past 17 years, the total number of hours worked by Americans has not budged, while our productivity has increased by 35% and our population has grown by 40 million.
We’ve reached an inflection point where productivity advances are eliminating jobs at a faster pace than they are creating them. The Luddites were not completely off base in their thinking. They were just a couple of centuries premature.
Yet the dangerous disconnect from reality I described remains front and center in the 2016 Presidential campaign. Bernie Sanders is all about the $15 minimum wage. His heart’s in the right place, but he lacks either the foresight or the political courage to address the real issue. The Republican candidates are in the upside-down Luddite mold I described. Hillary has taken a sort of “worst of both / no man’s land” approach: Raise the wage to $12 per hour. That would be enough to accelerate the replacement of jobs with technology, while leaving the wage so low that the remaining workers still find themselves at or below the poverty line.
It’s too late for this campaign, but progressives need to write a new battle plan, and soon. It’s not (and never was) about the jobs of a few McDonalds cashiers in Seattle. Rather, it’s about millions of jobs on the verge of being mechanized out of existence.
From Carl’s Jr. Wants to Replace Human Workers With Bots to Save Money and Increase Profits:
Andrew F. Puzder, CEO of the parent company of Carl’s Jr., has announced he’s investing in machines in part because the American government, he says, is making it too difficult to afford employees. Puzder, who was an economic adviser to Mitt Romney, contends that the costs of President Obama’s Affordable Care Act to employers has led to the cutting of workers’ hours across the country.
The focus of the article is what a creep Puzder is. Probably true. But he’s also acting entirely rationally. If a machine can do the same job as a human, but at a lower cost, the machine is the rational choice.
Puzder used his decision as an occasion to take a swipe at Obama, which places him firmly in the camp of the upside-down Luddites. But only at a superficial level. He’s a businessman first and a conservative ideologue second. His decision was based not on his emotional problem with Obamacare, but on an unemotional cost-benefit analysis.
Were Puzder a progressive, here’s what he might have said:
It’s with great sadness that we at Carl’s Jr. will be replacing the great majority of our workers with machines. We understand well that workers should receive a living wage, and have strived to pay our workers as well or better than have our competitors. But we can’t control the realities of the marketplace. Regrettably, the continued use of workers at today’s wages can’t be justified when the competition is moving to increasingly more cost-efficient machines to perform the same tasks.
Had Puzder used the progressive framing I’ve outlined to explain his action, would the left demonize him for taking it? I doubt it. But the impact on jobs in America would be the same.
As the jobs continue to vanish, Americans will need to waken to three realities: First, while many jobs have been off-shored, we’d still have a growing job shortage even if we brought all those jobs back. Second, the minimum wage doesn’t matter much to those who don’t have jobs. Third, the number of us who can’t find jobs will continue to climb.
The time for a basic income guarantee in America has arrived, and it’s the fight progressives should be fighting. In a country as wealthy as ours, the avoidance of poverty can’t be based on one’s ability to find work, when it’s an economic certainty millions will not be able to do so. In a country as wealthy as America, nobody should live in poverty. The logic behind justifying poverty with value judgments about the laziness of the impoverished never really existed, even when America supposedly was awash in jobs. As today’s jobs give way to the machines of tomorrow, the absurdity and outright meanness of that thinking will become crystal clear.
But the basic income guarantee only is part of the answer. America and the rest of the modern world must recognize that advances in productivity have benefitted almost exclusively the very rich since 1980. That must end. Advances in productivity should benefit society at large. Had we not allowed that very basic principle to be violated so completely over the last three decades by a tiny group of billionaires and multi-millionaires, we would be living in a much different and better country today.
The redistribution of productivity gains can take many forms, from increased taxes at the top, to minimum income guarantees, to infrastructure projects that make life better for all (and create jobs in the process) to the reduction of the hour threshold for overtime pay. The exact shape of policy change is not nearly as important as the principle, which is so fundamental yet has proven so elusive, that technological advancement must be for the betterment of all, not a select few.
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Bob, the discussion on minimum wage (whatever the amount/increase) should concern every American. I would appreciate your insight on the relationship of the value of work (or service) to wages paid. It seems that a balance between a humane or just wage should be aligned with the value of work or service provided. What are your thoughts?
Jeff, you’ve hit on the crux of the problem, and it cuts both ways. Fair value is what a willing buyer would pay a willing seller, neither under a compulsion to buy or sell. But a worker with no other means of support is under a compulsion to sell his services, which places the employer at a distinct advantage and causes the striking price to be less than fair value. Historically, we’ve had two mechanisms to address that problem: collective bargaining through unions and the minimum wage.
We now are seeing another distortion, this one from the employer’s perspective. It only makes sense to pay a worker what it would cost to accomplish the same job with technology. But what if that price is less than the minimum wage? We’re seeing this play out in fast food today, but it will be played out in half of today’s jobs within the next few decades.
The basic income guarantee addresses both those problems by taking poverty off the table. Workers are not under a compulsion to take whatever an employer will pay. And that allows us to dispense with the minimum wage, thereby allowing employers to pay truly market rates for labor.
I fear it would artificially distort the market rate for labor and push emplyers to automate the job positions rather than pay the artifically high rate.
I have to honest, Bob, I wish I could believe that things would work the way you describe. It would be far more humane and would be a far better world. I just can’t shake this pessimism about human nature. I guess it comes from a lifetime of seeing man’s baser nature manifest itself whenever pressure is placed on us. I don’t see human beings as benevolent creatures when threatened. I wish I had your optimism.
The usual bunch of Cato/Heritage nonsense about how a living wage won’t work.
A job that doesn’t pay a living wage is not a job. Even for a teenager starting out. If the job doesn’t pay enough to save up to move out of your parents house, buy your own transportation, afford insurance for yourself and your car, and save up for a family, it’s immoral.
If it doesn’t pay enough so you can start saving for retirement, which every financial advisor will tell you to do starting with your first paper route/babysitting paycheck, it’s immoral.
Fast food companies and the Walmart’s of the world train their employees on how to fill out forms for government assistance. We subsidize the corporate parasites with my tax money.
It’s working in other countries, but you say America can’t make it work? Why do you have such a low opinion of America?
It’s working in places like Seattle, so you’re clearly wrong anyway.
And seriously, why would any employer want to pay anything less than a living wage? What kind of scum wants to keep people dependent?
Parasites.
Tom, I can’t tell if your comment is directed to me or your buddy Huppenthal. If to me, I was not arguing against the $15 minimum wage. I support it, but believe it fails to address a much larger problem.
In my rush to show support for this fine blog, which I consider a critical counterpoint to the corporate and TeaParty controlled media, via an active comments section so vital to a blog’s health, I may have typed before my second cup of coffee.
Sorry I wasn’t clear Bob, I got your back, fine article as usual.
Your low opinion of employers notwithstanding, there is no way that EVERYONE can have a job that pays a living wage. There aren’t that many of those jobs to go around…that is part of what Bob is saying. Many jobs are not – and were never intended to be – jobs upon which you could build your life. Make those jobs expensive and they go away.
Your example of Seattle is a very poor example of success. Like Portland and San Francisco, the limited success it has is due to the surrounding support sturcture which allow it to exist. These enclaves of the wealthier could not exist without the poorer “feeder” sources coming in from outside. Look closer and don’t just take the word of those touting the beauty of the experiment.
And when you speak glowingly of Europe, you are speaking of entirely different economies. In France, they mandate MAXIMUM work weeks so that jobs are shared and they rely heavily on government subsidies AND they have a lower standard of living. In Britain, significant unemployment is kept in check only by major welfare systems. Greece is a train wreck. Spain hobbles along from year to year. Switzerland and Sweden do well, but they are a honogenous population that tends to agree – and history that supports – what they need to do. Germany is a powerhouse that carries much of Europe along, and they are starting to feel the effects of doing so.
I don’t have an answer, but high minimum wages and universal “living wages” aren’t it. It sounds good when you say it, and it sounds good in scholastic tomes, but it is as unrealistic as free education and free housing.
I don’t have a low opinion of employers, I have a low opinion of the current rigged system.
And you’re making my point.
Capitalism, as is, is failing the American people. If it can’t supply a living wage, healthcare, and work for people able to work, then it’s just a scam.
Greece is a train wreck partly because the politicians years ago lied, and mostly because Goldman Sachs took over their finances years ago and trashed the place.
Germany is a powerhouse, competing with China on the import level, and they pay well, have strong unions, and some level of guarantee of living standard.
They may not be perfect, but maybe they’re on to something.
I have no problem with Free Enterprise, but to worship at the alter of shareholder supremacy is kinda’ nasty, and that’s what this nation is doing.
I’m doing pretty good, and while I don’t want the government any bigger than it needs to be, I don’t want it to be any smaller than it should be, either.
Here’s what the very wealthy and most economists know: at some point, there’s going to be 9 billion people and only half a billion jobs.
We can either start working toward a more equitable world, or we can act surprised when the villager climb the hill with torches and pitchforks.
“Former marketing conglomerate CEO Peter Georgescu. Joined by his friend Ken Langone, founder of Home Depot, Georgescu warns his fellow 1 percenters that “[w]e are creating a caste system from which it’s almost impossible to escape.” The column raises the specter of “major social unrest” if inequality is not addressed.
Georgescu writes:
I’m scared. The billionaire hedge funder Paul Tudor Jones is scared. My friend Ken Langone, a founder of the Home Depot, is scared. So are many other chief executives. Not of Al Qaeda, or the vicious Islamic State or some other evolving radical group from the Middle East, Africa or Asia. We are afraid where income inequality will lead.”
John Nichols, writer for The Nation, was in Tucson last weekend for the Tucson Book Festival. He’s just written a new book People Get Ready, The Fight Against a Jobless Economy and a Citizenless Democracy”. During one of his talks, he stated that job automation is the number one topic among tech and other business innovators.
He gave the example that right now, the number one job in every state for men is driving some kind of vehicle, trucks, cars, forklifts, etc. Within ten years, driverless cars will be the standard. So, lots of jobs disappearing. It turns out that the only safe jobs might be those involving highly evolved people skills like social workers.
We really need to start talking about this. Thanks for starting the conversation.
More policy from morons. From economics, the minimum wage is destroying black culture, less than 10% of blacks from age 16 to 24 have jobs. From David Neumark, who has literally written the book on the effects of minimum wage: the minimum wage reduces incomes and employment of people in poverty. It reduces incomes in the short run and even more in the long run by denying people the critical work experience necessary to grow and prosper in the workplace.
Few of the people who occupy minimum wage jobs come from households in poverty. A $15 minimum wage would be enormously destructive. You can get away with crap policy advocacy like this on the pages of the Arizona Republic because their readers are morons. But you can’t get away with this here because the readers of this blog actually think a little bit, even if they don’t want to admit it.
I think they understand that here, John, but they can’t say so. I base that on their inability to answer the question, “Why $15 an hour?” Why not $18, or $25? The $15 figure is as arbitrary as any other. There is no rationale for it…they just pulled it out of thin air.
Like all schemes to “eliminate poverty” it is defeated before it is started. Even overlooking all the obvious flaws and unintended consequences, the fact is that someone is always going to be at the bottom of the economic scale and they will be deemed living in poverty. The poor will always be with us regardless of any well intentioned government programs or laws.
Once again, Thucky, you’ve stepped in it. The post was not really about an increase in the minimum wage, which makes your comment somewhat moronic.
Suggest all you want that I’m a moron. Even Steve, a conservative like you, will find it laughable.
You are correct, Bob, I have a high regard for your intellect and would never imply otherwise. I don’t agree with you on a lot of things, but I always consider what you have to say as worthy of consideration.
So, what is the solution, Steve? Starvation? Genocide? Because that’ll generate a hell of a lot more violence than angry old white dudes whinging about ‘welfare cheats’.
And all your anger at “angry old white dudes” is not going to change human nature. I don’t have any answers, but I do know that scholarly ideas and wishful thinking is not going to change how people behave, either. Any plans to effect change in an economy are going to have to take into account human nature and not just the axioms and thoughts of economic theorists who feel this is how it should be. People are more complex than that.
As logical as you sound, Bob, there are major human flaws that I don’t think can be overcome by government policy:
(1) The resentment that builds from the ones who produce towards those who receive the “guaranteed basic income” (which is a kind way of saying government welfare). Such resentment is a breeding ground for disharmony and rebellion.
(2) What do you do with those who have so much free time on their hands while receiving the “guaranteed basic income”? Idle hands and human energy are always a bad combination.
Government policy is not sufficient to change change basic human benavior.
Steve, the resentment of which you speak is more an American / racial thing than a human thing. Go to the Scandinavian countries and it’s hard to find. Just as people don’t resent the provision of education and health care for all, they can get beyond resentment at allowing everyone to live one dollar above poverty level.
And as the group of those who “produce” grows ever smaller, they’re going to have to replace their feelings of resentment with feelings of fortune at being in the small class of people in a position to produce.
Scandinavian countries are a much more homogenous groups than most world economies. Their social histories lend themselves the situations they live today. We don’t.
You say that producers will have to change their attitiudes…easier said than done. Human beings are not so easily manipulated or changed. I am one of those Luddites you speak of that thinks the ideas are great for the classroom, but not realistic or practical. They may need to be eventually put into place, but I suspect it be painful to do so and the result will not be as utopian as you imply.
It is a good discussion, Bob. Thanks for introducing it.
Your attempt to rationalize away the Scandanavian successes is flawed.
Claim that its success is due to “homogenous groups” is a false myth based on corporate media propaganda.
Try searching out what social scientists have to say about it.
It is so easy to say it is a cop out and ignore reality. Your fear of being labeled a racist will not allow you to comsider the possibility that single culture, homogeneous groups arrive at a general consensus as to what is the correct response to stimulus than large multicultural societies. Common sense would tell you that is the case but where thise subject is concerned common sense is sacrificed at the altar of political correctness. I am not surprised you can’t see it. If you acknowledged such could be the case, the cognitive dissonance would cause a major disruption in your world view.
Do you really think that social scientists in their gilded towers understand the phenomenon? Like you, they do not gain credibility in their fields by bucking the consensus…of course they will find that homogeneity will provide no advantage over multiculturalism. Their careers are based on finding the opposite. It is the blind leading the blind and describing the elephant.
European countries just don’t create jobs. This failure is a direct result of their welfare state. This has been documented by both Richard Rogerson, one of the world’s highest rated economists and Edward Prescott, also one of the world’s highest rated economists and a Nobel Prize winner. Picketty’s statement that all modern industrial countries grow at the same rate is simply false. In the stretch of 1980 to 2007, France failed to create a single additional hour of work for the working man and woman while jobs in the United States jobs grew over 45%.
Millions of people migrated from Europe to the United States precisely to take advantage of our job creation. Millions of people migrated into Europe to take advantage of their welfare state.
Just look at the per capita household income data:
1 United States 40,240
2 Norway 34,791
3 Australia 32,362
4 Germany 31,868
5 Austria 30,609
6 Canada 30,030
7 France 29,876
8 Belgium 28,657
9 United Kingdom 27,927
10 Finland 27,924
11 Netherlands 27,510
12 Denmark 26,444
We destroy these welfare states and we could do even much better.
Mmmmm, enough cherries for a pie!
I’m confused, though…. the GOTeaP keeps whining about people coming here to take advantage of welfare and….. oh, I just got it, Europeans come here for jobs, Mexicans come here for the free stuff.
I don’t see the logic myself, but I do love pie!