Fast-food workers and supporters organized by the Service Employees International Union protest outside a Burger King restaurant in Los Angeles on Aug. 29. Lawmakers in Sacramento have struck a deal to raise the state’s minimum wage to $10 an hour. (Patrick T. Fallon / Bloomberg)
On Spetember 13, 2013, The Times Editorial Board write in the Los Angeles Times:
A last-minute compromise between state legislative leaders and Gov. Jerry Brown has cleared the way for a bill that would significantly increase the minimum wage in California over the next 2 1/2 years. Not surprisingly, the California Chamber of Commerce called it a “job killer.” The chamber is probably right about that to a degree; some employers will eliminate jobs, reduce hours or expand their payrolls more slowly as a consequence of the higher entry-level wage. But the measure will bring much-needed relief to thousands of Californians struggling to get by on the minimum wage today, as well as help the businesses where they’ll spend their extra dollars. Because the gains clearly offset the costs, Brown should sign the bill into law.
California first set a minimum wage in 1916, 22 years before the federal government established a national one. The state’s minimum has gone up 25 times since then, rising to $8 in January 2008. On Thursday, the Legislature was expected to give final approval to a revised bill by Assemblyman Luis Alejo (D-Watsonville) that would raise the minimum to $9 in July 2014 and $10 in January 2016. Theoriginal version of the bill would have increased the minimum more gradually, reaching $9.25 in 2016, but with automatic cost-of-living increases in later years.
It’s hard to say exactly how many Californians’ pay would go up with the new minimum — the government doesn’t report how many people in the state earn $8 to $10 an hour. The left-leaning Economic Policy Institute estimates that 3.4 million low-wage Californians would receive raises if the minimum climbed to $10.10, as some Democrats in Congress have proposed.
A full-time minimum-wage worker with one dependent barely makes enough today to stay above the federal poverty line of $15,510 a year. But most minimum-wage workers don’t have the luxury of full-time positions — and that’s often not by choice. The combination of minimum wages and limited hours translates into dismally low, poverty-level earnings.
That would be less of a travesty if minimum- and near-minimum-wage jobs were simply the first rung on the career ladder for young Americans. Sadly, such jobs are increasingly being filled by workers in their mid- to late-20s, not teenagers just trying to supplement their allowances. And about a third of them are parents.
What’s worse, a growing percentage of U.S. jobs are in the low-skill industries that are the most likely to pay the minimum wage. Six of the 10 occupations expected to see the fastest growth this decade fall into this category, led by retailing, food service and home healthcare.
Ideally, brisk economic growth would force employers to compete more for workers, increasing wages and benefits across the board. That’s what happened in the mid- to late-1990s, and it’s evident today in some boom towns. But in California, as in most of the United States, growth has been sluggish. Many businesses are still hesitant to expand because the main driver of the economy, consumer spending, remains stuck in low gear.
That aversion to risk helps explain how the solid corporate profits and stock market gains in recent years have coexisted with diminishing median wages and stubbornly high unemployment. Raising the minimum wage should help shift some of the profits now being captured by business owners and investors back into the economy, because unlike upper-income Americans, minimum-wage earners aren’t savers. They spend, and that spending promotes growth.
The unusually large increases called for in Alejo’s bill would put the state on track to have the country’s highest minimum wage, potentially making it less attractive to some employers. But that risk isn’t as big as it may seem because so many low-wage, low-skill jobs are in service industries, which have to set up shop where their customers are. McDonald’s can’t sell burgers to Angelenos by opening a restaurant in Houston.
Admittedly, it’s foolish to think that government can raise wages without having an adverse effect on at least some employers. Otherwise, the Legislature would set the minimum wage at $50 an hour. The 25% increase called for by Alejo’s bill will be painful for minimum-wage employers with thin profit margins, especially if labor represents most of their costs, as is typically the case. Those companies may respond by cutting workers’ hours, which would only hurt the people Alejo is trying to help.
The best available research, however, shows that previous increases in the minimum wage haven’t decreased or increased hours or jobs in any statistically significant manner. Employers have adaptedin a variety of ways, including boosting productivity and trimming raises for other workers. And a higher minimum wage tends to keep workers on the job longer, reducing the costs associated with training new employees.
One other way employers have responded is to pass at least part of the increase on to consumers. In a sense, though, employers in minimum-wage industries are already passing on part of their costs to taxpayers, who pick up the tab when workers earn so little that they qualify for Medicaid and food stamps. A recent congressional study estimated that low-wage workers at one Wal-Mart superstore receive about $5,800 worth of safety-net benefits each annually. By raising the minimum wage, shoppers will pay some of those costs at the cash register, not on their tax bills.
Improving workers’ education and skills are part of the long-term solution too. In the meantime, though, no Californian who works full time should be stuck with poverty wages.
While a $1 initially and another $1 in 2016 will be welcomed by low-income minimum-wage earners, this is certainly not the solution to the serious widening income gap between the “haves’ and the “havenots.”
Digital computerized operations and automation are destroying jobs and devaluing the worth of labor. This tectonic shift in the technologies of production and the greater employment of robotics and super-automation to save labor costs is not well understood and reported by the national media. Advances in software and production technology, abundant and relatively inexpensive energy, fast access to huge amounts of data, and growing global demand will continue to drive competitiveness of American manufacturing, and drive down labor costs, except for people with jobs in research and high-tech skilled work. Such innovation will increasingly impact the fast-food and services industries and result in fewer and fewer jobs as a result.
While I am not opposed to the concept of a “minimum wage,” economic productivity is a bigger part of the story. Those arguing its support basically argue that labor is producing more value today, but working people aren’t seeing any of the gains. Who has walked away with the proceeds from all that productivity?
A January report from Oxfam noted, “The richest one percent has increased its income by 60 percent in the last 20 years.” It further argued that the 2012 net income of the world’s top 100 billionaires—a haul of $240 billion—would be four times the amount needed to eliminate extreme poverty internationally.
These arguments fail to point out the income source for the richest one percent is not their labor but their dividend income derived from their ownership of productive capital assets––the non-human factor of production.
To maximize profit and thus dividend income, the purposeful function of business, companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by non-human physical productive capital’s ever increasing role.
This is the reality of business in the global setting where lowest cost production is necessary to be competitive.
Yet, the government continues to discharge its responsibility for the health and prosperity of the economy through coerced trickle-down; in other words, through redistribution achieved by the rigging of labor prices, including the minimum wage, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed. Employment should practically start at the time one enters the economic world as a labor worker, to become increasingly a capital owner, whose capital contributes to the work load, and at some point to retire as a labor worker and continue to participate in production and to earn income as a capital owner until the day you die.
It doesn’t make any difference what’s going on in the scientific world or the business world or the industrial world, we still believe full employment and a minimum wage will solve our income distribution problems. This is what major political figures have always maintained.
Binary economist Louis Kelso, whose books should be read by ALL conventional economists, the media and political figures, was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”
The best way to protect American citizens from this spiraling disaster that will continue to undercut American workers, destroy jobs and devalue the worth of labor in the United States is to implement policies to create an OWNERSHIP SOCIETY, whereby EVERY American is extended the right to acquire productive capital with the self-financing earnings of productive capital––the physical wealth-creating assets of corporation, e.g., machines, super-automation, robotics, digital computerization operations, etc. Currently non-property-owning Americans are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners.
What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need the dividend earning it produces.
This will address the fact that productive capital is becoming more productive and increasingly responsible for the production of society’s products and services, not labor, whose relative input is constantly being diminished by the substitution of the non-human factor of production.
As Kelso asserted: “The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance.”
See my article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html
Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html. And also “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html
Also see the article entitled “The Solution To America’s Economic Decline” at http://www.nationofchange.org/solution-america-s-economic-decline-1367588690 and “Education Is Critical To Our Future Societal Development” at http://www.nationofchange.org/education-critical-our-future-societal-development-1373556479. And also “Achieving The Green Economy” at http://www.nationofchange.org/achieving-green-economy-1373980790.
Also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.
http://www.latimes.com/opinion/editorials/la-ed-minimum-wage-increase-20130913,0,40358.story
