Opinion: You Call It the Gig Economy, but California Calls It “Feudalism”

From today’s New York Times:

Labor leaders cheered in the balcony and lawmakers embraced on the floor of the California Senate on Tuesday as it passed a landmark measure that defines employees, a move that could increase wages and benefits for hundreds of thousands of struggling workers.

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But the bill is as much a starting point as an endgame: It will drive a national debate over how to reshape labor laws fashioned in the industrial era of the 1930s to fit a 21st-century service and knowledge economy.

With the measure, which Gov. Gavin Newsom says he will sign, California will lead in a shift that will likely redefine the roles of governments, unions and worker organizations. Just as federal labor laws were promulgated to help the country recover from the Depression, the imperative to extend basic guarantees like a minimum wage stems from the staggering income inequality in California, the state with the highest poverty rate in the country.

The new paradigms will need to fit not the relatively stable industrial work force of the last century but a gig economy in which workers are increasingly likely to hold multiple jobs or report to no workplace at all. California lawmakers took a major step in constructing the foundation of such a model with the new measure, which presumes workers are employees, entitled to all concomitant protections and benefits, unless they meet strict criteria as truly independent contractors.

Read the complete article here.

McDonald’s Announces It Will No Longer Lobby Against Minimum Wage Hikes

From today’s CNBC News Online:

McDonald’s will no longer take part in efforts to lobby against raising the minimum wage at the federal, state or local level, the fast-food giant told the National Restaurant Association Tuesday. 

Genna Gent, McDonald’s vice president of U.S. government relations, said in a letter to the association that the company believes wage increases “should be phased in and that all industries should be treated the same way.”

“The conversation about wages is an important one; it’s one we wish to advance, not impede,” Gent wrote. The fast-food chain also stated that outlets owned by the company have an average starting wage that exceeds $10 per hour while franchisees pay “likely similar” wages in their own restaurants.

A McDonald’s spokeswoman declined to comment further to CNBC. Politico was the first to report the news of the letter. 

The move from McDonald’s, one of the largest employers in the world, could boost House Democrats and their efforts to raise the minimum wage. Earlier this month, the House Committee on Education and Labor advanced a bill to raise the U.S. wage floor to $15 per hour by 2024. Currently, the minimum wage is $7.25.

Read the complete article here.

Americans Want to Believe Jobs Are the Solution to Poverty. They’re Not.

From today’s New York Times:

U.S. unemployment is down and jobs are going unfilled. But for people without much education, the real question is, Do those jobs pay enough to live on?

These days, we’re told that the American economy is strong. Unemployment is down, the Dow Jones industrial average is north of 25,000 and millions of jobs are going unfilled. But for people like Vanessa, the question is not, Can I land a job? (The answer is almost certainly, Yes, you can.) Instead the question is, What kinds of jobs are available to people without much education? By and large, the answer is: jobs that do not pay enough to live on.

In recent decades, the nation’s tremendous economic growth has not led to broad social uplift. Economists call it the “productivity-pay gap” — the fact that over the last 40 years, the economy has expanded and corporate profits have risen, but real wages have remained flat for workers without a college education. Since 1973, American productivity has increased by 77 percent, while hourly pay has grown by only 12 percent. If the federal minimum wage tracked productivity, it would be more than $20 an hour, not today’s poverty wage of $7.25.

American workers are being shut out of the profits they are helping to generate. The decline of unions is a big reason. During the 20th century, inequality in America decreased when unionization increased, but economic transformations and political attacks have crippled organized labor, emboldening corporate interests and disempowering the rank and file. This imbalanced economy explains why America’s poverty rate has remained consistent over the past several decades, even as per capita welfare spending has increased. It’s not that safety-net programs don’t help; on the contrary, they lift millions of families above the poverty line each year. But one of the most effective antipoverty solutions is a decent-paying job, and those have become scarce for people like Vanessa. Today, 41.7 million laborers — nearly a third of the American work force — earn less than $12 an hour, and almost none of their employers offer health insurance.

Read the complete article here.

Higher Minimum Wage, Faster Job Creation

From yesterday’s NYT “Taking Note” Blog by Teresa Tritch:

The standard argument against a higher minimum wage is that it will lead to job loss as employers, unable to pay more, lay off current workers or don’t hire new ones.

It’s important to state up front that research and experience don’t bear that out. The minimum wage has been raised many times without hurting employment. Rather than cut jobs, employers have offset the cost of higher minimums through reduced labor turnover. Employers also cope with a higher minimum by giving lower raises further up the wage scale, raising prices modestly or other adjustments.

Bolstering what we already know, new evidence shows that job creation is faster in states that have raised their minimum wages. The Center for Economic and Policy Research used federal labor data to tally job growth in 13 states* that raised their minimums in 2014. In all but one, New Jersey, employment was higher in the first five months of 2014 (after the wage increase) than it was in the last five months of 2013 (before the wage increase). In nine of the 12 states with faster growth, employment gains were above the national median.

That doesn’t mean that a higher minimum wage caused the job growth, a point clearly stated by the researchers at CEPR.  But it indicates that raising the minimum didn’t hurt job growth, as opponents claim ad nauseam.

That hasn’t stopped those opponents — especially in the restaurant industry — from attacking the findings. But their only argument is bluster. They don’t dispute the job gains in states that have raised their minimums. Rather, they claim that it may mask job loss among low-wage workers directly impacted by the raise. To support that conjecture, they have pointed to a study from 2010, sponsored by the restaurant lobby, which found a link between a higher minimum wage and lower teen employment.

The fact of the matter is that no one knows why job growth has been above trend in states with higher minimum wages. A plausible explanation is that a minimum-wage hike may have a more pronounced stimulus effect in a generally weak economy than it would have in a strong economy, as workers who long have struggled to make ends meet quickly spend their extra dollars, providing an economic boost that help job growth.

What is clear is that there is no need to fear a minimum wage increase — unless, apparently, you are a restaurant lobbyist, whose job depends on keeping wages low for already very low paid waitresses, waiters and fast-food servers.

*Four states passed legislation to raise their minimum wages in 2014: Connecticut, New Jersey, New York, Rhode Island. Nine states automatically increased their minimums in line with inflation: Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont and Washington.

Germany and the Minimum Wage

From the New York Times Editorial Board:

The federal minimum wage of $7.25 an hour is obviously too low. So is the Democrats’ proposed increase to $10.10 an hour by 2016. If the minimum wage had merely kept pace over time with inflation, average wages or productivity growth, it would be between $11 an hour and $18 an hour today.

It would also be higher if it kept pace with what other advanced economies are prepared to pay.

Last week, the lower house of Parliament in Germany voted to set a nationwide minimum wage of 8.50 euros an hour, about $11.60, effective in 2015. The upper house is expected to approve the measure this week. With the passage of it, Germany, France, Britain and the Netherlands have or soon will have higher minimum wages than the current and proposed minimums in the United States, and only six countries in the European Union will be without a statutory minimum wage: Austria, Cyprus, Denmark, Finland, Italy and Sweden.

The expected German minimum is noteworthy not only for its level. For nearly 70 years, most wages in Germany have been set by agreements that are collectively bargained between unions and employers. In recent decades, however, and particularly following reunification with the former East Germany, the share of workers who are effectively covered by union agreements has fallen. By enacting an adequate minimum wage, the German Parliament is responding constructively to that development, because a solid wage floor ensures that economic growth is broadly shared even by those who fall outside the collectively bargained framework.

In a global economy that has long relied on low wages to lift profits, a relatively high minimum wage in Germany would also reflect a growing consensus there that a high-wage, high-productivity economy is, in fact, an advantage in stabilizing the nation economically and socially.

In Germany, as in the United States, business lobbyists and some economists have warned that a robust minimum wage will lead to job losses and higher prices, but that has not been the historical experience. Rather, higher wages for low-wage workers are generally offset by lower labor turnover, while the boost in consumer spending from higher wages is good for the economy. Boosting consumer demand is especially important in Germany, whose economy is overly reliant on exports.

Germany’s move offers the United States important lessons, if only lawmakers in Washington would learn.

Room for Debate: Overcoming the New Low-Wage Economy

From the NYT “Room for Debate” by Robert Reich:

By raising its minimum wage to $15, Seattle is leading a long-overdue movement toward a living wage. Most minimum wage workers aren’t teenagers these days. They’re major breadwinners who need a higher minimum wage in order to keep their families out of poverty.

Across America, the ranks of the working poor are growing. While low-paying industries such as retail and food preparation accounted for 22 percent of the jobs lost in the Great Recession, they’ve generated 44 percent of the jobs added since then, according to a recent report from the National Employment Law Project. Last February, the Congressional Budget Office estimated that raising the national minimum wage from $7.25 to $10.10 would lift 900,000 people out of poverty.

Seattle estimates almost a fourth of its workers now earn below $15 an hour. That translates into about $31,000 a year for a full-time worker. In a high-cost city like Seattle, that’s barely enough to support a family.

The gains from a higher minimum wage extend beyond those who receive it. More money in the pockets of low-wage workers means more sales, especially in the locales they live in – which in turn creates faster growth and more jobs. A major reason the current economic recovery is anemic is that so many Americans lack the purchasing power to get the economy moving again.

With a higher minimum wage, moreover, we’d all end up paying less for Medicaid, food stamps and other assistance the working poor now need in order to have a minimally decent standard of living.

Some worry about job losses accompanying a higher minimum wage. I wouldn’t advise any place to raise its minimum wage immediately from the current federal minimum of $7.25 an hour to $15. That would be too big a leap all at once. Employers – especially small ones – need time to adapt.

But this isn’t what Seattle is doing. It’s raising its minimum from $9.32 (Washington State’s current statewide minimum) to $15 incrementally over several years. Large employers (with over 500 workers) that don’t offer employer-sponsored health insurance have three years to comply; those that offer health insurance have four; smaller employers, up to seven.

My guess is Seattle’s businesses will adapt without any net loss of employment. Seattle’s employers will also have more employees to choose from – as the $15 minimum attracts into the labor force some people who otherwise haven’t been interested. That means they’ll end up with workers who are highly reliable and likely to stay longer, resulting in real savings.

Research by Michael Reich (no relation) and Arindrajit Dube confirms these results. They examined employment in several hundred pairs of adjacent counties lying on opposite sides of state borders, each with different minimum wages, and found no statistically significant increase in unemployment in the higher-minimum counties, even after four years. (Other researchers who found contrary results failed to control for counties where unemployment was already growing before the minimum wage was increased.) They also found that employee turnover was lower where the minimum was higher.

Not every city or state can meet the bar Seattle has just set. But many can – and should.

Read other views in the debate here.

Breaking News: Seattle adopts $15 minimum wage, setting standard

From today’s NYT’s by Kirk Johnson:

SEATTLE — The City Council here went where no big-city lawmakers have gone before on Monday, raising the local minimum wage to $15 an hour, more than double the federal minimum, and pushing Seattle to the forefront of urban efforts to address income inequality.

The unanimous vote of the nine-member Council, after months of discussion by a committee of business and labor leaders convened by Mayor Ed Murray, will give low-wage workers here — in incremental stages, with different tracks for different sizes of business — the highest big-city minimum in the nation.

“Even before the Great Recession a lot of us have started to have doubt and concern about the basic economic promise that underpins economic life in the United States,” said Sally J. Clark, a Council member. “Today Seattle answers that challenge,” she added. “We go into uncharted, unevaluated territory.”

But some business owners who have questioned the proposal say that the city’s booming economy is creating an illusion of permanence. The fat times and the ability to pay higher wages, they warn, will not go on forever.

“We’re living in this bubble of Amazon, but that’s not going to go on,” said Tom Douglas, a prominent restaurateur in Seattle, referring to the local boom in jobs and economic growth from hiring at Amazon, the online retailer, which has its headquarters here. Mr. Douglas said the new law will inevitably result in costs being passed on to consumers. “There’s going to be some terrific price inflation,” he said.

The measure has the support of Mr. Murray, who ran last year on a pledge to raise the wage to $15 and made it one of his first priorities in office.

Cheers and jeers repeatedly erupted in the City Hall meeting room, which was packed with supporters of the plan, who often interrupted speakers in the 90-minute debate before the vote with chants.

“We did it — workers did this,” said Kshama Sawant, a socialist who campaigned for a $15 minimum wage when she was elected to the Council last year. Ms. Sawant sought to accelerate the carrying out of the measure and to strip out a lower youth wage training rate, but the council rejected her proposals.

The vote, economists and labor experts said, accentuates the patchwork in wages around the country, with places like Seattle — and other cities considering sharply higher minimum pay, including San Diego, Chicago and San Francisco — having economic outlooks increasingly distinct from those in other parts of the nation. Through much of the South, especially, the federal minimum of $7.25 holds fast.

Eight states plus the District of Columbia have already increased their minimum wages this year, the most to have done so in a single year since 2006, and at least eight other states and municipalities could put minimum wage ballot measures before voters by November. But it is the scale of ambition that is catching the attention of economists, labor leaders and business owners.

Read the entire article here.

Republicans’ War on Workers’ Rights

From the New York Times blog “The Great Divide” by Corey Robin:

Midterm elections are like fancy software: Experts love them, end-users couldn’t care less. But if the 2010 elections are any indication, we might not want to doze off as we head into the summer months before November. Midterm elections at the state level can have tremendous consequences, especially for low-wage workers. What you don’t know can hurt you — or them.

In 2010, the Republicans won control of the executive and legislative branches in 11 states (there are now more than 20 such states). Inspired by business groups like the American Legislative Exchange Council (ALEC), the U.S. Chamber of Commerce and the National Association of Manufacturers, they proceeded to rewrite the rules of work, passing legislation designed to enhance the position of employers at the expense of employees.

The University of Oregon political scientist Gordon Lafer, who wrote an eye-opening report on this topic last October for the Economic Policy Institute, a liberal think tank in Washington, looked at dozens of bills affecting workers. The legislation involved unemployment insurance, the minimum wage, child labor, collective bargaining, sick days, even meal breaks. Despite frequent Republican claims to be defending local customs and individual liberty, Mr. Lafer found a “cookie-cutter” pattern to their legislation. Not only did it consistently favor employers over workers, it also tilted toward big government over local government. And it often abridged the economic rights of individuals.

Read the entire article here.

NPR Reports: Does Raising the Minimum Wage Kills Jobs?

NPR’s David Kestenbaum investigates the question, Does raising the minimum wage kill jobs? Here is an overview:

President Obama has called for increasing the minimum wage, saying it will help some of the poorest Americans. Opponents argue that a higher minimum wage will lead employers to cut jobs.

Figuring out the effect of raising the minimum wage is tough. Ideally you’d like to compare one universe where the minimum was raised against an alternate universe where it remained fixed.

Economist David Card found the next best thing. In 1992, New Jersey was about to raise its minimum wage. Right next door, there was a parallel universe: Pennsylvania, which was not raising its minimum wage.

Card and a colleague decided to study what had happened to jobs at fast-food restaurants in both states. They surveyed restaurants and found that the number of jobs actually went up in New Jersey, which increased its minimum wage, compared to the number of jobs in Pennsylvania, which didn’t.

Card theorized that employers were making less money. The prices of hamburgers had gone up. But as far as he could tell, raising the minimum wage did not end up costing jobs.

The study and subsequent book, Myth and Measurement: The New Economics of the Minimum Wage, bugged economist David Neumark. He explains:

“It was presented as, ‘Economics has it all wrong.’ And I think that coupled with the evidence that the data looked kind of strange, just really prompted us to say, ‘Let’s go back and get what we think will be better data, and do the whole thing over again.’ “

Neumark and a colleague got actual payroll data from fast-food restaurants in New Jersey and Pennsylvania. They came to the opposite conclusion: Raising the minimum wage slightly reduced the number of jobs.

But this was not the end of things. The authors of the original paper then went back and redid the experiment using government data. And they came to the same conclusion as from the first study: Raising the minimum wage did not cost jobs.

Findings like these are the reason the debate over the minimum wage goes on and on — not just among politicians, but also among economists.

The newest study, which the Congressional Budget Office published in February, says raising the minimum wage could cost 500,000 jobs. But it would also increase hourly wages for more than 16 million people.

Listen to the entire story here.

The Clear Benefits of a Higher Wage

From the New York Times Editorial Board:

Republicans sputtered with outrage when the Congressional Budget Office said that immigration reform would lower the deficit, strengthen Social Security and speed up economic growth. They called for the office to be abolished when it dared to point out that tax cuts raise the deficit or when it highlighted the benefits of health care reform. But now that the budget office has predicted (and exaggerated) the possibility that an increase in the minimum wage might result in a loss of jobs, Republicans think it’s gospel.

“This report confirms what we’ve long known,” said a spokesman for the House speaker, John Boehner. “While helping some, mandating higher wages has real costs, including fewer people working.”

What Republicans fail to mention is that Tuesday’s report from the budget office, a federal nonpartisan agency, was almost entirely positive about the benefits of raising the minimum wage to $10.10 by 2016, as President Obama and Congressional Democrats have proposed.

But the report said there could be a cost to the wage increase, and most of the headlines have focused on the possible loss of 500,000 jobs, or about 0.3 percent of total employment. That bears further scrutiny, because, unlike the benefits, the employment estimates have been disputed by a wide variety of nonpartisan economic studies.

What the report actually says is that there is a two-thirds chance that a $10.10 wage would produce job losses in a range from just above zero to one million. The number 500,000 was simply picked as a midpoint. (There is a one-third chance the wage increase would lead to more than a million job losses or actually increase employment.) A range that big is essentially the budget office’s way of saying it doesn’t really know what would happen to employment if the wage goes up, because, as the report says, there is vast uncertainty about how much wages will go up on their own over the next three years, and uncertainty about how employers would react to a higher minimum.

The budget office didn’t do its own research on those variables. It surveyed the economic literature on the subject, and chose a figure more conservative than the most recent and rigorous studies have found. That means the job-loss figure needs to regarded skeptically, as a careful reading of the report shows, while the benefits are undisputed.

Those benefits to millions of low-wage workers overwhelmingly outweigh the questionable possibility of job losses. Lawmakers who focus only on the potential downside of an enormously beneficial policy change are the same ones who never wanted to do it in the first place.