AEI’s Mark Perry Inadvertently Makes the Case that $15 is 31% Below the Peak Minimum Wage

Seattle2017

Over at the American Enterprise Institute’s Carping Diem blog, Professor Mark J. Perry flexes his Excel spreadsheet muscles by producing a chart (above) tracking Seattle’s minimum wage since 1938. The dark blue line is the real (inflation-adjusted) minimum wage in 2015 “dolalrs” [sic]. The light blue line you can ignore; nominal dollars are just plain stupid.

Pointing out that Seattle’s  2017 minimum wage of $15 an hour will be about 36 percent above its 1968 peak (actually, closer to 32 percent when you account for two additional years of inflation), Perry asks: “Economic death wish? Free lunch?”

Well, to help Professor Perry answer his own question, I’ve annotated his chart (below) to put his numbers in some actual, you know, context:

anotated_perry_chartTurns out that Seattle did quite well during most of the first three decades of Perry’s chart, quickly growing to become our nation’s 19th largest city. It was only after the federal minimum wage was unpegged from productivity growth that Seattle’s economy hit the skids. Then, starting in the late 1980s, right around the time Washington State started boosting its minimum wage substantially above the eroding federal rate, Seattle’s economy started to boom! Today, Seattle not only has one of the highest minimum wages in the nation, it is also one of the fastest growing big cities!

Sure, correlation does not equal causation. But it’s hard to look at past performance and conclude that a $15 minimum wage is some sort of economic death wish.

Still, the larger problem with Perry’s chart is that when he talks about our 2017 minimum wage being 36 percent above the 1968 peak (well, 32 percent), he glosses over the question, peak of what? For example, from 1938 through 1968—through Democratic and Republican administrations alike—there was a bipartisan commitment to raising the real value of the minimum wage roughly in step with rising productivity. Just take a look at the chart below (rather than the lazy straight lines I pasted into Perry’s chart):

Productivity vs Min. Wage (via CEPR.net)

Productivity vs Min. Wage (via CEPR.net)

That’s productivity growth versus the real federal minimum wage, rather than Seattle’s, but the point remains the same. Through 1968, the minimum wage largely tracked productivity—not inflation or median wage or anything else. So if Perry truly believes that the 1968 minimum wage is a meaningful standard by which to compare Seattle’s 2017 minimum wage, wouldn’t it be more accurate to describe $15 as 31 percent below the productivity-adjusted peak rather than 32 percent above?

If Perry says “no”—that productivity is not an index by which we should adjust the minimum wage—then what’s his point? That $15 is economic suicide because it’s 32 percent higher than some arbitrarily arrived-at number? That’s not much of a persuasive argument. But if Perry says “yes”—that the productivity-adjusted 1968 minimum wage is a reasonable standard by which to judge future minimum wage increases—isn’t he just validating the very notion of a productivity-adjusted minimum wage?

The 1968 metric is either bullshit or it isn’t. Which is it, Professor Perry?

Councilmember O’Brien Announces Legislation Allowing Uber Employees to Unionize

Councilmember Mike O’Brien just introduced a very interesting piece of legislature. Lydia DePillis at the Washington Post has the scoop:

Councilmember Mike O'Brien

Councilmember Mike O’Brien

Here’s how the new system , which will be formally introduced in the Council next week, would work: Drivers would vote on a non-profit organization to serve as their “exclusive driver representative,” which would then negotiate a contract with the company. If the two parties fail to come to an agreement, they have to submit to arbitration. The resulting contract would be enforced through the courts, rather than the National Labor Relations Board, which unions have found to be slow and sometimes ineffective in deterring employers from violating contract terms.If it worked, it could theoretically be extended to cover other kinds of independent contractors, like the port truck drivers who ferry containers from docks to rail yards and warehouses, or other workers on internet platforms like Taskrabbit.

This is an interesting idea, one which attempts to solve an ever-worsening problem: too many of our employees are contract workers, and therefore not eligible for minimum wages and benefits and overtime and all the other worker protections that we’ve taken for granted for too long. The bill will be introduced next week, and the City Council’s page on the legislation has officially gone live.

Congratulations are due to Councilmember O’Brien for his attempts to solve a pervasive problem in our work culture on a local level. We need as many innovators as possible working to find solutions for these problems. It’s especially important to have those leaders in Seattle, because the $15 minimum wage demonstrated that the nation considers us to be a leader on labor issues. If this bill takes off, it will likely be copied by other metropolitan areas around the country.

On a national level, Civic Ventures co-founder Nick Hanauer and SEIU 775 president David Rolf have proposed a streamlined Shared Security System that would use technology and innovation to streamline the employment process and offer all Americans a basic suite of benefits and protections. But for an ambitious plan like this one to succeed, we need lawmakers like Mike O’Brien to promote solutions on a local level, to continue reminding the public that this problem is not going to solve itself, and that it’s certainly not going to be solved by the invisible hand of the market.

Daily Clips: August 31st, 2015

Bernie Sanders very right about police treatment of African Americans: Bernie is trying to expand his deep, but narrow support base of white Americans. After his “incident” with Black Lives Matter protestors in Seattle, he added a whole new “Racial Justice” section on his campaign website. Within this thoughtful racial justice platform, PolitiFact decided to examine one of his statements he made about African Americans and police:Screen Shot 2015-08-31 at 8.40.29 AM

Obama pisses off the GOP about renaming Mt. McKinley: No, I’m not kidding. On Sunday, the Obama administration announced that the mountain will now be referred to as “Denali”, its traditional Native American name. Naturally, this “executive action” has angered the GOP. I guess they feel like there aren’t enough “things” named after white dudes in this country.

Scott Walker wants to build a wall…and no, not to keep out those pesky Mexicans either! Gov. Walker said this Sunday that it is “legitimate” to discuss building a wall separating the US from Canada.

Is it September yet? There have been almost no interesting political stories so far in August – if you discount Trump saying stupid stuff and the media salivating over a Joe Biden run. As someone that has to look over headlines every day, I cannot tell you how excited I am to exit this god forsaken month.

Forbes, Fox, and AEI: The Axis of Idiocy

Axis of EvilOf course this is how these things work. First Professor Mark “Connect the Dot” Perry of the American Enterprise Institute puts forth a stupid theory about some left-wing conspiracy to cover up the disemployment effects of a $15 minimum wage by gradually phasing it in, then Tim “Superfluous Adjective” Worstall echoes the meme at Forbes.com, calling it an “excellent logical point” (as opposed to one of those “awful logical points” or something). Next, no doubt, we’ll be hearing this new conventional wisdom from the mouths of Fox News and other propaganda outlets.

It’s just like making sausage. Only with more offal.

Perry and Worstall ask, “if an increased minimum wage is such a good idea then why delay implementing it?” Their conclusion: because $15 advocates know it will destroy jobs, and we’re just trying to hide the impact within years of data. Because, I presume, we’re evil!

Okay. Maybe. I suppose it’s possible that the real mission of $15 advocates is to put millions of Americans out of work. Last time I looked in the mirror I wasn’t twirling a cartoon villain mustache, but I’m pretty sure I could grow one if I wanted to.

Or—and perhaps I’m reaching here—we might want to consider the following alternative hypotheses for why we are phasing in the $15 minimum wage:

  1. Um… we always do it this way.
  2. Because, politics!
  3. We didn’t want to kill jobs.

The first hypothesis should be the easiest to understand as it is backed up by 80 years of historical fact: minimum wage phase-ins have always been the norm. Nothing new here. Simple as that. This minimum wage hike is being implemented no differently than most others.

The second hypothesis should also be pretty obvious to anybody who has observed the political process up close. Seattle’s two-tiered excruciatingly long phase-in is the result of our excruciatingly consensus-obsessed political process. A lot of minimum wage advocates wanted an immediate jump to $15 (they even adopted the name 15 Now!), but, no, we had to extract a compromise between labor and business leaders, because that’s how we do things here in Seattle. (Remember, this is the city that is still debating how to replace an earthquake-damaged highway 14 years after the trembler.) San Francisco is less process-obsessed, and so they implemented a more sensible straight-up three-year phase-in.

But given their blind faith in “the time-tested, irrefutable, ironclad economic laws of supply and demand,” the third hypothesis is likely the most difficult for the free market theocrats to wrap their minds around: perhaps some $15 advocates believe that an immediate hike would have been too disruptive, while a phase-in gives business owners enough time to adjust their models to the new reality? Because, you know, humans are adaptable.

Which brings me to where I think Perry and Worstall really go wrong—they may be very familiar with neo-classical economic theory, but they don’t seem to have much experience with actual human beings. To repeat: humans are adaptable. We’re innovative. We’re resilient. Just because we might start with a low-wage business model doesn’t mean we can’t thrive with a high-wage one.

Also, we’re nuanced. At least, some of us. It is no more “intellectually inconsistent” to posit that an immediate jump to $15 might cost jobs while a three-year phase-in wouldn’t, than it is to acknowledge that a $50 minimum wage would be an economic disaster while a $15 minimum wage would not. Perry and Worstall are so tightly sealed within their neo-classical closed equilibrium system that they’re incapable of accommodating a whiff of nuance.

And finally, we’re not all evil. Again, most of us. Yet to accept Perry and Worstall’s logic that a phase-in proves we know a $15 minimum wage will hurt the workers it’s intended to help, but we continue to advocate for it anyway, you must also logically conclude that we are simply bad people. And that’s what’s really missing from Perry’s stupid conspiracy theory: a motive. What’s our motive? What could I possibly gain from promoting a policy I know to be inherently bad?

There’s a shtick I sometimes employ when critiquing an adversary, in which I sarcastically ask the question “Liar or Idiot?” The joke is that I’m giving them the benefit of the doubt as to intent. But Perry and Worstall don’t even grant us that courtesy. They just assume ill-intent, whatever our motive, and in doing so they fail to follow the basic dictum of Occam’s Razor—that the hypothesis relying on the fewest assumptions is likely the most correct.

I could speculate on Perry and Worstall’s motives. Perhaps they’re just shilling for their corporate overlords? Perhaps they’re less interest in actual fact than they are in scoring rhetorical points? Perhaps they’re lashing over the frustrating lack of data to support their “ironclad” assumptions? But I think the most obvious explanation for their fervent opposition to a livable minimum wage is that their economic theories are flat out wrong.

Simple as that. I’m right and they’re wrong. No need to impugn anybody’s motives by imagining some far-out political conspiracy.

Republicans Should Listen to Trump on Taxing the Wealthy

As I told you earlier this week, Donald Trump proposed raising taxes on “the hedge fund guys,” which is absolutely something that needs to happen. Brian Beutler at the New Republic says Trump may be rewriting the Republican playbook for everyone:

If you actually buy this shirt, you should rethink your life priorities.

If you actually buy this shirt, you should rethink your life priorities.

For almost any candidate, promising to reduce taxes on rich people is the price of admission into the Republican primary. Trump, by contrast, is poised not only to survive this apostasy, but to singe any of the more orthodox rivals who challenge him.

Senator Marco Rubio’s tax plan represents the most pointed contrast to Trump’s middle-class populism. Rubio proposes not just to lower the top marginal income tax rate, but to completely zero out capital gains taxes. To escape scrutiny for offering such a huge sop to the wealthy, Rubio plans to fall back on his origin story—as the son of a bartender who worked at a hotel financed by investors, Rubio can elide the typical criticisms of trickle-down economics, by claiming to be a direct beneficiary of it. This might be an effective diversion against a Democratic politician promising to increase people’s taxes, but against a rapacious developer like Trump, it falls completely flat. Trump would love nothing more than for a career elected official like Rubio to lecture him about the impact tax rates have on investment and growth. Trump has managed to survive in the business world at a number of different capital gains tax rates, whereas Rubio has struggled to stay afloat, and racked up high levels of credit card debt, in the working world.

A lot of the discussion circling Trump is baseless clickbait, but this is a real point that will have real consequences for Republicans. We’re now seeing headlines like “Donald Trump Says He Wants to Raise Taxes on Himself” spread across the internet. And this is important for a lot of reasons.

You could argue that the insanity of the Tea Party was a logical extension of the ridiculous pledge that Grover Norquist required Republican candidates to sign promising that they’d never raise taxes. When a party judges their candidate purity on an unrealistic scale like this—taxes = failure—that party is eventually going to welcome all kinds of fringe concepts into its mainstream.

It’s clear now to almost everyone from the Seattle Times editorial board to, well, Donald Trump that America needs revenue. And you can close all the tax loopholes you want, but at some point you’ve got to start thinking about raising taxes. And the obvious target for those taxes should be the top one percent, which has been enjoying low taxes for decades.

The Republican playbook insists that if you lower taxes on the wealthy, that saved money should trickle down to the very poor. (It’s fitting that Beutler chose Marco Rubio as the oppositional axis to Trump, because Rubio is about as classic a trickle-downer as they come. As I’ve pointed out, he delivers the same old trickle down message in a relatively young and relatively fresh package.) But that trickle-down theory obviously hasn’t worked out, and even though it’s apparent to everyone that it hasn’t worked out, Republicans have painted themselves into a corner. They can’t propose raising taxes without enraging the base that they’ve cultivated.

Or can they? What Donald Trump provides for Republicans is a much-needed way forward. Now that the unquestionable frontrunner in the Republican presidential campaign is openly admitting—through example, no less—that America should raise taxes on the wealthy, he’s offering an opportunity for Republicans to shake off the Norquist trap and come to peace with the idea of taxation. Republicans have been eager to parrot Trump on issues ranging from immigration to China to Iran, but they’re surprisingly resistant to embrace Trump’s proposed taxes on the wealthy. The shame of it is, this is the one case where Trump is the most reasonable candidate in the field.

 

 

Daily Clips: August 28th, 2015

How are the 2016 candidates getting their money? NPR takes an in-depth look into the donation patterns of different candidates. From their beautiful infographic, one can easily see that some candidates, like Cruz and Rubio, rely heavily on their superPACs while others “like Sanders, O’Malley, and Carson are dependent on their campaigns, which limit contributions to $2,700.”

Below, I’ve taken a little snapshot of the infographic, specifically looking at Jeb!, Hillary, and Ted’s donations.

I'm actually stunned at how much big money the Cruz campaign has been able to gather.

I’m actually stunned at how much big money the Cruz campaign has been able to gather.

The GOP is stuck in the first stage of grief: The GOP establishment is in denial over Trump’s candidacy. This is the message of Matthew Yglesias and Eugene Robinson‘s latest columns. They both independently conclude that the establishment dismiss the rise of Trump at their own peril.

Yglesias looks globally to explain Trump’s candidacy, pointing to the recent rise of populist-right parties in the Western world. He argues that Trump’s campaign looks very similar to “UKIP,  the Danish People’s party, the Sweden Democrats, the National Front, the True Finns — [parties which] emphasize nationalist themes and hostility to immigration while offering a mixed bag on the welfare state.” Sound familiar?

My god, Republicans love war: And Scott Walker is perhaps the most gung-ho of them all. If Walker is elected president he’s promised to defeat ISIS, defeat Iran, and defeat defeat radical Islam…blah, blah, blah. In Manichaean language, Walker says:

Yes, the world is complex, but some things are simple: There is good and there is evil. America is a force for good in the world. Radical Islamic terrorists are agents of pure evil.

In essence, he’s taking a page out of George W. Bush’s foreign policy. Because we all know how well that turned out.

Thank You, Paul Allen, for Standing Up to the NRA on Behalf of Endangered Species

Yes on I-1401For decades, the National Rifle Association has relied on its deep pockets to frighten lawmakers into surrendering to its legislative agenda. But like most bullies, once you call the NRA’s bluff, there’s not much left to back up all the bluster. As Joel Connelly reports on SeattlePI.com:

After going after entrepreneur Nick Hanauer during the Initiative 594 battle last year, [NRA Olympia lobbyist Brian] Judy has now drawn a bead on Seattle Seahawks owner Paul Allen, who has championed Initiative 1401.  The initiative would prohibit the purchase, sale or distribution of products from much-poached land and sea creatures, including elephants, rhinos, lions, tigers, cheetahs, leopards, sea turtles and sharks.

At an NRA-sponsored event in Federal Way, Judy boasted that I-1401 is only on the ballot “because we were successful defeating Legislation in Olympia,” before going on to attack Allen as a “huge billionaire.” The NRA had also killed universal gun background checks in the legislature before voters overwhelmingly approved I-594 at the ballot. Judy was forced to disappear for the final months of that campaign after being caught on tape ridiculing me as a “billionaire plutocrat” who supported “the same policy that got his family run out of Germany by the Nazis.”

That’s just offensive. But I understand Judy’s frustration. The NRA had grown accustomed to getting its own way by virtue of dramatically outspending its opponents. But they can’t possibly outspend a hugely passionate billionaire advocate like Paul Allen backing a hugely popular measure like I-1401.

So my prediction is that, apart from a few brash words, the NRA will back down—just like it did against I-594. And when Allen has finished trouncing the NRA by a wide margin and throughout the state, he may want to add one more endangered species to I-1401’s list: the paper tiger.

Daily Clips: August 27th, 2015

The Economy Boomed in 2Q: Per the Wall Street Journal, the US economy grew at a faster pace than initially thought in the second quarter of 2015. “Gross domestic product…expanded at a 3.7% seasonally adjusted annual rate in the second quarter of 2015, the Commerce Department said Thursday, up from the initial estimate of 2.3% growth.”

Shooting victim’s dad pleads for gun sense: After Alison Parker was shot dead yesterday morning, her father, Andy Parker, emotionally promised on TV that he would devote the rest of his life to implementing commonsense gun legislation. Mr. Parker follows in the tragic footsteps of other American parents who have seen their children gunned down in senseless . “We’ve got to do something about crazy people getting guns,” Parker says. “My mission in life… I’m going to do something to shame legislators into doing something about closing loopholes and background checks and making sure crazy people don’t get guns.”

Obama’s two-faced energy policy: President Obama made a pledge to the American people that he would look after “a planet in peril.” So, you can imagine how his supporters/environmentalists were surprised when he green-lit new oil drilling in the Arctic! This comes after the administration’s own studies concluded “that there is a 75 percent risk of an oil spill if such offshore leases are developed.”

I suppose this is what happens when environmentally-aware Americans only have one political party which even *slightly* cares about the environment. Obama can pay lip service to the environment being one of his “top three priorities” without having to worry about the “environmental bloc” voting for a Republican. This is the danger of having a two-party system.

“This is the Republican Party”: A Hillary Clinton allied Super-PAC Priorities USA is already starting to hit the GOP hard on their anti-Hispanic message. The ad will start airing in states with large Latino populations, such as Florida, Colorado & Nevada: