Trade

Shut Up! Shut Up! Shut Up, Already! The Minimum Wage Does NOT Kill Jobs!

HearNoEvil

While the headline is worse than what follows, Peter Coy’s latest piece in Bloomberg Businessweek — “The $15 Minimum Wage Will Kill Jobs. Should You Care?” — is an object lesson in the power of sheer repetition to overwhelm the actual facts. Oy:

Start with an unpopular but irrefutable fact: Raising the minimum wage to $15 an hour, as some states are doing, will create both winners and losers. The winners will be workers who get paid more, of course. The losers will be low-skilled workers who don’t get paid at all, because employers couldn’t afford to keep them on.

In the short term, no doubt, yes. Some businesses will struggle to adapt, and fail. Some workers will lose their current jobs. But then, that’s true of every economic innovation, from new technologies to new regulatory policies. The more pertinent question is not whether $15 will cause some workers to lose their jobs, but whether it will cause net job loss in the aggregate over time.* And on this, there is simply no historical evidence to suggest that it will.

Coy repeats former Bureau of Labor Statistics Commissioner Katherine Abraham’s claim that we “have no experience with an increase in the national minimum of that size,” but a quick glance at past hikes shows that this simply isn’t true. We have plenty of experience with 50 percent, 60 percent, even 94 percent minimum wage increases phased in over several years, with no evidence of any discernible correlation between rising wages and rising unemployment.

Might $15 result in a substantial net loss of jobs? I suppose. As they say in the footnote to all those investment brochures, “past performance is not necessarily indicative of future results.” But while Coy’s job losses remain theoretical, I can absolutely guarantee you that the wage gains are real.

So yeah, despite how frequently and faithfully it is repeated, the assertion that “the $15 minimum wage will kill jobs” — that $15 is “a job-killer” — is totally unsupported by the facts. A more honest (if admittedly less click-baity) headline would have been: “If the $15 Minimum Wage Kills Jobs, Should You Care?” You’re welcome, Peter.

Which finally brings me to Coy’s larger thesis: that when it comes to the minimum wage and free trade, those bemoaning job losses from one often ignore the job losses from the other. An interesting point. Too bad I’m so exhausted from reading Coy’s credulous headline to give it the serious discussion it deserves.

 


* Actually, I don’t really believe net job loss is the appropriate metric at all. But that’s a subject for another conversation.

 

 

The Panama Papers Highlight the Inequality of Globalization

Nick Cassella wrote about the Panama Papers in Daily Clips this morning, but I can’t stop thinking about them, for obvious reasons. Have you seen this video of Iceland’s Prime Minister being asked about his role in the Panama Papers? It’s so uncomfortable to watch:

And the above video led, in part, to this crowd of 22,000 Icelanders protesting outside their seat of government. (For reference, Iceland’s population was 323,002 in 2013.)

I can't be the only person who's had this song stuck in my head since the Panama Papers hit the headlines yesterday, can I?

I can’t be the only person who’s had this song stuck in my head since the Panama Papers hit the headlines yesterday, can I?

This really does seem to resemble Nick Hanauer’s prediction that if income inequality persisted, pitchfork-wielding mobs would be coming after plutocrats. What we’ve seen in the Panama Papers is that global elites seem to believe that a different set of rules apply to them. They believe they can stash their money—much of which was made through unethical means—away from taxes and the media’s scrutiny and the attention of their fellow citizens.

You know how Republican politicians complain that taxes take money outside of the economy? This is obviously baloney—governments are a huge part of the economy. By taking part in these Panamanian tax shelters, these global elites are actually removing money from the economy. Their taxes aren’t collected, the money isn’t invested into local businesses. It just—poof—disappears into a cozy little offshore account, waiting for its owner to collect it at a time of their choosing.

Rana Foroohar at TIME writes, in a story titled “The Panama Papers Could Lead to Capitalism’s Great Crisis,” why this is such a big deal:

Voters know at a gut level that our system of global capitalism is working mainly for the 1 %, not the 99 %. That’s a large part of why both Sanders and Trump have done well, because they tap into that truth, albeit in different ways. The Panama Papers illuminate a key aspect of why the system isn’t working–because globalization has allowed the capital and assets of the 1 % (be they individuals or corporations) to travel freely, while those of the 99 % cannot. Globalization is supposed to be about the free movement of people, goods, and capital. But in fact, the system is set up to enable that mobility mainly for the rich (or for large corporations). The result is global tax evasion, the offshoring of labor, and an elite that flies 35,000 feet over the problems of nation states and the tax payers within them.

This is a serious problem, and it needs to be addressed. Globalization is adding a whole new dimension to the conversation about income inequality. And unless we reform the system to address this inequality, we’re about to see a whole lot more angry crowds gathering in capitol cities around the globe, demanding justice.

David Brooks Can’t Do Math

math

stockimages | FreeDigitalPhotos.net

I could easily spend the next five days fisking New York Times op-ed columnist David Brooks’ absurd notion that it was a “Democratic Tea Party” that was to blame for the TPP’s defeat… if I could only get past his stoopid, stoopid lede:

Last week, the Congressional Democrats defeated the underpinnings of the Trans-Pacific Partnership trade agreement.

Um, Congressional Democrats defeated the TPP? Really? Sure, the motion failed 126-302, with only 40 Democrats voting yes. But the last time I checked, Republicans hold a commanding 246 to 188 seat majority. GOPers could have easily passed TPP on their lonesome, but only about a third of House Republicans could bring themselves to vote for fast track authority. Yet somehow, according to Brooks, it’s the minority Democrats who are solely to blame for its defeat?

By that logic, I guess Dems are also to blame for the fifty-some times Congress has voted to repeal Obamacare. Damn you, Democratic Tea Party!

 

Because Free Trade Isn’t Free

Port of Seattle

The free trade crowd likes to roll their eyes at critics of the Trans-Pacific Partnership trade agreement as if we’re a bunch of idiots who just can’t (or won’t) understand the way markets work. But here’s the thing about “free trade” as defined by agreements like the TPP: it doesn’t create a free market.

Sure, goods are free to cross borders under TPP. And financial capital sure is free to cross borders. And since goods-plus-capital equals jobs, the TPP frees more jobs to cross international borders.

But you know what’s not free to cross borders? People. And since under TPP and NAFTA jobs are mobile and labor isn’t, free trade agreements like these end up distorting the economy in a way that advantages capital and disadvantages labor.

I’m not making shit up here. The same neoclassical economic theories that argue for free trade will tell you that if capital is free but labor mobility remains constrained, then the labor market can never reach a state of natural equilibrium. Capital can (and will) arbitrage the price difference between various labor markets, artificially suppressing wages for all.*

Good for profits, not so good for workers.

Of course, that doesn’t mean we can’t have free trade. We could open our borders to all comers, and vice versa, allowing people to move to where the good jobs are. Or, we could all openly acknowledge that trade agreements disadvantage labor, and insist that they come with policies designed to ameliorate the harm and redistribute the profits more broadly. You know, if we actually gave a shit about workers.

But let’s not pretend that, on their own, free trade agreements are good for American workers. TPP is great for the owners of capital, and it may be good for the economy broadly—if you broadly define the economy as GDP. But it will further weaken the relative power of labor in the United States, and thus push down wages for many workers.


* Not to be construed as an actual endorsement of neoclassical economic theory.