Monday, December 30, 2013

Raising the Minimum Wage

My friends and I have been debating raising the minimum wage to a living wage.  They think it will cause inflation and make those in skilled or professional jobs lose ground in the economy.
Some of them talk about how unfair it seems to artificially reward people who made "bad choices" and didn't go to college or pursue post graduate studies in technology, trades, or the arts.
What about the idea of a "rising tide lifts all boats?"
You would think that the bad job market means that our economy is bad overall and that productivity is down.  Not so.  You might suppose that the poor "job creators" simply can't afford to pay their workers better.  Again, not so.  The pie has gotten bigger, but the piece for more than 80% of us has shrunk.  Please check this graphic from 

You can see that productivity has grown over 38% between 1995 and 2011.  As stated in the article, "Emmanuel Saez, an economist at the University of California at Berkeley, found that the top 1 percent of households garnered 65 percent of all the nation’s income growth from 2002 to 2007, when the recession hit. Another study found that one-third of the overall increase in income going to the richest 1 percent has resulted from the surge in corporate profits."
Some of that productivity comes from automation and some comes from off shoring of jobs.  In both cases it means that the job market for the average worker has become more competitive.  Some skills are no longer relevant in today's US market.
People talk about bringing back "good paying jobs" like those in manufacturing.  Exactly what is it that a factory worker does that is more "skilled" than people in retail or food services?  While there may be some programmable machine operators who deserve to be paid better than assemblers, the jobs are generally repetitive and not very pleasant. 
Why do we feel comfortable paying a factory worker $15 or $25/hour (a wage that is quickly dropping, btw), but judge that someone assembling a cheeseburger at McDonald's is only entitled to minimum wage?   Why do we pay our 70K computer engineers a median $47.50/hour with a Bachelor's degree, but our 650K Social Workers earn only $20.42 per hour and generally require at least an MS for the higher paying clinical positions?
Our 420K licensed plumbers can expect to earn $22.43/hr, while one of the 1.5 Million Certified Nurses Aide can expect to earn only $11.54 per hour
Does that mean that the more people we have in a profession, the lower the salary?  No, because the 2.7 Million Registered Nurses earn a median of $33.23/hour  (Still quite a bit less than a computer engineer, though!)
So, sometimes the "bad choices" we make are to do work that is meaningful to us and very much needed, but not valued monetarily.  The theme that emerges for me is that jobs that were traditionally filled by women (snacks/meals prior to fast food, daycare, healthcare aides, social work, teaching) tend to pay poorly or not at all, no matter how much education is required. 
The difference for the nurses and teachers has been the unions and the fact that, for the most part, these jobs can't be easily "off-shored." 
I don't think of the corporations as "evil" for shipping jobs overseas or for suppressing wages or for not sharing the gains in productivity with their workers.  I think of them as fighting for competitive advantage and reveling in the profits to their shareholders.  If we change the playing field for EVERYONE, prices might go up, and dividends might go down, but taxes for welfare (SNAP, Fuel Assistance, School Lunch, etc) programs will go down too.  The big corporations are paying the lowest effective taxes (not the tax rate, but the actual taxes paid after all the loopholes they've written into the tax code) since the days of the Robber Barons.  They don't want to pay their workers more because they have to remain competitive with others in the industry. They are not evil, they are amoral.  If we raise the minimum wage (perhaps using the Australian model that has exceptions for teenage workers for everyone, the playing field stays level and the corporations will adjust.  Offering tax credits to small business owners to help reduce the sting of increased business expense makes more sense to me than offering subsidies to factory farms and oil companies.   
So, what would that mean for people in higher paying occupations?  Will their relative income advantage disappear?  No.  Chances are, their incomes will also increase. 
This is anecdotal, but serves to make a point.  When I was an engineering manager, I helped recruit two PhDs from MIT.  If I wanted to hire them I had to offer a higher salary than I was earning as their manager.  I did it anyway, without any resentment, because I gambled that doing it to attract the right talent would impress my bosses more than my thinking "small" and offering them less than I was making.  I was right.  I got a $10K pay increase that year.  In effect, the highest pay of my new hire acted as a "minimum wage" for me.  The new minimum wage can be a springboard for a discussion about increases because of skills and education. 
Can we afford it?  Won't it just cause spiraling inflation?   Again, no.  Australia has an inflation rate of 2.2%, while the US inflation rate is 1.2%.
Let's talk about inflation.  Food, housing, and clothing prices are somewhat stable...for the moment.  As energy prices increase, everything will become more expensive.  Education and healthcare costs have skyrocketed.   Education has priced itself to the point where some degrees will never pay you back, at least monetarily, for your investment.
A lot of those increases can be tied back to "privatization" and "for profit" healthcare and educational institutions.  For instance, there are staffing organizations out there who provide home healthcare and CNAs.  The agencies charge Medicaid/hospitals/ longterm care facilities $20 to $25 for workers they pay only $10 to $15 per hour with NO or few benefits.  
And, here's a reality; we don't all start out on a level playing field.  I'm not just talking about good schools, parenting, healthcare and opportunities.  It's a fact that half of us have IQs less than 100.  You can be as ambitious as you want, but if you don't have the capacity to get high scores on admissions or licensing exams, no matter how hard you work, you may truly be limited to offering burgers with those fries.  Should that condemn you to a life of poverty?  Where is the justice in that? 

I am SO thankful that I was gifted with a good mind.  It isn't just that I can earn more money.  I have also been able to pick and choose how I want to spend my time working.  The best job I ever had paid more than $50 per hour and all I had to do for it was solve logic puzzles and lead product teams.  It was pure heaven for me...most of the time, anyway.  Even if I were paid just a "living wage," I would still count myself lucky not to be putting the same parts together over and over again. 
I did not leave engineering willingly.  I was forced out as manufacturing jobs went overseas and the engineering jobs followed.  I did everything right.  I was a good contributor.  I earned patents for my company.  I pursued post graduate studies.  I was 41 years old when the bottom fell out of high tech back in 1991.
For my second act, I focused on finding a career that would offer a sense of purpose and allow me to make a real contribution to society.  I went back to school to study nursing.
The hardest job I ever had was working as a CNA in a long term care facility for $8.00/hr while I was in nursing school in my 40s.  Even though I knew I was doing valuable and necessary work, the conditions were brutal and it took a toll on me physically and psychologically. 
And while my first nursing job paid over $20 per hour, it was still a much more demanding and responsible job than engineering ever was! 
This essay is getting to be much too long.  I need to subject it to a major rewrite and sum it all up. 
For now, I will just say that I think we can do better for our workers.  The contributions of workers is just as important as capital.  The balance has shifted too much in favor of capital.  It is up to us to move it back.  It starts with a living wage for all workers.