Thursday, May 7, 2015

Elizabeth Warren's $22 Minimum Wage Pitch?

Whether or not Elizabeth Warren, the liberal Senator from Massachusetts, will jump into the race for the Democratic nomination is anyone's guess.  But, if she does, expect to hear a wide range of far left and progressive ideas during her campaign. I can say that with certainty since she has already demonstrated this with such comments like the following in her attempt to justify higher debilitating taxes on businesses:
"Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along."
Of course, that comment completely ignores the primary and "underlying social contract" for  businesses -- if there is such a thing -- which is to create jobs for most Americans so they can feed themselves and not depend on government handouts. 

However, the most far left idea she has presented to date, is the belief that the minimum wage shouldn't just be $10.10 or even $15 an hour.  Instead, it should be $22 an hour based on the assumption that, by now, it should have been indexed to productivity gains.  In arguing that point, she presented this chart sourced from a progressive think tank known as the Center for Economic Policy and Research:

Graphic Shown Without Seeking Author's Approval On The Basis of Fair Use For Commentary and Criticism
What the above graphic fails to explain is "why," starting in 1968, the minimum wage and, for that matter, all wages, started to diverge from productivity increases.  Oddly enough, the simple answer to that is actually World War II, which ended more than two decades earlier.

At the end of the war, many of today's industrial powers such as Japan, Germany, England and France suffered devastating damage to their industrial infrastructure.  Unemployment was high, wages were low; and, their currencies were weak.  Only by the 1960's did their industrial activity recover enough to start exporting products.  Because of this, the United States businesses found themselves unable to compete with cheaper imported goods.  Cheaper because of lower wages in Europe and Japan and because our currency was stronger than many others. As a result, the U.S., starting in the late 1960's, went from being a net positive exporter to a net negative importer of foreign goods (see the balance of trade report referenced below).

In order to compete, businesses had to find ways to lower costs. This entailed eliminating jobs by increasing the productivity levels through automation and, in many cases, moving their manufacturing operations overseas.  And, it has been the fear of losing more jobs that has, in the past, kept politicians from raising the minimum wage in the face of increasing productivity.  Yet, politicians like Warren are willing to tempt fate by pushing it even higher.  A fact that could result in increasing job losses through automation in the form of artificially intelligent robotics.  Already, experts are predicting that 30% of American jobs could be replaced by robots within 10 years.


References:

Elizabeth Warren: "There is nobody in this country who got rich on his own": http://www.cbsnews.com/news/elizabeth-warren-there-is-nobody-in-this-country-who-got-rich-on-his-own/

Elizabeth Warren: Minimum Wage Would Be $22 An Hour If It Had Kept Up With Productivity: http://www.huffingtonpost.com/2013/03/18/elizabeth-warren-minimum-wage_n_2900984.html

Seattle's $15 Minimum Wage Is Still Far From What It Should Be: http://www.huffingtonpost.com/2014/06/03/seattle-minimum-wage_n_5437916.html

The Center for Economic and Policy Research (CEPR) is an economic policy think-tank that was founded in 1999 by economists Dean Baker and Mark Weisbrot. It has been described as both progressive and left-leaning: http://en.wikipedia.org/wiki/Center_for_Economic_and_Policy_Research

Trade Balances: https://www.census.gov/foreign-trade/statistics/historical/gands.pdf

Experts predict robots will take over 30% of our jobs by 2025 — and white-collar jobs aren't immune: http://www.businessinsider.com/experts-predict-that-one-third-of-jobs-will-be-replaced-by-robots-2015-5

The 'Fair Use' Rule: When Use of Copyrighted Material is Acceptable: http://www.nolo.com/legal-encyclopedia/fair-use-rule-copyright-material-30100.html 



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