Posted by: twotrees | August 5, 2013

The Great Divide

99% v 1%Two interesting pieces in the local daily papers Sunday:

The first was in the Ventura County Star, which on page A1 discusses the current (and ongoing) debate about the minimum wage and how it affects job creation and employment.  The second in the LA Times entitled Middle-Class Mayday, discusses trickle-down economics and what it has done for the middle class in America.  To the first point, the analysis of whether raising the min. wage would affect job creation appears clear.  From today’s Star (available online only to subscribers):

There have been many studies, lots of data, different methodologies — but not much variation in their conclusions.   A 2009 “meta-study” by two Australian economists of 64 separate minimum-wage studies found that estimates on employment effects were heavily clustered very close to zero.  It appears, says economist Sylvia Allegretto of the UC Berkeley Institute for Research on Labor and Employment,  that something close to a consensus has emerged.   “The range of answers has become so narrow that the debate has effectively been settled,” she said. “At this point, we’re arguing over whether it results in no negative employment effects or very small negative effects.”

So, to arrive at a conclusion, there seems to be no affect on hiring when the minimum wage is increased.  Still, some lawmakers (mostly on the right side of the isle), don’t let the facts get in the say of a good fight to keep the minimum wage at its current $8 per hour.  Fifteen years ago, the minimum wage in California was $575, making the present $8 per hour twenty nine percent higher than in 1998.  That sounds decent: a 1.93% annual increase over that period.  But looking at the reality of living in the Golden State, one has to factor in the increased costs of living:  housing, food, energy, etc…

Nationwide, home prices are 75% higher than they were in 1998 but in California, they are well over 125% higher.  The stats for rental units are similar.  Food prices have doubled and in some categories tripled in that time.  And gas prices were right around $2 per gallon fifteen years ago (reflecting a nearly 100% increase since 1998).  A movie ticket cost $4.69 on average (and has doubles since), etc…

The point is – LIFE costs a lot more now, yet those on the lowest end of the pay scale have not kept up, not by a long shot.  And when millions of Americans don’t have enough money for necessities, they are no longer consumers.  Which means, retailers (wth the exception of WalMart, KMark and similar discounters), suffer.

In Middle Class Mayday, written by Hedrick Smith in the LA Times (read it here), the argument that ‘trickle down economics has worked out terribly for most Americans’ is made.  Simply put by President Obama, ‘the average CEO has gotten a raise of nearly 40% since 2009.  The average American earns less than he or she did in 1999.

Was a time when workers, as well as their employers, benefited financially when productivity increased.  That’s no longer the case.  According to Smith’s piece ‘productivity has increase by 80% since 1973, yet employee income has risen only 10%.  “Our growth problem is weak demand’, which ties directly into how Americans should be but can’t afford to be the consumers of the past.

So as Congress takes a long and not particularly deserved summer vacation, Americans should consider why we must continue to battle over lower taxes for the 1% who’s income has accelerated over the past two decades, when it’s become very clear that very, very little trickle-down to those who need it most.

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