Lowering wages will not lessen poverty
Mac Diva
The bias that the low-income somehow deserve to be poor is a deep-seated one. It is not surprising that people who claim to be interested in the poor will sometimes let slip evidence that they believe the low-income are stupid or lazy.
I recently happened across that giveaway in an op-ed article in the Oregonian. The piece, by Paul F. deLespinasse, is an exercise in misunderstanding poverty and what it takes to overcome it. deLespinasse believes the solution to poverty is to eliminate minimum wage laws. His attack is on Oregon's guarantee of a minimum wage, but I believe his belief applies to the practice, period.
On Jan. 1 Oregon's minimum legal wage will increase from $7.05 per hour to $7.25. This is because Measure 25, approved by voters in 2002, requires annual cost-of-living increases.
One can only applaud policies that increase incomes of poor people. But Measure 25 is unlikely to have any such beneficial effect for poor people in general. The amount of anything, including the services of labor, that we are willing and able to buy decreases as its price increases. Therefore, while some low-wage workers may get increased pay because of Measure 25, others will lose their jobs or not get hired in the first place.
Unemployment virtually guarantees that its victims will remain poor, since they have no earned income and are not acquiring the promotion-enabling skills and work habits that even low-paying jobs can provide.
Ironically, the very harm done to poor people by Measure 25 invites a court decision that in fact and not just intention helps poor people. The Fifth Amendment to the U.S. Constitution provides that: "No person shall be . . . deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."
The right to exchange labor for money may be the most important property anybody has. This is especially true for poor people, who don't have much other property. People rendered unemployable because the market value of their labor is less than the minimum legal wage have been deprived of property. Under the Fifth Amendment they should therefore have a right to compensation.
deLespinasse goes on to argue that poor people should sue the state of Oregon to repeal Measure 25, or, compensate them for lost jobs. deLespinasse's notion of what the Fifth Amendment means by private property is peculiar. He is the type of layman who has latched onto legal language without knowing what it means. Though a worker may have an interest in maintaining a job he already has, it is not a property interest. He does not "own" the job. Instead, the employee can argue that he has a justifiable reliance on continuing to receive the income he has become used to. However, since most workers are employees at will, that theory would not apply unless there are unacceptable grounds for the dismissal, such as union busting or discrimination. Workers, or to be more accurate, potential workers, have no grounds to sue anyone over jobs that don't exist at all.
deLespinasse's projection of his own viewpoint onto low-income workers is unintentionally comical. It is doubtful that they ares irate because they believe their wages are too high.
Furthermore, there is no proof that minimum wage laws result in failure of job creation. It seems more likely that persons or corporations who start new businesses consider the minimum wage as an inevitable cost. They factor in the $7.25 per hour as part of the price to paid for doing business in Oregon. Those who believe that cost to be too high choose to locate elsewhere. Those who believe the cost of using American workers prohibitive take their business across the border to Mexico or overseas.
deLespinasse would argue that loss of employment below the minimum wage to other places is reason enough to dispense with Measure 25. To keep those jobs, let employers pay whatever they are willing. Say $5.50 an hour to baristas at Starbucks or $3.00 an hour, plus tips, to the person who pumps your gas at Chevron. According to him, both parties would benefit from such an arrangement. The employer would have an incentive to hire because he could pay workers less. Employees would be happy because they would have jobs. Presto! The end of poverty.
deLespinasse is not just wrong, but fatuous. The point of employment is to pay bills. Yes, some workers enjoy what they do and their work enhances their self-esteem. But, the core reason people work, often at stultifying jobs, is to earn money so they can pay their bills. If the wages paid do not cover the worker's basic expenses -- housing, food, clothing and health care -- there is a disincentive to work . Advocates for the homeless report that as many as half of homeless persons are employed. But, their wages do not amount to enough to cover the expense of housing. Under deLespinasse's plan we would see that situation become more common. There would be millions more people working 40 or more hours per week, but barely subsisting.
A second misconception common to the kind of reasoning he is engaged in is confusing American costs of living with those elsewhere. American workers need higher wages than those in Second and Third World countries because living is more costly in the First World. Comparisons between wages in Sri Lanka and, say, South Carolina, are pretty meaningless for that reason.
There is no theory of law that supports the kind of class-action lawsuit deLespinasse envisions. Nor do I expect to see the poor take to streets demanding that minimum wage laws be repealed. What his 'libertarian' outlook reveals is that, when it comes to low-income people, there are folks who would prefer to see them even worse off than they are.
What's the art?
Starbucks emloyees are paid minimum wage or more.
Note: My blog is Mac-a-ro-nies.
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Jan 27, '05
Okay Mac I'll cop to being a Libertarian. A big "L" version of one and I am oppossed to the government interfering in the marketplace as a matter of principle and that includes minimum wage laws, however I don't recall the writer you quote as stating he was a libertarian. Maybe he did and I missed it. That being said I have not seen much in the way of studies indicating that jobs will be lost because of the increase. There are too many other factor involved. Obviously some will, but how many is questionable. I would tend to believe that people who say they are concerned about the poor, or low income folks gave a damn when the started to get up in arms about government policies that do add to the cost of living. No one seems to be too upset that the high cost of housing in Portland may be due to government regulations, or the lack of adequate transportation is because the government has put the screws to private operators and run them out of business. Then there is good old inflation. From about 1820 until 1940 this country had basically zero inflation. Prices went up during wartime and down afterwards. However since WWII the nation has been on a constant inflationary policy so that today's currency is worth a fraction of what it was during the 1940's. So maybe if we deal with the inflation issue, which is the root cause of the decline in living standards for many of us, then just maybe the wage issue will not be so inflammatory. Michael, who punches a time clock and is a libertarian to boot.
8:46 p.m.
Jan 27, '05
Michael, you wrote, the lack of adequate transportation is because the government has put the screws to private operators and run them out of business.
Exactly what are you talking about? I see lots of cars and trucks cruising around.
Is this some kind of libertarian fantasyland - there's not enough cars?
Exactly what would the cars drive around on if it weren't for government construction of roads? Oh, and stop signs? Oh, and cops to enforce traffic laws?
Jan 28, '05
Kari government regulation in most cities across the country make it virtually impossible to own a private transit company. The government transit agencies that monopolize the business and the taxi cartels offer limited service to low income people and low income people are least likely to afford their own vehicles, or if they do own one it is a major drain on their limited income. Sociologist William Julius Wilson in his book "When work Disappears" comments that the lack of transit is a major problem for inner city minorities. In our own city when Trimet open the Interstate line they reduced service along MLK to the Rivergate Industrial Park, which was poor to begin with. Previously it took about twenty minutes to go from Mlk and Killingsworth to the 6000 block of Marine Drive in the Rivergate Park. Today it is about an hour and requires two or three buses. Rivergate could provide excellent job opportunities for many people living in the north parts of Portland, but the lack of transportation leaves that option out. I'd have to dig to find some specific information, but nationally minorities, the elderly and women working part time jobs are the least likely to have access to adequate transportation. Michael
Jan 28, '05
What most people don't realize about poverty and unemployment is that it is the direct result of Federal Policy. Federal fiscal Policy happens at three levels: The Congress by way of law, the Administration by way of intrepretation and implementation, and at the Federal Reserve via monetary policy. Setting aside the first two arena's for this discussion - let's look at the central function of the Federal Reserve.
The Federal Reserve's primary function is to bring stability to our financial system. They attempt to balance the forces of inflation and deflation, and attempt to minimize harm to the economy in serveral areas. The main control, but not only control, they have on our economy is the overnight interest rates between our major banks. If they raise this key rate, it slows the economy and decreases employment; and conversely if they lower this key rate it puts more money out at lower interest rates to stimulate the economy.
How do they decide to slow down or speed up? One key factor is employment. If the unemployment rate approaches 4% - one in 25 people without a job, it is time to put on the brakes. The theory here is that if unemployment falls below 4%, there is inflationary pressure on wages. A shortage of workers would create a bidding war to get workers and increase wages. Conversely, when unemployment gets much above 5%, the economy is judged to be too slow, and the reverse steps are taken.
There are no similar controls on prices of goods and services.
So, it is the policy of the United States of America to keep at least 1 in 25 people unemployed. A host of social problems follows. Drug and alcohol use, abuse, and addiction follow the feelings of hopelessness if you fall into the chronically unemployed status. Frequent location moves disrupt children's education. Stress related to unemployment contributes to divorce and domestic abuse. Crime follows, etc.
When the "problem" is properly seen as the direct follow through of Federal Policy, we can then properly do analysis of proposed solutions.
Does lowering wages then fit as a "solution"? Of course not, it only makes the problem worse! If you lower wages, you will have worse crime problems, drug and alcohol problems, worse educational outcomes, etc.
Steve Bucknum
Jan 28, '05
Getting more income into the hands of low income people is a worthy goal. How it is done is another matter. I will suggest that opening the transit market to other providers should be a goal and that government regulations presently stand in the way of that goal. Acheiving that goal would help many people across the economic spectrum. Below is a study that may shed some light on the problem and who is affected. I have just pasted on a sample.
http://www4.nationalacademies.org/trb/crp.nsf/All+ Projects/TCRP+H-08
Despite the broad availability of the automobile, considerable segments of the population do not have access to the highway network because they do not own a car. These segments of the population, which include the nation's youth, the elderly, and low-income groups, remain dependent on public transportation systems. However, public transportation systems have not kept pace with changing land use patterns and, as a result, many transit-dependent users now find fewer essential destinations available to them.
This lack of personal mobility has economic, social, and human costs, such as higher unemployment, reduced tax revenue, greater welfare and medical costs, and limited social potential. There is a need to define and measure the economic, social, and human costs of personal immobility and to identify public transportation services that will help reduce such costs. For the purposes of this project, the public transportation system is broadly defined to include publicly operated rail, bus, and light rail systems; school bus systems; social service agency transportation; paratransit; jitneys; private bus systems; and taxicabs. Many of these transportation services have specific trip purposes, and eligibility is sometimes limited to specific groups. However, some communities have effectively used various combinations of transportation services to reduce personal immobility.
Michael
Civil Liberties Economic Freedom
Jan 28, '05
Steve Bucknum writes>>>What most people don't realize about poverty and unemployment is that it is the direct result of Federal Policy.<<<<
Wow. That's quite an assertion. Surely you don't mean to imply that "Federal Policy" was set firmly in place at the dawn of man? Or do you mean "poverty" the kind we have now, vs "poverty" the kind we had in the "olden" days? Welfare vs work house? Food stamps vs outright starvation?
As for unemployment, well, I guess if you classify beggars as being "employed" that might work. Sort of. That raises the fascinating question -- if beggars are "working" -- what really is the "oldest profession"? Prostitution, or begging?
Jan 28, '05
Good connundrum, Anne.
Steve, I happen to be a fan of Franklin Roosevelt and how he improved workers' lives by enabling wage and hour legislation. Left to the 'free market,' Americans might still be working 60 hours a week for whatever an employer deigned to pay them. There are doubtlessly some federal policies that are regressive, but I can't agree that federal policy causes most or all problems related to employment.
Michael, I did some additional reading on deLespinasse. He is a former political science professor who considers himself a libetartian.
I believe public transit in the Portland area is good for us who live in hub areas, such as Northwest Portland. But, your point about poor service in some ways is true. It now takes longer to get to Jantzen Beach than it did before the Expo line of MAX opened. The number 5 bus was cancelled. People must now take a bus to a MAX stop. Take MAX to Interstate. Take another bus to Jantzen Beach. I learned that the hard way when I was trying to avoid parking woes right before Christmas. It must have taken two hours just to get to Jantzen Beach. But, I don't think the existence of mass transit is the problem, poor planning at TriMet is. Let me add that I am totally opposed to 'gypsy taxis' which are common in some poor areas of other cities. The drivers are often uninsured and the vehicles are often in bad shape. The safety issue should be paramount.
2:36 p.m.
Jan 28, '05
Steve,
You cannot possibly have a business background. Unemployment cannot dip lower than 4% in any economy--whether the government intervenes or not--simply because you always have a migration of workers.
Uh oh, a new concept for you. I hope it does not cause a migraine headache and result in the inability to think and work thus leaving you unemployed for a bit. You can always blame the government, though.
Jan 28, '05
Interesting responses on my thoughts (Steve Bucknum) - Comments back
Yes, there is a small unavoidable transition unemployment number at the bottom of the unemployment figures - so Jenson is correct to a point. But the way we count unemployment in this Country at this time (really, we can't deal with a historic perspective here, we are talking about the here and now in America), is to not count those whose benefits have expired. That is a whole lot of people.
I have seen first hand that at a point when there were millions of people wanting jobs in America, it was perceived that the economy was too "hot" and the Federal Reserve was "cooling" it down.
Other places handle this differently. In Europe, there is a higher rate of employment - in good jobs - and when there is a need for more workers, they are willing to bring them in from out of country.
I really wish that those of us proud to call ourselves "liberal" and "progressive" would allow thought outside of the box.
Steve Bucknum
Jan 29, '05
Starbucks is an always easy target, consider:
Baristas are started off at above minimum wage, plus tips. They receive healthcare benefits for both themselves and their families (including domestic partners!) when they work just 20 hours a week or more (so part-timers receive full benefits too -- something rare). There's no requirement of a college degree to work your way up into management and they pay for college if one is interested in bettering themselves in that way.
They contribute to the cost of adopting children, if that is something that you'd like to do.
Baristas receive annual stock awards (NASDAQ: SBUX), not to mention a free pound of coffee every week.
They encourage volunteerism by their baristas, and then pay the organization the barista is volunteering for, for every hour volunteered by the barista.
They pay fair-trade prices for all their coffee, not just the coffee marked 'fair-trade'.
Many complain about the high cost of their coffee, but consider that they are putting a lot of that money back into their baristas and their community.
There is a certain aspect of the issue of wages that can be driven by patronage.
Source: http://www.inc.com/magazine/19930101/3340.html
1:27 p.m.
Jan 29, '05
"The number 5 bus was cancelled. People must now take a bus to a MAX stop. Take MAX to Interstate. Take another bus to Jantzen Beach."
Bus 6 runs from downtown to Jantzen Beach. No changing needed. If you live along Interstate, it's a bit more inconvenient to get to Jantzen Beach. If you live along MLK it's a bit more convenient.
Jan 29, '05
Hey, Michael, this is getting off-topic, but I'm dying to know: Are you really saying that there are lots of entrepreneurial types out there who want to start businesses driving poor people around? And that significant numbers (enough to make a difference to the average poor person) could, if the government would let them, find the capital for an enterprise like that?
How would such a business work?
1:53 p.m.
Jan 29, '05
"Unemployment cannot dip lower than 4% in any economy--whether the government intervenes or not--simply because you always have a migration of workers."
Nope, Steve is right. The FED believes unemployment can go below 4% but that if it did it would cause runaway inflation so they purposely try and keep unemployment above 4%. Go to the Bureau of Labor statistics website and look at the historical data and you'll see that in the past the unemployment rate has been under 4% for years at a time. It was under 3% for much of 1952-53.
The ironic things is, the theoretical "modern" number below which unemployment couldn't fall without pumping up inflation used to be 6-7%. Then the late 90's gave us under 5% unemployment for several years but little inflation. So do they rethink the theory? Nah, just change the number.
Jan 29, '05
Keith, Willamette Week did a good story on the falsity of most attacks on Starbucks within the last year. I did not know about the free pound of coffee. I'll be hitting up one of the baristas who doesn't drink coffee for a sweet deal, maybe $5 for prime Colombia Supremo.
Thanks for the information, Doretta. A friend and I tried to do get to Jantzen Beach a couple days before Christmas without driving. We ended up spending more time in transit than shopping. If I need to take public transit there again, I'll go downtown and take the Number 6.
Suzii, I have been seeing that claim for two decades. But, in most cities there are too many taxis, meaning the real ones. The effect is that taxi drivers barely make enough money to get by. The gypsy taxi route to success is a myth that pleases some people, mainly conservatives, for its up by their bootstraps appeal. The reality is that mainly desperate people with no other option in the worst ghettoes and barrios take the risk of riding with a driver in a car that might not be safe, and, is likely uninsured.
Jan 30, '05
Dorretta,
One would expect the number you cited (on transitional unemployment) to keep going down as advances in communication, transportation and skills training make the prospect of finding a new job easier. Supply meets demand quicker nowadays.
However, it will never hit zero. We can hope that it may edge closer to 1-2%. That said, the supply of available labor (i.e., talented people searching for work) is a key ingredient for promoting economic innovation. If employment is always 100% then the cost of an entreprenurial gamble skyrockets. Blame the market for all relative income disparaties that vex you, its dynamism is indisputably the catylist of human progress in almost every field.
Without the ability to gamble on ideas with a little saved capital and an available labor pool, the price of failure becomes too steep and human progress stagnates.
Still the policy of the FED (or min wage supporters for that matter) should not be less directed toward shaping a predictable outcome than just recognizing that the most beneficial outcome is most likely to occur when certain conditions are met (stable currency, enforceability of contracts, private property, personal freedom, limited tax burdens).
The lesson of the last century is that we can only pull so many market outcome levers for so long before the market re-adjusts itself and shatters our illusions of control. Pretending that "correct" monetary policy can prevent the natural boom-bust cycles in the market is like trying to change the weather.
There are theories about how we might prevent hurricanes (seeding rainclouds at the right moment, tapping static energy in the ocean, altering wind patterns, etc.). Most of these appear futile (and if they managed to somehow alter the natural outcome of the multitude of factors involved in weather phenomena, who knows what sort of butterfly-effect results might spring from them).
I prefer doing our best to predict bad weather/economy and encouraging people to stock up on necessities and bunker down when the bad weather approaches.
If you don't like the risk of hurricanes, then don't live in Florida.
If you don't like the risk of a crashing market, then diversify and back your investment in bonds, gold, etc.
If you don't like making $5.00 per hour, then spend your extra time acquiring the skills that will place you in higher demand.
As with the weather and the stock market, there are no guarantees in the job market either. Sometimes twisters touch down in Oregon. Sometimes the market is shaken by political events outside anyone's ability to control or predict. Sometimes a machine (or a hungrier foreign worker) will end up becoming more efficient than you in your chosen trade.
2:49 p.m.
Jan 30, '05
Pancho, I agree with some of what you said and am not sure why you directed it at me. My only contribution to this debate was to correct Jenson's blatant misinformation.
Since you mention it, most people agree that you can't eliminate the ups and downs of the business cycle. The policy since the depression has been aimed at dampening the swings, not eliminating them.
Still, it'd be nice to think we adjust our theories and policies when reality hands us new data, don't you think?
Jan 30, '05
I agree with Mac Diva about the inherent problems with unregulated "poor-people's" taxis. I may be the only person posting on this subject who once, regularly, rode one such "jitney" service. I remember the cockroaches, I remember the eerie, fog-horn moaning of the brakes on scary downhill turns.
That wasn't here, of course...
That said, I also think Tri-Met has been putting a little too little into continuing development of its most essential service - the buses. I think there is need for a corrective shift in priorities on this. I have seen one stop after another abandoned, despite the crucial nature of that stop to folks who regularly ride the buses. I have experienced the very real paucity of services to our close-in but more suburban neighborhoods. TriMet always plays it as a sorry financial choice: "So sorry, we couldn't help it. Tight times, tight times, you know." Yeah, we all need to suck it in...
The problem is that at the same time there is money to expand MAX. I like and support MAX, but the bus system is at the heart of our public transportation system. It feeds MAX, and MAX will never be as good as it can be, if the bus system is not also as good as it can be.
4:44 p.m.
Jan 30, '05
Bus service is certainly crucial to public transportation in Portland. That doesn't mean, however, that TriMet should never kill bus service to areas where it's use is so sparing it doesn't make sense.
Anne, which specific stops and bus lines have you seen cancelled despite good ridership?
Jan 30, '05
Sorry to have not replied sooner to some comments, but I was taking care of personal business. When writing about other transit options I was not suggesting I know anything about how to run such a business. I don't, nor am I suggesting there will be an immediate interest by the public in using it. In fact if the market was open today I would expect a degree of turmoil.
However there are a number of successful operation in the U.S. today that might serve as a model to build on. The most successful is the Atlantic City, New Jersey Jitney Assoc. Information about it can be viewed athttp://jitney.bigstep.com/aboutus.html. It is the oldest, unsubsidized transit business in America dating to 1915 and has 190 vehicles in operation running 24hours a day 7 days a week. And the fares are about $1.50 trip or lower. My concern is with the number of people whom I have encountered who have little access to transit service.
One person I know who runs a temporary service told me that one of their biggest problems is the lack of transit for their people and that often people cannot get to a job because of that reason. There are plenty of gray market taxis in cities around America serving all income levels, but the especially serve low income people. And they are in the "gray market" because the government has outlawed them, but they spring up to meet a demand that the government has not met. I do not know what form the market will take if it is opened, but the need apparently is there and Trimet is not meeting the demand. There is no reason that you should be restricted from entering such a business running one vehicle from your home if you wished.
We need to look at a range of alternatives from private bus companies, to ride sharing taxis to meet the demand. We are not getting any younger and our societies demands for alternatives will only grow. Naturally we should be looking for ways to improve the quality of life as well as put money back into people's pockets. M.W.
Jan 31, '05
I just read this at Tim O'Riley's blog:
Customers ordering at the Hermiston McDonald's drive up will be patched through to Grand Forks, North Dakota to place their order. Why you ask? You see, that state's minimum wage is only $5.15 an hour...Oregon's is $7.25. The informaton will be passed on the Hermiston kitchen where you'll still be allowed to pick up your food.
I think McDonald's deserves flak for evading state law.
Jan 31, '05
That's the funniest thing I've read in a while.
Outsourcing drive-thru order takers to states with lower minimum wages?
I suppose you won't accept this anecdote as evidence of high min. wage leading to higher unemployment, so go ahead give them flak.
I'm on my way to order a value meal.
Feb 1, '05
Hi Doretta,
My apologies for not responding sooner. I'm home with the flu and just now feeling well enough to do anything beyond sleep and play Spider Solitaire. (Though I had to switch my difficulty level to "easy" because I could not win a game, not a single game in my wooly-minded condition at any harder level -- and I tried, 15 in a row :-(...)
Anyway, the first time I remember paying attention to stops being closed was on Beaverton-Hillsdale Highway, probably 6 to 7 years ago. Several of the announced closures (they were enforcing rules about distance between stops) caused such a ruckus TriMet backed off on them. (Do you know that miserable highway? I used to bus-commute on it - hell to cross on foot at any time of the day but absolutely hair-raising at rush hour. And as for pleasant strolling along the verge to a stop a few “blocks” away...)
More recently there have been several issues in NW, most notably a closure near 20th and Trinity (sorry, I can't remember where exactly, though I'll check when I get back to work) that worried some disabled folks.
I understand the issue of usage, the problem, though becomes the chicken-and-egg thing -- if the service isn't there, people won't use it. If people don't use it, the service isn't there. The reality is you have to have the service up and available if you really want to change folks' habits.
More importantly, what of those who don't have other transportation options? I think TriMet needs to look at running smaller shuttles in less transit-using areas. This would make the service available for those who absolutely need it and expand other folks' notions/expectations of its utility.
If TriMet can't/won't do this, then we do need to open the conversation to ideas around some safe, regulated alternative. And, I’d say the conversation should include questions about value for public subsidy -- would this new organization(s) also be subsidized? How?
There's also a sort of opposite problem with the really heavily used lines, such as my own, (the big Kahuna) the number 14. "Still Life in Sardine Can", (packed in oil), may be just fine for the fishies, but, not so for the humans...