Oct 19, 2016 – Arsenal For Democracy Ep. 156

Posted by Bill on behalf of the team.

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Topics: The Harvard strike and other campus organizing news. Plus, Bill goes viral. People: Bill, Persephone, Jonathan, and Greg. Produced: Oct 17th, 2016.

Episode 156 (56 min):
AFD 156

Discussion Points:

– Why are Harvard dining hall staff’s union on strike?
– What constitutes a living wage?
– What else is going on in campus organizing right now?

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iTunes Store Link: “Arsenal for Democracy by Bill Humphrey”

Oct 7, 2015 – Arsenal For Democracy 145

Posted by Bill on behalf of the team.

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Topics: The Future of Wages; Burkina Faso shakes off a coup; emerging movements in the Republican and Democratic presidential races. People: Bill, Kelley, Nate. Produced: September 13th and October 4th, 2015.

Episode 145 (56 min):
AFD 145

Discussion Points:

– What is the future of living wage laws?
– What can Burkina Faso’s resistance to a coup tell us about transitions to democracy in poor countries today?
– Can anyone save the Republican field from itself? Can Sanders prevail over Clinton after all?

Related Links

The Globalist (by Bill): Op-Ed: “The Future of Living Wages”
AFD: “Short-lived Burkina Faso Coup had very little support”
AFD: “Procedurally, GOP nomination is within Trump’s reach”

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iTunes Store Link: “Arsenal for Democracy by Bill Humphrey”

And don’t forget to check out The Digitized Ramblings of an 8-Bit Animal, the video game blog of our announcer, Justin.

Sept 16, 2015 – Arsenal For Democracy 143

Posted by Bill on behalf of the team.

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Topics: How to redirect hundreds of billions of dollars in subsidies for the wealthy toward low-income programs; the low-wage service economy recovery; should the US accept more Syrian refugees? People: Bill, Kelley, Nate. Produced: September 13th, 2015.

Episode 143 (55 min):
AFD 143

Discussion Points:

– CFED.org: “Redeploying $540 Billion in Federal Spending to Help All Families Save, Invest, and Build Wealth”
– Why it doesn’t feel like a recovery: So many new jobs in retail services get paid less now than before the recession’s peak.
– Should the U.S. accept more than just 10,000 Syrian refugees in the coming year?

Related Links

Corporation for Enterprise Development (CFED): “Redeploying $540 Billion in Federal Spending to Help All Families Save, Invest, and Build Wealth”
NYT: “Low-Income Workers See Biggest Drop in Paychecks”
AFD by Kelley: “United States to accept (a few) more Syrian refugees”

Subscribe

RSS Feed: Arsenal for Democracy Feedburner
iTunes Store Link: “Arsenal for Democracy by Bill Humphrey”

And don’t forget to check out The Digitized Ramblings of an 8-Bit Animal, the video game blog of our announcer, Justin.

Op-Ed | The Future of Living Wages

This essay was originally published in The Globalist.

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What can governments do for incomes in an era of intense global labor competition and automation?

Whose duty is it to ensure a living wage in a global economy where jobs can be moved easily to more “flexible” jurisdictions? And how is that goal of a living wage best achieved, regardless of any moral responsibility?

Increasingly, those questions may have two very different answers, as abstract ideals diverge from realistic solutions in the 21st century.

Aging policies

One common policy solution of the 20th century industrialized world was legal compensation floors, mainly hourly minimum wage laws. Companies were simply compelled to meet their duty to workers.

The first country to authorize a government role in setting minimum wages was New Zealand in 1894. The United States saw its first state minimum authorized in 1912, just over a century ago.

Franklin D. Roosevelt, the U.S.’s 32nd President and the leader of America’s New Deal, in 1933 explained the principle behind such mandates:

It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country.

In 1933, that statement was not just a moral argument, but also an enforceable policy position. Today, in many cases, it is not.

No enforceability

Large multinational corporations that operate worldwide have more leverage and flexibility in the global marketplace than any single national government. Their transnational character allows them to avoid national efforts to compel them to do their fair share under a more democratic capitalism.

In many sectors, if a large business has – in the words of Roosevelt – no “right to continue [operating] in this country” due to its preference for paying sub-living wages, it can and will simply go elsewhere.

The century-old mechanism of a legal wage minimum — while still critical — is losing its effectiveness against poverty and labor abuses due to the radical transformation of the global economy. New mechanisms are now urgently required to supplement it.

The underlying goal – the need for a living wage – that once led to the creation of minimum wages have not changed – but the toolbox must expand.

Until lately, the issue has stalled. In most of the industrialized world, strong social safety nets often reduced the perceived need for higher wages. Meanwhile, U.S. activists were tarred as closet socialists seeking the Europeanification of free-market America.

Everywhere, the poor typically lack political leverage. Their demands are frequently written off as ignorant populism detached from economic realities.

Tipping point

But we have reached a tipping point. Even techno-optimists – those who have long boosted the life-easing benefits of the arrival of robots – are now concerned.

They are starting to acknowledge that the pressure on wage levels (and employment levels themselves) will no longer just come from cheap, surplus human labor overseas. It will also come from increased mechanization, automation and robotics.

And this time, the pressure will affect (and is already starting to affect) workers with higher incomes, too. Read more

The origin story of minimum wage laws, part 2

Part 2: Why did some industrialized nations wait so long to get a minimum wage? When did the UK, Germany, and France get minimum wage laws? Why do some industrialized nations still not have legal minimum wages? || This original research was produced for The Globalist Research Center and Arsenal For Democracy.

Why did some industrialized nations wait so long to get a minimum wage?

From a historical perspective, minimum wage laws were implemented first in countries where trade union movements were not strong. Countries such as the UK that traditionally had strong labor unions have tended to be late adopters on minimum wage laws.

In those countries, powerful unions were able to bargain collectively with employers to set wage floors, without needing legislative minimums.

The early gold standard guideline for government participation in wage setting was the International Labor Organization’s Convention No. 26 from 1928 – although many industrialized countries never adopted it.

The convention said that governments should create regulatory systems to set wages, unless “collective agreement” could ensure fair effective wages. This distinction acknowledged that, by 1928, there was already a major split in approaches to creating effective wage floors: leaving it to labor organizers versus using statutes and regulators.

When did the UK, Germany, and France get minimum wage laws?

Much like pioneers New Zealander and Australia, the United Kingdom did adopt “Trade Boards” as early as 1909 to try to oversee and arbitrate bargaining between labor and management. However, its coverage was far less comprehensive than Australian and New Zealand counterparts and cannot be considered a true minimum wage system. Instead, UK workers counted on labor unions to negotiate their wages for most of the 20th century.

The Labour Party introduced the UK’s first statutory minimum wage less than two decades ago, in 1998, when it took over the government following 18 years of a Conservative government that had focused on weakening British unions. The country’s current hourly minimum wage for workers aged 21 and up is £6.50 (i.e. about $8.40 in purchasing power parity terms), or about 45% of median UK wages.

Despite opposition to minimum wages in some quarters, The Economist magazine noted recently that studies consistently show that there is little impact on hiring decisions when the minimum wage level is set below 50% of median pay. Above that level, some economists believe low-level jobs would be shed or automated, but this is also not definitively proven either.

In fact, not all countries with minimum wages above that supposed 50% threshold — a list which includes at least 13 industrialized economies, according to the OECD — seem to have those hypothesized problems. True, some of them do, but that may indicate other economic factors at work.

Germany, Europe’s largest economy, only adopted a minimum wage law after the 2013 federal elections. Previously, wages had generally been set by collective bargaining between workers’ unions and companies.

As a result of the postwar occupation in the western sectors, Germany also uses the “codetermination” system of corporate management, which puts unions on the company boards directly. This too encourages amicable negotiations in wage setting, to ensure the company’s long-term health, which benefits the workers and owners alike.

The new minimum wage amounts to €8.50 per hour ($10.20 in PPP-adjusted terms), or more than 45% of median German pay.

However, in some areas of Germany, the local median is much lower. There, the minimum wage affords significantly more purchasing power. In eastern Germany, the minimum is about 60% of median wages.

In France, where unions have long had a more antagonistic relationship with management, a minimum wage law was adopted much earlier – in 1950. It is now €9.61 per hour (about $10.90 in PPP-adjusted terms), or more than 60% of median French pay.

N.B. Purchasing-power currency conversions are from 2012 local currency to 2012 international dollars rounded from UN data.

Why do some industrialized nations still not have legal minimum wages?

Because of their generous social welfare systems, one might assume that the Nordic countries were early adopters of minimum wage laws. In fact, Denmark, Sweden, Norway, Finland, and Iceland all lack a minimum wage, even today.

Instead, wages in these countries are virtually all set by collective bargaining in every sector – conducted between workers’ unions, corporations, and the state. (This is known as tripartism.) Non-union workers generally receive the same pay negotiated by the unions.

A prevailing minimum or average lower-end wage can usually be estimated, but there is no law. In U.S. dollar terms, Denmark’s approximate lowest wage level is higher than almost every minimum wage in the world. Mid-level wages are even higher. Even McDonald’s workers in Denmark reportedly make the equivalent of $20/hour.

 
Missed part one? New Zealand, Australia, Massachusetts, the New Deal, and China: How governments took an active role initially, and how they balance economic variability now.

The origin story of minimum wage laws, part 1

Part 1: New Zealand, Australia, Massachusetts, the New Deal, and China: How governments took an active role initially, and how they balance economic variability now. || This original research was produced for The Globalist Research Center and Arsenal For Democracy.

More than 150 countries have set minimum wages by law, whether nationwide or by sector. Other countries have no legal minimum, or governments play a different role in wage setting processes.

Where in the world did government-set minimum wages originate?

In 1894, over 120 years ago, New Zealand became home to the first national law creating a government role for setting a minimum wage floor – although this may not have been the initial intention.

The Industrial Conciliation and Arbitration Act established an arbitration court made up of both workers and employers. It was intended to resolve various industrial-labor relations disputes in a binding manner. The goal was to avoid all labor strikes.

The court was empowered to set wages for entire classifications of workers as part of these resolutions. It did not take long for this to evolve into a patchwork of rulings that effectively covered all workers.

Today, New Zealand’s hourly minimum wage is about equivalent in purchasing power parity (PPP-adjusted) terms to US$9.40.

Which country first adopted a living wage?

In the 1890s, neighboring Australia was still a loose collection of self-governing British colonies, rather than one country. One colony, Victoria, was inspired by New Zealand to adopt a similar board with wage-setting powers. This occurred shortly before the Australian colonies federated together in 1901 to become one country.

In 1907, Australia pioneered what is now known as a “living” wage when the country’s new national arbitration court issued a ruling in favor of a nationwide minimum wage.

That court specified that it had to be high enough to fund a worker’s “cost of living as a civilised being.” While the ruling soon ran into legal trouble from the federation’s Supreme Court, it remained a crucial precedent in future labor cases.

To this day, Australia has a generous minimum wage. The current rate is about equal to US$11.20 in PPP-adjusted terms. This represents about 55% of median pay. However, New Zealand’s minimum wage is actually proportionally higher, at 60% of median pay.

N.B. Purchasing-power currency conversions are from 2012 local currency to 2012 international dollars rounded from UN data.

Which U.S. state had the first minimum wage?

In the United States, a minimum wage mechanism was first introduced in 1912 at the state level — but specifically for female workers (and some child laborers) — in Massachusetts.

The state passed a law to create a “Minimum Wage Commission” empowered to research women’s labor conditions and pay rates, and then to set living wages by decree. For any occupation, the Commission could set up a “wage board” comprising representatives of female workers (or child workers), employers, and the public to recommend fair pay levels.

The Commission’s decreed wage had to “supply the necessary cost of living and to maintain the worker in health.”

1912, the year Massachusetts passed the law creating the commission, was part of a period of major reforms in the United States, which had become the world’s largest economy.

These changes gave government a more active legal role in economic policy. In 1913, the country adopted the Sixteenth Amendment to the U.S. constitution, which made possible a federal progressive income tax. Also in 1913, the Federal Reserve System was created.

More than a dozen U.S. states followed Massachusetts within less than a decade. However, they had to contend with frequent battles before the U.S. Supreme Court on the constitutionality of government-set minimums. Read more

Fair wages are just another operational cost to meet

There are op-ed columnists weeping about all the jobs a $15 wage floor would supposedly eliminate, as if companies couldn’t just cut executive pay and shareholder payouts. Some still insist that, to avoid spurring unemployment, it would be better to pay everyone less than they need to pay bills.

I hate to break it to them, but the first goal of paid work is to get workers enough money to survive, not to give everyone something to do. But at any rate, there’s just so much evidence that reasonable minimum wages don’t cause mass unemployment (despite what those folks seem to think).

Really, it’s all a matter of priorities. Wages are just part of the field conditions in which companies compete under a properly regulated capitalist market, along with taxes and supply costs and anything else you can imagine a company needing to pay for. We’ve decided not to properly regulate the labor market, so companies use money for other stuff (or profits), and not for wages.

As FDR argued, if your business literally can’t operate without underpaying workers, it doesn’t deserve to operate. If higher wages for low-level workers is the breaking point for your company and no internal changes can save it, your company is a disaster. A properly regulated market would adhere to the principle of corporate survival of the fittest, but “fittest” would include ability to pay fair wages without bankruptcy. Small businesses wouldn’t go bust automatically either, because all workers would be getting paid more and thus have more to spend locally.

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