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

MA legislature blocks Gov. Baker’s painful education cuts

massachusetts-statehouse

Last week the State Senate voted to restore much of the education funding to the Massachusetts State budget, including: $5.25 million to the University of Massachusetts, $217,000 for Quinsiggamond Community College, and, perhaps most importantly, $17.6 million in kindergarten grants. The House followed along the same lines.

By July 30, lawmakers had restored 60% of Governor Baker’s $162 million budget cuts (via line-item veto) to the $38.1 billion Massachusetts budget originally sent to his desk. As to be expected in Massachusetts, a state consistently ranked as having one of the country’s best public education systems, it was the cuts to education that drew the most attention and ire.

Senate President Stanley C. Rosenberg (D) spoke strongly about the need to keep funding for education:

“If we’re serious about closing the income inequality gap, expanding educational opportunities for working families must be an important priority. By overriding the governor’s ill-advised education vetoes, we’re helping middle-class kids get the tools they will need to prosper in a demanding and competitive economy.”

 
Governor Baker, who ran and won his seat as Governor as a moderate Republican in a deeply blue state, has been evasive when it comes to his true opinion of early childhood education. While running for governor, he insisted:

“We need to make sure there’s a runway here between pre-k into strong elementary and middle school and high school education.”

 
However, as a candidate, he refused to pledge to shrink the waiting list of 17,000 low-income students hoping to get a spot in a subsidized pre-kindergarten program.

As governor, Baker has frequently pointed to the cost of pre-Kindergarten programs, but vetoed a program to establish best practices for cost-control in pre-K programs. Baker also frequently sites a Brookings Institute study, which notes the disappearance of benefits of a pre-K program by the third grade if students are in under-preforming schools. This seems like a thin defense for cutting pre-K programs, but an important reason to figure out how to improve pre-K programs.

Governor Baker points out that the $17.6 million of kindergarten grants he planned to cut was part of a program originally intended to help school districts establish full-day kindergartens and with 90% of MA towns now providing full-day kindergarten, the grants no longer fulfill their original purpose. Many school leaders say their kindergarten programs rely on this funding and if it is to disappear, it should do so gradually, not all at once, leaving school districts in the lurch.

The cut of these kindergarten grants was overridden unanimously in both the House by a vote of 155-0 and the Senate by a vote of 38-0.

The truth is that Baker governs a state where 73% of residents support early childhood education and 53% would support raising taxes to support it. With polls like this one, it is easy to see that Baker’s values may not match up with the state he is governing. It is hard to believe that short-sighted budget cuts like this one will not come back to haunt him.

Patriots’ Day 240

Today, in Massachusetts it’s Patriots’ Day, a holiday on which this year we mark 240 years since the Battles of Lexington and Concord on April 19, 1775 — depicted with some artistic license in the Capitol frieze currently featured at the top of this website.

For those of you not fortunate enough to be from Massachusetts, that was the day that the great and democratic people of this state decided to liberate the rest of the dithering colonies from Great Britain, over a year before everyone else could be bothered to sign the Declaration of Independence.

You’re all welcome.

Now here’s a photo I took last 4th-of-July Weekend of a cow next to Battle Road in Lexington. This cow is wholly unimpressed by your lack of Massachusetts-centric patriotism today.

Credit: Bill Humphrey for Arsenal For Democracy

Photo Credit: Bill Humphrey for Arsenal For Democracy

Conservatives can hate Massachusetts all they want, but that doesn’t change the fact that we shot first at the monarchy.

As a native, I can assure the rest of the country that we definitely haven’t forgotten about any of the early events leading to the Revolution. Massachusetts took a lot of the brunt of the British response before and during the American Revolution. Things like the Third Amendment are mostly about how we really don’t want British troops living for free in our houses in Boston. The American Revolution is a big part of Massachusetts history classes from grade school through high school, and the historical sites are literally all around us.

Contrary to the snide remarks of conservatives in many other states, I think we Bay Staters have a pretty solid handle on what the American Revolution was about and what unreasonable government oppression looks like. Nevertheless, Massachusetts folks by and large seem pretty happy with the progressive agenda they’ve been voting their representation into office to enact. If it were tyranny — or even mildly inconvenient, as in the case of tea taxes passed without legislative representation — we would have noticed by now.

Social Impact? Deval Patrick joins Romney’s old firm

Former Massachusetts Governor Deval Patrick seems to have decisively ended speculation he had national aspirations in the Democratic Party after announcing he will be going to work for the job-slashing firm Mitt Romney founded to help rich people park their money in “good causes”:

Deval Patrick is joining the Boston investment giant Bain Capital, where the former governor will start a new line of business, directing investments in companies that produce profits but also have a positive impact on social problems. […] Patrick will help give Bain its first foothold in the growing field of “social impact” investing, tackling social problems such as hunger and climate change with for-profit investments.
[…]
During the 2012 presidential campaign, when stumping for Barack Obama against Romney, Patrick declined to join Democrats who vilified Bain and Romney’s work for the firm. On MSNBC’s “Morning Joe,” Patrick called Bain “a perfectly fine company.”
[…]
For Bain Capital, the Patrick hiring goes beyond the common practice of giving a politician a desk and a rainmaker’s role between elections. It is a way for a firm known for hard-core business deals to provide clients such as pension funds and wealthy individuals with a social outlet for their money.

 

Former Massachusetts Gov. Deval Patrick served from 2007 to 2015. (Photo by Scott LaPierre)

Former Massachusetts Gov. Deval Patrick served from 2007 to 2015. (Photo by Scott LaPierre)

This role sounds innocuous, or even positive, and perhaps it will be. But Bain in particular has a fairly nasty reputation, and the general field of “social impact investing” can be fairly shady. Instead of just using money to fix long-term problems, everything becomes a shorter-term profit-seeking investment. Many of these private sector investments aim to replace government functions (or even profit off government) and treat all the problems in profit/loss terms. Whereas a one-way donor or a government program is ostensibly acting in the public interest, all social impact investments are made in the primary interest of the shareholders or company stake-owners. Some of the money that could be re-invested into getting an even bigger impact is instead needlessly siphoned out to create a profit margin.

Moreover, I am specifically concerned because of the recent, very sketchy “social impact” investments of Goldman Sachs in the Massachusetts correctional system, when Gov. Deval Patrick was still in office, which could foreshadow the type of investments he would introduce into the Bain portfolios. Such investments are far more concrete (and financially less abstract or long-term) than amorphous goals like “hunger” and “climate change.” I wrote about them in May 2014:

Recently, in some states, Goldman Sachs has been issuing “social impact bonds,” a new financial instrument that purports to help cure social ills with Wall Street’s “help.”

In this case, they’re loaning $9 million to the state of Massachusetts to help support a Boston organization that tries to help young offenders from bouncing back into prison. (Reducing young recidivism is a good social goal, obviously, and would have a ripple effect on crime prevention.)

If the effort reduces the number of days past inmate spend back in prison — which would save the state money — the savings would go back to Goldman Sachs, up to a million dollars. If the effort really pays off (above and beyond the bond repayment terms), then the state would get to keep the money. Of course, if the effort doesn’t hit the minimum targets needed to generate enough savings, Goldman Sachs would still get interest payments on the bond, but would lose the principal loan ($9 million or however much of it couldn’t be repaid due to insufficient savings).

As private investments in the prison industry go, it’s not the worst thing in the world. At least the profit incentive is toward rehabilitation rather than toward further imprisonment in the way privatized prisons are. But the question is why is it even necessary to involve the private sector middleman in the first place?

The state could pay for the upfront cost of the program through tax revenues (if it were willing to raise taxes, of course), instead of taking a loan, it would keep all the money and not end up paying Wall Street no matter how things turn out. That money could be reinvested into expanding the successful efforts even more, thus benefiting all taxpayers.

In my opinion, the job of corrections and the rehabilitation of young offenders is part of the role of government. The private sector is free to help, but it should be an add-on to the process, not a redundant profit diversion mechanism in the middle.

 
Another problem is the issue of emphasizing data-driven decision-making in government. The profit motive strengthens this trend much faster, even though government is often meant to be performing roles that could not be profitably well executed by the private sector and remain profitable. The data-driven policymaking favored by such approaches presents a false objectivity in place of really subjective questions: Read more

Governor Charlie Baker’s MBTA problem

Anti-tax Massachusetts Governor Charlie Baker says tax-revenue-starved MBTA’s service during these massive storms — wherein ancient equipment has been breaking down at the mechanical level from all the record-breaking snow and ice — has been “not acceptable.”

He’s just proposed $40 million in cuts to state transportation (not to mention his legacy role in under-funding transportation since the 1990s) but also has the audacity to complain about the functionality of the state’s transportation …. It’s amazing how refusing to properly fund government services keeps them from performing effectively.

Pictured: MBTA Orange Line platform at Green station, early afternoon on Monday February 9, 2015.

Pictured: MBTA Orange Line platform at Green station, early afternoon on Monday February 9, 2015.

New Jersey still no clearer on Charlie Baker’s role in scandal

Weird that the Boston Globe Editorial Board endorsed Charlie Baker for Governor of Massachusetts after the paper’s own coverage back in June about the connections between Baker and the pay-to-play scandals of the Chris Christie Administration in New Jersey:

Baker’s new-found notoriety in the Garden State came to a head when the New Jersey State Investment Council agreed to seek a legal review of the $10,000 donation he made to the New Jersey GOP in May 2011 — just seven months before General Catalyst, the investment firm where he is listed as an “executive in residence” principal, received $15 million from the state’s pension fund.

The council’s decision sparked a series of headlines across the state that has put Baker in the middle of the ongoing media feeding frenzy that is swirling around Christie and his administration.

Just last week, a Washington-based campaign finance watchdog group, Citizens for Responsibility and Ethics in Washington, called on the Securities and Exchange Commission, the New Jersey attorney general, and the state’s Election Law Enforcement Commission to investigate a possible connection between the donation and the investment.

Here’s a sampling of some of the headlines over the past month: “N.J. pension fund’s investment draws pay-to-play inquiry” is the way the Philadelphia Inquirer’s website, philly.com, headlined its story. “Christie administration to investigate pension investment tied to Massachusetts Republican” topped the story in the Newark Star Ledger. The Asbury Park Press and the Bergen Record covered the meeting with stories detailing the controversy.

The Inquirer website salted the wounds with a huge photo of Christie on a stage with Baker, then the 2010 GOP gubernatorial nominee, when the New Jersey governor came to Massachusetts to campaign for him. It also carried a head-shot of Baker farther on in the story, with the phrase “pay-to-play” in the caption. The controversy is also drawing national media. Businessweek ran a piece about the council’s decision, Fortune magazine has weighed in, and CNN’s website has also followed the story.

 
According to David Sirota, writing in the International Business Times last week, Chris Christie is now actively suppressing information related to the inquiry into Baker’s involvement in the situation in New Jersey.

As chairman of the Republican Governors Association, New Jersey Gov. Chris Christie has helped Charlie Baker with millions of dollars worth of ads supporting his Massachusetts gubernatorial campaign. But that’s not the only way he may be boosting the GOP candidate in the final weeks of a close election: Christie officials are blocking the release of the findings of New Jersey’s pay-to-play investigation into Baker.

The documents being withheld pertain to an investigation of Baker’s $10,000 contribution to the New Jersey Republican State Committee. The contributions came just months before Christie officials gave Baker’s company, General Catalyst, a contract to manage New Jersey pension money. New Jersey’s pay-to-play rules prohibit contributions to state parties from “any investment management professional associated” with a firm managing state pension money.

When the campaign donations and subsequent pension contract came to light in May, Democrats criticized Baker, who was then launching his 2014 campaign for governor of Massachusetts. In response, New Jersey launched a formal investigation into Baker’s contributions. The Newark Star-Ledger reported at the time that Christie officials “said the review would take several weeks.”

In a reply to International Business Times’ request for the findings of the audit under New Jersey’s Open Public Records Act, Christie’s Treasury Department said the request is being denied on the grounds that the documents in question are “consultative and deliberative material.” Despite officials’ assurances in May that the probe would take only weeks, the New Jersey Treasury said in September that the investigation is still “ongoing” — a designation the department says lets it stop the records from being released.

 
As a reminder: If the governor of Massachusetts has to resign for some reason — which, between scandals and promotions to Federal offices, is pretty common for U.S. governors in general these days — the lieutenant governor becomes Acting Governor of Massachusetts. From New York to Arizona, in the last six years, we’ve seen some pretty terrible lieutenant governors fail to rise to the challenge when suddenly promoted. If Charlie Baker becomes governor, and his term ends unexpectedly early for any reason, his current running mate, anti-gay Karyn Polito, would be the acting governor of Massachusetts.

5 reasons I’m supporting Martha Coakley after the primary

She wasn’t my first choice for Governor of Massachusetts, but here are 5 big reasons to make sure Martha Coakley wins in November, instead of Republican Charlie Baker.

Above: Atty. Gen. Martha Coakley. (Credit: Fogster - Wikimedia)

Above: Atty. Gen. Martha Coakley. (Credit: Fogster – Wikimedia)

  1. Veto Wielder: No matter who you supported in the Democratic primary, nothing genuinely progressive you wanted to see happen is going to get done to advance Massachusetts if Charlie Baker becomes governor and wields the veto pen. No matter how liberal he claims to be, he still identifies as a Republican, rather than a conservative Democrat, and that tells you where his priorities will lie. It definitely won’t be in pushing progressive laws and expanded investments in our state’s future, and it will likely mean vetoing them on so-called “fiscally conservative” grounds or for the benefit of Big Business.

    Even with strong Democratic majorities in the legislature, there is enough of a conservative wing in the Massachusetts Democratic Party to sustain Baker vetoes or derail and water down legislation toward elusive “compromises.” We saw what happened when we let Mitt Romney hold the veto pen: health insurance reform cost-controls were ripped out and the state’s health costs ballooned. We wouldn’t even be looking seriously at a “healthcare executive” to run the state if it weren’t for the last Republican’s horrible job of trying to make health care policy in the first place. We need a Democratic Governor to prevent that from happening all over again. Time and again, Democratic governors across the country have proven more fiscally responsible than their “fiscal conservative” counterparts in the Republican Party.

    In contrast, Martha Coakley has been running on a progressive platform this year with a long list of ambitious agenda items. She’ll work with the legislature — not against them — to make some of those ideas happen.
  2. Lieutenant Governorship and the Republican Platform: You might think the lieutenant governor (elected on a ticket with the governor in the general election) is unimportant, but if the governor has to resign for some reason — which, between scandals and promotions to Federal offices, is pretty common for U.S. governors in general these days — the lieutenant governor becomes Acting Governor of Massachusetts. We had two Republican Lieutenant Governors become Acting Governors in Massachusetts from 1997-2001. One even had to deal with 9/11’s impact on the state, after two flights from Boston were hijacked and ended in disaster. Fortunately, she was reasonably up to the job, but this is not something to leave to chance. From New York to Arizona, in the last six years, we’ve seen some pretty terrible lieutenant governors fail to rise to the challenge when suddenly promoted. So who did Baker select for that job?

    Supposedly inconsistent with his own views, Charlie Baker chose an anti-marriage equality “stalwart” (as the Boston Globe put it) as his running mate, to please the fringe base of the rapidly dwindling Massachusetts Republican Party. Last time around, Baker actually had the guts to run with an openly gay state senator, who this year was forced to boycott the state convention because it was set to adopt an anti-gay, anti-choice platform in the year 2014 in Massachusetts. Baker isn’t even in office yet and he’s already catering to the lunatic right-wing, while trying to convince us he’s more liberal than ever.

    If Charlie Baker becomes governor, and his term ends unexpectedly early for any reason, anti-gay Karyn Polito would be the acting governor of Massachusetts. That’s unacceptable. If Martha Coakley becomes governor, in the number two spot we’ll get Steve Kerrigan, a competent and progressive former Ted Kennedy staffer. The contrast in backup governors could not be clearer.
  3. Nominations: This is pretty straightforward. I would rather have any Democratic governor nominating people to the state’s courts and cabinet positions than Charlie Baker nominating them. His first nomination so far — his running mate, see #2 — has already given us a strong hint that he would use nominations as a way to appease conservatives who think he’s too moderate.

    Appointed officials and judges tend to be the people residents end up most affected by, whether they realize it or not. They are the people who make the big decisions on how to implement what the lawmakers approve or how to interpret those laws. If you don’t want your rights and programs in the hands of unqualified, right-wing Republican Party favorites, Martha Coakley needs to become governor instead of Charlie Baker.
  4. Executive Orders: When faced with an opposing party’s control of the legislature, executives start getting creative with executive orders. Sometimes that’s a good thing, but sometimes it’s a way of circumventing the normal legislative process and making or suspending rules and regulations by fiat. Again, there’s a legitimate role for executive orders, but I would trust Coakley over Baker on executive orders. Plus, she won’t need to rely on them as heavily, because she can go to the legislature controlled by her own party.
  5. National Implications…
    Implementation of Federal laws: From the Affordable Care Act’s Medicaid expansions to any number of other Federal laws that allow flexibility to state governments, we’ve seen in the past several years what the consequences can be of allowing Republicans to become governor. Don’t let Charlie Baker on Beacon Hill help Capitol Hill Republicans block President Obama’s agenda even more.

    Baker for President? Charlie Baker, much like the last Republican governor of Massachusetts, Mitt Romney, has already flipped-flopped a lot to try to reposition himself for a second attempt to win office. If Baker becomes Governor of Massachusetts, it will immediately position him on the shortlist for the Republican nomination for president in 2020 or 2024. The media and the party opinion-makers love it when somebody doesn’t quite fit the partisan mold and manages to become governor of a state that is traditionally associated with the other party. These narratives are always overblown and oversimplified, but they sure fuel a lot of presidential campaign bids. Let’s not help Republicans find an electable, flip-floppy moderate to run for the White House.