Tag: labor

Should Low-Skill Workers Eat Cake?

Yesterday, the governors of California and New York signed legislation to raise their states’ minimum wage over the next few years to $15 an hour throughout California and much of New York. Similar proposals are percolating in other state and local governments, and Democratic presidential candidate Bernie Sanders has called for a national minimum wage of $15/hour.

Predictably, critics of raising the minimum wage are arguing that the higher wage floor will hurt employment for low-skill workers, the very people the wage floor is intended to help. A worker will be employed only if the value of his output is greater than the cost of employing him—a cost that includes wages, employer payroll taxes (e.g., Social Security, Medicare, unemployment insurance), training and outfitting costs, the new health care mandate and other benefits, etc. According to these opponents, the higher wage floor will reduce employment for low-skill workers and encourage employers to find non-labor ways to accomplish low-skill tasks (e.g., ATM machines, self-serve gas pumps, vending machines, automated phone answering systems).

Wage-increase supporters dismiss this concern, claiming there’s no proof that a higher wage floor hurts employment. A very large body of empirical research indicates otherwise, however, with the negative effects falling mainly on workers below age 25 (which isn’t surprising, as 77% of workers earning the federal minimum wage are below age 25, and they have few demonstrated work skills). Wage-increase supporters can argue the research isn’t unanimous, but given the one-sidedness of the extensive empirical evidence, that argument sounds a bit like climate change denial—if not creation science.

More thoughtful wage-increase supporters have begun offering a different argument: Yes, they concede, raising the minimum wage can hurt low-skill employment. But that harm is a worthwhile tradeoff for better wages for the remaining low-skill work: some workers may lose their jobs or some work hours, but others will get a raise.

This argument is important and interesting—in a Marie Antoinette* sort of way.

Senator Sanders and the Average Workweek

Senator Bernie Sanders recently tweeted the following.

Fortunately, the gruelingly long workweek described by Sanders is not the norm. In fact, leisure time has been on the rise. In 1950, an average U.S. worker worked 1,984 hours a year, or about 38 hours a week. In 2015, an average American worker worked 1,767 hours, or about 34 hours a week.

That means that the average U.S. worker had 217 more hours for leisure or other pursuits in 2015 than in 1950. That is about 9 days of extra time.

The 50-hour workweek described by Sanders is more common in China, where the average worker worked 2,432 hours in 2015, or around 47 hours a week. Compare other countries using HumanProgress.org’s interactive dataset.

Air Hostesses Then and Now

In the mid-1960s, being an air hostess was considered to be a glamorous job. Back then, however, air stewardesses were paid less than half of what they make today. They also had to endure much longer flights, since 1960s airplanes carried relatively little fuel and had to stop for refueling. That also meant that flight attendants had to serve more meals and, consequently, worked harder during the flight. Most importantly, the likelihood of dying on the job declined substantially. In 1965, there were 1,142 airplane fatalities per 250 million passengers carried worldwide. Only 761 people died out of over 3 billion people who flew in 2014.

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A Case for Making TTIP Better for Workers

In today’s Cato Online Forum essay, George Washington University Professor of Foreign Affairs Susan Ariel Aaronson argues that the “TTIP provides an opportunity to think differently about how policymakers in advanced industrialized economies can protect labor rights, encourage job creation, and empower workers.”  After describing some of the concerns workers have about the TTIP and explaining why certain parts of the agreement could serve to undermine labor rights, Susan provides some fresh recommendations for making the TTIP more appealing to workers.

Read it. Provide feedback.  And register for Cato’s October 12 TTIP conference.

 

TTIP: Battle for the Soul of Trade Policy?

In today’s Cato Online Forum essay, the AFL-CIO’s Celeste Drake asserts that labor unions are not opposed to trade per se, but to neo-liberal trade deals that only benefit corporate entities. Drake argues that the Transatlantic Trade and Investment Partnership offers a good opportunity to change the nature of trade agreements to include progressive, standard-raising provisions that promote inclusive growth and shared prosperity. She concludes:

No one believes that righting the course of globalization and trade will be quick or easy.  But if the process is to begin, the TTIP, with informed, active and engaged civil society on both sides of the Atlantic, seems an opportune place to make a stand to change the rules: not to stop trade, but to use it as a tool to achieve a global economy that works for all.

Celeste’s essay is offered in conjunction with a Cato Institute conference on the TTIP taking place October 12.  Read it. Provide feedback.  And please register to attend the conference.

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The Rising Cost of Labor — a Triumph for Capitalism

Articles on page A7 and A8 of Saturday’s Wall Street Journal, about rising wages in China and France, confirm something that I learned from Julian Simon. As the Journal reported:

The 14% wage rise for private-sector workers in 2012, reported by China’s National Bureau of Statistics on Friday, represented an acceleration from 12.3% in 2011.

And:

With high labor costs eating into his bottom line, Mr. Madec uses frozen ingredients—and even complete main courses—for the dishes served at Les Templiers…. a steady increase in labor costs and food prices has fueled an unexpected phenomenon: Many restaurants can no longer afford to prepare meals from fresh ingredients in their own kitchens.

And what’s the lesson I learned from Julian Simon? As I wrote in Libertarianism: A Primer,

Over the long run, in real terms, the only price that consistently seems to rise is the price of human labor.  Looking back a hundred years or so, we see that prices of goods–from wheat to oil to computers–have fallen, while the real wage rate has quintupled in 50 years.  The only thing getting more scarce in economic terms, that is, relative to all other factors, is people.

 

The National Equalization of Opportunity Board

The National Labor Relations Board filed a complaint last month to stop Boeing from building its new 787 in South Carolina rather than Washington State. As Arthur Laffer and Stephen Moore explain in today’s Wall Street Journal, the Board’s action stems from Boeing’s declaration that it cannot “afford a work stoppage every three years” as has been happening in Washington. The New York Times seems to endorse the NLRB complaint, implying that the federal government must force companies to do business in agency-shop states like Washington, because otherwise they couldn’t compete with more efficient right-to-work states like South Carolina.

Laffer and Moore claim that the NLRB’s move is unprecedented, but it is actually highly reminiscent of the “Equalization of Opportunity Bill.” The EOB forbade entrepreneurs from owning more than one business, in order to allow less efficient, less capable entrepreneurs to compete with them. The EOB is, of course, a measure enacted by the United States Government in Ayn Rand’s Atlas Shrugged.

Yet more evidence that the Obama administration is not only conversant with Rand’s classic, it is using the book as a policy model. It’s just a little confused as to which characters were the heroes and which the bad guys.