The Minimum Wage Goes Up


The national minimum wage rose by 70 cents to $7.25 an hour on July 24.  Set by Congress, the minimum wage was unchanged from 1997 to 2006, which meant that workers earning the national minimum suffered real and substantial declines in their standard of living.  Finally in 2006 Congress agreed to raise the wage by increments in each of the following three years; this is the final increase.

This increase, while welcome, is still limited.  For comparison purposes, in real terms the new minimum wage is still some 25% below what it was in the late 1960s.  Yes, that is right—in terms of purchasing power, the minimum wage now buys some 25% less than it did some 40 years ago.

The decline in the real value of the minimum wage means that full time workers earning the current minimum wage will find themselves living in poverty.  As the Center for Economic and Policy Research explains:

While significant, this month’s increase in the minimum wage will still leave a full-time worker receiving it with income far below what they need to make ends meet. Of course, what it takes to “make ends meet” is subject to much debate among experts, but regular Americans have a more definite opinion. Surveys conducted by Gallup over the last several decades have asked people to name the minimum amount of money that a family of four would need to “get along in your local community.” For much of the 1950s and 1960s, the typical response to this question was around $32,000 in today’s dollars. In 1969, a woman working in a minimum-wage job and supporting two children earned an amount not far below this basic “get-along” standard (adjusted for family size).

Today, such a worker would be nowhere near it. In 2007, the “get-along” amount was $45,000. Even after this week’s increase, a minimum wage worker will still earn less than $15,000 a year. Moreover, most will have no health insurance, no retirement plan, no paid vacation, or even sick days.

This increase, despite its limitations, couldn’t be more timely.  It means money in the hands of people who will spend it, thereby helping to stimulate our economy.  The Economic Policy Institute estimates that the 70-cent increase will boost consumer spending by $5.5 billion over the next year.

Sadly some economists dismiss the minimum wage as irrelevant, arguing that it only helps middle class teenagers working part-time for spending money.  In reality, 76% of all workers earning the national minimum wage are over 20 years of age.  And even teenagers need the money to help themselves and their families in this period.

Moreover, the gains extend significantly beyond the 2.2 million workers currently earning the minimum wage to include a large percentage of the almost 8 million workers who earn wages just slightly above it.  This happens because most companies have found it beneficial to maintain a wage scale and an increase in the minimum wage forces them to increase the wages of those who previously earned above the past minimum.

Seems all to the good right?  Well, not according to the logic of some.  According to these analysts, this increase is dreadful.  The reason: raising wages of those at the bottom will push up labor costs, hurt profits, and prolong the recession.  Interesting isn’t it—when the economy was going up, most of these people defended policies that produced a real decline in worker earnings.  They are doing the same now, even though the economy is going down.

Capitalism is often defended as the best means to a desirable end.  But in reality it has become the end itself.  We are now told what compromises we must make (in wages, working conditions, social services) in order to sustain profits.  Seems like it is time for us to pursue the creation of a system that can help us get to where we want to go.


Who Doesnt Have Health Insurance?

Who are the uninsured?  According to the results of a June 2009 Gallup survey,  as reported by the New York Times, 16% of the US adult population have no health insurance. More specifically, as the chart below highlights, Hispanics, the poor, and the young are most at risk of being uninsured.


The Politics of Health Care Reform

OK class—last time we discussed the need for health care reform.  Now we are going to have a lesson on the politics of health care reform.

Click HERE for a chart that shows (1) how much money every US senator, by state, received from HMOs and the health insurance industry last election cycle and (2) the state by state growing gap between health care premiums and median wages over the period 2000-2007.

There are even review questions to make sure that you are paying attention!

The Need for Health Care Reform

How good is the US health care system?  Here is what the conservative British Economist magazine recently had to say:

America’s health-care system is the costliest in the world, gobbling up about 16% of the country’s economic output. Comparisons with other rich countries and within the United States show that its system is not only growing at an unsustainable pace, but also provides questionable value for money and dubious medical care.

And some people wonder whether we really need major reform?

The market has had its chance, producing high costs and low value for the great majority (although high profits for a powerful minority).  It is time for single payer.


Unemployment hits 23.5% in Oregon–

How bad is the unemployment problem in Oregon (and the rest of the US)?

The New York Times offers a graphic that allows you to see the value of the two main unemployment indicators (U-3 and U-6) for every state in the country.  U-3 is the official rate; it is 9.5% nationally and 12.2% in Oregon.  U-6 is the adjusted rate (which means it takes into account involuntary part-time employment and discouraged workers).  It is a crushing 16.5% nationally and an even higher 23.5% in Oregon.

That’s right—23.5% in Oregon.

According to the Times, the U-6 rate “was 21.5 percent in both Michigan and Rhode Island and 20.3 percent in California. In Tennessee, Nevada and several other states that have relied heavily on manufacturing or housing, the rate was just under 20 percent this spring and may have since surpassed it.”

I think we are moving beyond the “Great Recession” to the “Great Depression 2.”

Those arguing about whether we need a bigger or smaller stimulus are missing the point–we need a new economy.


Learning From China?

What words come to mind when you think of the Chinese working class?  If passive was one of them, think again.

The China Labor Bulletin just released a major report on the state of the Chinese workers’ movement called Going it Alone: The Workers’ Movement in China.  After analyzing collective labor protests during the years 2007 and 2008, the report identifies the following three major trends:

  • Workers took matters into their own hands. Bypassing the largely ineffectual official trade union, they used public protest as a means of forcing local governments to intercede on their behalf. And, in many cases, workers were successful.
  • Strikes ignited other protests in the same region, industry or company subsidiaries. The wave of taxi strikes that swept the county at the end of 2008 exemplified both the spread of industry-wide protests and the willingness of local governments to negotiate with the workers.
  • Workers’ demands became broader and more sophisticated. Previously, disputes were mostly related to clear-cut violations of labor rights, such as the non-payment of wages, overtime and benefits, but in the last two years collective interest-based disputes came to the fore, with workers seeking higher wages and better working conditions, and protesting arbitrary changes in their employment status and pay scales. One of the major causes of discontent was, for example, attempts by managements to circumvent the new Labor Contract Law by forcing employees to relinquish long-term contracts and rejoin the company on short-term contracts or as temporary labor.

How would we measure up if a similar report were done in the US?

Action Gets Results

From the Wall Street Journal, June 29, 2009:

British Workers Recover Jobs After Mass Protests

LONDON — Hundreds of laid-off U.K. workers got their jobs back this week after organizing mass protests at energy plants across the country, coordinated through text messages and social-networking Web sites.

The contractor companies at Total SA’s 200,000-barrels-a-day Lindsey oil refinery met nearly all the striking workers’ demands, which had become a rallying cry of sympathy strikes across the U.K.’s engineering-construction industry. More than 8% of the industry’s work force walked out, although the protests didn’t have an impact on production.

“Total are pleased the contractors and their work force were able to reach a positive conclusion,” a spokeswoman for the French oil major said. The strikes bypassed official trade-union channels as they weren’t called after a vote by members and didn’t go through the U.K.’s legal requirements for industrial action.

Employers agreed to reinstate the entire 647-strong work force at Lindsey and, on Monday, a full return to work on a £200 million ($331 million) construction project to build a refinery unit, according to a joint statement late Thursday.

The speed and scale of the wildcat strikes, unprecedented in the U.K., caught energy companies by surprise, with protests organized by assembling large groups of people at specific sites through mass text messages.

“The idea of spreading it by text messages was just instinctive, you get your mate on the phone,” said Alistair Tice, a regional secretary for the U.K. Socialist Party in the Yorkshire and Humberside region. The engineering-construction industry is largely composed of itinerant workers with networks all over the country, making it easier for strikers to mobilize, he said. For years, U.K. governments have taken a hands-off approach to industrial disputes. However, as the U.K. recession has deepened, the government has appeared more willing to assert its views.

“I’m sure the government was concerned and was closely monitoring the situation, but there was no direct pressure,” said Mike Hockey, managing director of the Engineering Construction Industry Association.

On Friday, Prime Minister Gordon Brown’s spokesman welcomed news of the deal. “It is a positive step forward,” he said. “We’ve made clear on a number of occasions over the last week or so that it’s important that talks do resume.”
—Laurence Norman contributed to this article.