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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

November 6, 2013 at 10:45 AM

Minimum wage: Today SeaTac, tomorrow the nation?

Well, no. If the trend holds and SeaTac voters approve a $15-per-hour minimum wage, it will be very hard to translate this victory into a national movement.

SeaTac is a tiny municipality with only 12,000 registered voters. It has a large number of low-wage restaurant and hotel businesses that are captive to their proximity to Seattle-Tacoma International Airport. They will have little choice but to pay the new wage.

For that same reason, SeaTac won’t likely be a useful laboratory to examine the unintended consequences that critics warned about, or the benefits that supporters claim.

Enacting the wage in a city such as Seattle would be much more difficult, even though Mayor-elect Ed Murray has paid lip service to it. Business community resistance would be fierce and potent. And businesses would have more options: Move, close, cut back hours and refuse to hire the least-skilled workers.

America does face a serious inequality problem that drives support for measures such as the SeaTac vote. At one time, businesses shared productivity gains more widely with workers. That stopped in the 1970s. If the minimum wage had kept pace with productivity, it would have been $21.72 an hour last year, according to the Center for Economic and Policy Research. Instead, the federal minimum wage is $7.25 and $9.19 in Washington, the highest in the nation.

According to Pulitzer Prize-winning reporter David Cay Johnston, last year the median wage hit its lowest level since 1998. Statistically, half of working Americans are falling behind to an astonishing degree. On the other hand,

While most workers are having a tough time, the (Social Security Administration) data reveal a dramatically different story at the top of the job market. The number of workers making $5 million or more grew almost 27 percent, to 8,982 workers, up from 7,082 workers in 2011. Total wages earned by these highly paid workers grew 40 percent — 13 times the overall increase in compensation for workers.

Traditional tools for raising wages, such as private-sector unions and a business ethic that tied a company’s interests to the wider public good (“What was good for our country was good for General Motors and vice versa,” as GM President Charlie Wilson said) have been in a long decline.

Globalization and purblind trade deals have sent millions of jobs overseas, more were lost to the Great Recession, and those created tend to be low-wage with few benefits. A huge cohort of older workers are in low- or minimum-wage jobs. As the well-off self-segregate in their own suburbs and gated properties, middle-class neighborhoods are in decline.

Mobility has stagnated as those at the bottom find it much harder to move into the relatively few sectors with high-skilled, high-wage jobs. And New York Times columnist Tom Friedman’s mantra of “everyone an entrepreneur” is held back by, among other things, lack of intergenerational wealth and no universal health coverage.

No wonder demand is holding back growth. So many Americans lack purchasing power.

I’m skeptical that this can be fixed by legislating a relatively high minimum wage. True, New Jersey voted for a constitutional amendment raising that state’s minimum — by $1 to $8.25 an hour. “So that’s it,” as Tony Soprano said.

Policies that would make a difference include easier unionization, better education for the poor,  smarter trade agreements, corporate governance and government incentives that tilt the balance back toward workers and away from financial plays, and reversing the suicidal decline in infrastructure investment…it’s a long list, and all of it heavy lifting against powerful special interests.

But the people at the top shouldn’t be surprised that today’s inequality is driving a political backlash of the kind seen in the SeaTac vote.

And Don’t Miss: FedEx and UPS have turned Memphis and Louisville into “aerotropolises” | The Economist

Today’s Econ Haiku:

Tweet an IPO

It’s such a sexy story

But where are the jobs?

 

 

Comments | More in Inequality, Jobs/Unemployment | Topics: minimum wage, SeaTac vote

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