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Jon Talton

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

December 18, 2013 at 10:19 AM

A higher minimum wage: Seattle and Washington (D.C.)

If advocates of a higher minimum wage in the city of Seattle succeed, it might look something like what has happened in the District of Columbia. There, the city council has voted to raise it to $11.50 an hour and has the votes to override a veto from Mayor Vincent Gray.

This is not the $15 per hour narrowly approved for Sea-Tac and promised as a battleground issue in Seattle by Council member-elect Kshama Sawant. But it is more politically realistic.

D.C. has some advantages. As the nation’s capital, it has a wealthy elite that needs the lower-wage workforce in the city. The new minimum would be indexed for inflation and lawmakers in the Maryland suburbs have approved similar increases. Workers in the Virginia suburbs, i.e. right across the bridges, would make only the federal $7.25 an hour.

So between SeaTac — which has a captive situation thanks to restaurants and hotels by the airport — and D.C., we will have two laboratories that might give us a sense of how this would play out.

What will be the unintended consequences? For example, would it be one more blow against unique, locally owned businesses? Would it cause fewer people to be hired at fast-food restaurants, especially those with the least skills, making their entry into the labor force even more difficult?

Would it provide an upwind that would propel other wages higher for many more workers than those getting the legal minimum? We don’t know.

The minimum-wage crusade is perfectly understandable in a time of historic inequality. Anyone who is not concerned has not been paying attention. The problem is not a lack of equality of outcomes — few Americans ever supported that — but a lack of opportunity, widely available.

Unlike the first three decades after World War II, gains in productivity and skills aren’t being widely shared, even among highly skilled workers. For Exhibit A, consider Boeing, which would rather buy back shares and reward mostly rich stockholders rather than invest some cash in a more equitable compromise with its machinists, and in doing so ensure a much smoother transition to the 777X.

Worse, for the lower skilled, pathways up that once rewarded gaining new skills are being closed off. Economic mobility is at a decades low. Some of this comes from the destruction of manufacturing jobs. Some from an inability to create pathways up in services. Some from a gamed system that favors those who make money by investing, often in exotic securities that don’t create jobs, over those who depend on wages.

But the minimum-wage effort is also a bit like performing CPR and thinking this will fix the patient’s heart.

The scores of policies, compromises and balances that created both the greatest middle class in history and the most successful business nation in history have been destroyed piece by piece over more than 30 years. It was a social compact by laws, trade protection, unions, antitrust and tax policy, yes, but also a broad consensus among Americans.

That’s gone. And I don’t know how we put it together again.

Maybe it starts here, with a proposal that sounds so far-reaching (SOCIALISM!!! as some of my emailers put it) that it gets the attention of elites that control politics. Maybe not.

In many ways, we are back in the 1880s without the remains of a frontier to exploit. But I don’t see a new progressive movement on the horizon. Indeed, millions of people who are suffering economically keep voting to perpetuate the policies that favor the elites.

And Don’t Miss: This chart blows up the myth of the welfare queen | The Atlantic

Today’s Econ Haiku:

Just come on back, Bill

Make it easy on the board

Microsoft ’14




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