Dear Citizens and Elected Officials:
Despite all the hard work by various grass root labor activists and considerable shoving by the left side of the Democratic Party, we American workers are still struggling to get a $15 minimum wage through the Congress, a national minimum wage increase from the current $7.25 an hour. The public supports it, but many in the business community do not, especially small businesses.
But what if the trends of the Golden Decades of the U.S. economy, that is, 1945-1975, had held, especially those tracking productivity gains and wage increases, which went nearly lock-step during that glowing era, and then diverged so dramatically, so badly that wages fell also way behind inflation?
Well, economist Dean Baker offers a take on “what if” here, and his chart I’ve chosen as the lead picture tells the story graphically. Here is the full article: rwer.wordpress.com/…
However, Baker, ever the realist in tempering even his own ideals, then explains why such a tantalizing wage isn’t possible given the other changed realities in the economy since the Golden Decades. (I’m partial to the French version of that period, Les Trente Glorieuses which I have ringing in my head from Thomas Piketty’s repeated use in his magisterial Capital in the 21st Century (2014) although it was, according to Wikipedia, a French demographer, Jean Fourastie, who first coined the flowing term.
Baker says, just and justified by the earlier trends or not, a $26 per hour minimum wage would cause havoc today because, well, the system is rigged (promoting his book, Rigged (2016) in so many ways that it would result in unemployment and inflation, which are the two dramatic hydra-heads of doom from the 1970’s, AKA “Stagflation.”
I dissented from Dean’s “impossibility today” by writing the following:
As usual, thank you Dean Baker for giving us a tantalizing view of what might have been, raising our hopes that now that many are for $15 an hour, but not yet quite the Democratic Party in the breach, you were going to raise the ante – and call – at $26 per hour.
But no, always sober and responsible Dean Baker walks us back through the minefield of why $26 under current structural situations, including “the greatest transfer of wealth in human history” of some $49-$51 trillion dollars upwards since 1975″ makes that an impossibility. Baker is citing the same trend as that dramatic declaration which came, in the fall of the Presidential election year in the US, 2020, from a Time magazine article here https://time.com/5888024/50-trillion-income-inequality-america/ and a study conducted through the RAND organization. One would have that thought that with a headline like that it would have…but no, I never heard anyone talk about it during our Presidential “campaign.” (The authors are Nick Hanauer and David M. Rolf).
Now the interesting thing, Dean, is that the two authors of this Time magazine article, and of the study, are respectively an entrepreneur-philanthropist and a former Union leader. It does tell us a lot though, that neither’s camps of colleagues seemed to jump on the train which was crying “greatest crime of the century” to anticipate Mr. Trump’s later appropriation of the claim.
Ok, let’s descend into the economic trenches to where Mr. Baker claims that $26 per hour would lead to unemployment and inflation. Is that a slam dunk put down, Dean? I’m not so sure. It’s sure conventional wisdom, buttressed by the fact that $50 trillion went upwards, but there’s a little difference in the propensity to consume, isn’t there, between the upper 10% and the bottom 80%? Also following conventional wisdom, business would automate, go the AI route wherever possible given those wage pressures, but wait, didn’t some rival economists over at MMT land also call for a job guarantee (L. Randall Wray, most prominently) which became part of the Green New Deal Resolution in Feb. 2019? {Editor’s Note: Wray’s essays on these topics: www.levyinstitute.org/…; www.levyinstitute.org/… — “MMT’s State of Play in Washington, DC — with ample coverage on what causes inflation)
I think it’s obvious that such a major shift in purchasing power to the bottom 80% would be bound to change the demand for certain goods, from apartments for housing to homes, more auto demand and travel…and so forth…but wouldn’t industry increase production in those areas – or just ride the higher price waves possible without lifting a finger to increase demand?
In other words, our political economy could accommodate this vast $50 trillion “transfer” of wealth and income upwards between 1975-2018 (the boundaries of the study) but would fall apart if the transfer were reversed?
And I’m still scratching my head over how the AFL-CIO did not jump on this article, “the greatest transfer of wealth in human history” (the facts of which have been apparent for so long, if not the concluding sum ) instead of plodding along in the same inexplicable “business as usual” mode for them…their terrible history and the fate of the working class in America never being able to generate a leader with appropriate fire…until AOC came along…and she emerged from a pressure cooker district of front line workers under the shadows of NY City’s skyline…
And I’ve always been intrigued with the AFL-CIO framing of “class”: for them, I conclude from years of boring speeches, working class is something they help you escape from, to get to the promised land of “middle class” – “Unions built the middle class, brought you the ‘Weekend’”…
Not much pride or dignity in being working class then…kind of banks the fires so that the indignities of 1975-2018 wouldn’t set off an explosion in the boiler room.I think the explosion in the boiler room did occur; however, it occurred under Neoliberal guidance in the rise of the Republican Right, not in the Democratic Party of the AFL-CIO.
If only half the condescension and contempt which the populist right authors accuse our liberal, secular coastal elites as having visited upon American workers and rural residents were true, that would be enough in itself to explode the boilers in our democracy. That and the fundamentalist Religious Right belief that success is measured by one’s moral worth – a premise so intensely held that it could survive even the most prominent public refutation of its logic: Donald Trump himself.
Readers should know that if my comments seem to drift out of the rigors of trained economists, even left-leaning ones like Dean Baker, that’s because I’m working under the title of a forthcoming essay, still months away from completion, on “The Emotional Contours of American Politics: ‘dispensations’ granted to the Right but not the Left”
Best to you all,
GracchiBros
Frostburg, MD
gracchibros 