Tag: inflation

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Minimum wage Ontario Political Eh-conomy Radio Unions USA Workers

What do we do when we Fight for $15

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On this episode, three guests provide some perspective on the politics and the economics of the Fight for $15. First, I speak with Jonathan Rosenblum, campaign director at the first Fight for $15 at SeaTac Airport, just outside Seattle, Washington. Workers there won an immediate raise to $15 via a municipal ordinance in 2015. Jon is also an author and has recently published Beyond 15: Immigrant Workers, Faith Activists, and the Revival of the Labor Movement. Next, I move closer to home and talk to Sheila Block, economist at the Ontario office of the Canadian Centre for Policy Alternatives. Sheila lays out the context for the $15 and Fairness campaign in Ontario, one of changing work and a weaker labour movement. Rounding out the show, economics writer and researcher Nathan Tankus returns to the podcast to discuss the economic arguments in favour of raising the minimum wage. We go beyond the narrow issue of  minimum wages to broader challenges to “textbook economics.”

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Minimum wage

The $15 minimum wage is good: busting business lobby myths

With the Ontario government seriously considering raising the minimum wage thanks to the tireless organizing efforts of the $15 and Fairness campaign, the labour movement and thousands of supporters, the business lobby is out fear-mongering in force. Here is a tool for the rest of us to fight back. It’s a collection of 5 myths and facts about raising the minimum wage: clear arguments for why $15 an hour is right for Ontario workers and the Ontario economy. This is an edited version of a section prepared for the Rank and File $15 and Fairness Now! An Organizer’s Handbook for Building a Movement.

MYTH #1: Raising the minimum wage will cost low-wage workers their jobs.

FACT: There is resounding evidence that raising the minimum wage is not a job-killer. Economists doing cutting-edge studies have found that the typical minimum wage increase does not cause major overall job loss. “Job loss is more of a threat than a theory.” For instance, the threat that robots will take our jobs has been made for over 200 years and full-time work is still 40 hours a week or more! The argument that jobs will be shipped offshore fails similarly. As much as business tries, it’s not yet possible to move a barista job halfway around the world. There are still so many jobs that require human labour.

A $15 minimum wage would pump billions of dollars into the pockets of low-wage workers and thus the Ontario economy. Jobs would be created as a result of the new economic activity, compensating for losses incurred by businesses that can only function on poverty wages. As the minimum wage goes up, workers become more valuable to businesses and jobs generally get better. Economists have found that when the minimum wage rises workers get more training and there is less turnover. Businesses put more energy into raising efficiency rather than keeping tabs on workers in poverty. And wages tend to become more equal: wages for managers and other high-paid workers don’t go up as much and businesses spend proportionately more on the lowest-paid.

Most importantly, potential job losses are not the only thing we should care about when the minimum wage goes up. Less poverty, better jobs, higher incomes for the lowest-paid — all of these would far outweigh the impact of a minimal job loss.

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Economic theory Value

There is no good value

A piece in the Financial Times from several days ago has finally pushed me to scribble down a few initial thoughts on value – a topic I been thinking about more and more. Titled “The attack of the rentier killers”, the article argues that the wealthy who hold and receive income from assets will fight low interest rates and rising inflation tooth and nail because it lowers the value of their assets. Paul Krugman has recently picked up on this topic as well, while the notion that only sustained low interest rates can “euthanize” a dangerous, politically-motivated rentier class originally comes from Keynes.

There is much to be said about this claim. One question is whether there currently exists a well-defined rentier class whose interests are opposed those of a class of capitalist producers. The growth of finance and its increasing integration into all other aspects of the economy challenge this idea. Furthermore, the current application of extraordinary monetary policy has produced a combination of low interest rates and low inflation. The former decreases the flow of gains from interest-bearing assets; at the same time, the latter means that all assets better maintain their value. Finally, current policy has led to a greater concentration of assets (I posted some thoughts on this here), which has disproportionately benefited the wealthy.

In writing this, however, I was motivated by a smaller point that comes right at the end of the Financial Times article:

Based on [the previous] analysis, the surest sign that our society is on the verge of […] a secular stagnation story is the increasing frequency and severity of bubbles today. But if they’re really symptomatic of the death throes of the rentier class, then perhaps they shouldn’t be feared by central bankers at all?

Instead, central bankers should start thinking about ways to create entirely new forms of positive value in society based on social, educational, sustainable or even humorous activity? Carbon credits, RINs, energy rationing units, brownie points and Dogecoins, and so forth.

I want to focus on the phrase “positive value.” I take this to be opposed to “negative value.” A likely example of the latter would be the financial returns that accrue to rentiers while asset price bubbles are being inflated; with the problem being that these same bubbles also end up harming others when they burst. The argument is that rather than continue to allow for the creation of financial bubbles that have negative economic impacts, we should instead create sinks into which rentiers can pile their money looking for higher returns, but which will also be socially-useful. Tongue firmly planted in cheek, the author even suggests feel-good brownie points as a worthwhile “positive value”-generating asset bubble vehicle.

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Central banking

Myths of central banking

The Bank of Canada has been in the news lately – or, more precisely, the news has been full of other well-placed people telling our central bankers what to do. In an interview on CTV this past weekend, Jim Flaherty made comments (later retracted) that Canada’s central bank will be pressured to raise interest rates sooner rather than later. On Tuesday, the influential, pro-business Conference Board of Canada also came out with some advice. A Globe and Mail editorial written its chief economist suggested, somewhat surprisingly, that the Bank should target a higher level of inflation, up to 4% from the current 2%.

Predictably, these pronouncements, especially Flaherty’s, spawned a chorus of criticism from conservative commentators. They lambasted the Minister of Finance for potentially undermining the central bank’s independence. Such attacks from the right were to be expected; however, even the NDP chimed in, calling the Minister’s comments “inappropriate”.

One reason for such universal criticism of any perceived meddling in central bank matters is that central banks are some of the most mythologized institutions of contemporary capitalism. They are often the subject of pious reverence on the part of media, politicians and economists. There is broad consensus that central banks should be independent and target low inflation (which, for many economies in the North has meant about 2%). This is why it was particularly odd to hear conservative voices question both of these assumptions: Flaherty, independence, and the Conference Board, low inflation.

In reality, however, both of these assumptions should be open to discussion and questioning. First, take the central bank’s independence. While we have many institutions that should be at arms-length from the government, these are largely bodies that hold government accountable and ensure that it is correctly carrying out its mandate – whether in terms of environmental protection, child welfare or accounting principles. The central bank is, however, not this kind of institution.

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Minimum wage Workers

Legislating a real raise: Minimum wages and real earnings growth

In a recent post titled, “What happened to the distribution of real earnings during the recession?”, Stephen Gordon presents a graphs that shows some significant growth in real (adjust for inflation) earnings in Canada between 2007 and 2012. In addition, plotting average annual growth rates in real earnings against the distribution of earnings, the graph has a U shape. That is, the growth rates of real earnings are higher for those at or near the bottom and those at or near the top of the earnings distribution, with a “hollowed-out” middle.

Figure 1. Stephen Gordon’s graph showing a U-shape in real earnings growth 2007-2012 (black line). Source: Worthwhile Canadian Initiative.

This graph, as well as several others presented by Gordon in this post and a previous article that show some sustained general growth in real earnings, goes against the received wisdom that real earnings have been stagnant, in Canada and across the world, for the past 30 or 40 years – especially so for low earners. What is behind the discrepancy between this new data and the long-standing trend? Gordon claims it is lower-than-expected inflation and, if not the active, then at least the passive policy of the Conservative government. I take issue with these claims.

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