wages – Sheila Kennedy

A Different Kind Of Florida Man

“Florida man” has become a comedy label, a phrase recognizing the ubiquity of stories about someone from the Sunshine State doing something idiotic or bizarre (but definitely funny).

Business Insider, however, recently had a different sort of “Florida man” story, and it’s worth pondering.

As businesses across the country advertise for workers, as “we are hiring” signs proliferate and every day brings complaints from businesses that tell us they are struggling to find employees, a Florida man decided to test their claims. He submitted at least two applications every day in September, taking care, as he told the magazine, to apply only for positions for which he was qualified.

Joey Holz had watched as business after business complained that the availability of government stimulus money was keeping workers at home and out of the job market. The complaint–and the attribution of the scarcity to government largesse–“was so ubiquitous that he joined a ‘No one wants to work’ Facebook group.”

He said he found it hard to believe that government money was keeping people out of the labor force, especially when the end of expanded federal unemployment benefits did not seem to trigger a surge in employment. The expanded benefits ended in September, but 26 states ended them early in June and July.

“If this extra money that everyone’s supposedly living off of stopped in June and it’s now September, obviously, that’s not what’s stopping them,” he said. Workers have said companies struggling to hire aren’t offering competitive pay and benefits.

So Holz, a former food-service worker and charter-boat crewman, decided to run an experiment.

Holz spent a month applying for jobs, mostly at businesses whose employers had been vocal about a lack of workers . He kept track of those applications in a spreadsheet. After submitting 28 applications, he had received exactly nine email responses, one follow-up phone call, and one interview. That interview was with a construction company that had advertised a full-time job focused on site cleanup paying $10 an hour.

But Holz said the construction company instead tried to offer Florida’s minimum wage of $8.65 to start, even though the wage was scheduled to increase to $10 an hour on September 30. He added that it wanted full-time availability, while scheduling only part time until Holz gained seniority.

None of the companies that bothered to respond were paying over $12 an hour.

On September 29, after submitting 58 applications, Holz posted to Twitter about his saga, saying, ” y’all aren’t desperate for workers, you just miss your slaves.” The post went viral.

Holz acknowledged that his results may not be representative of the larger labor challenges in the country, since his search was local and targeted the most vocal critics of stimulus spending.

Holz is actually employed, and he noted that–despite the media focus on businesses that say they are struggling to hire–his own boss had experienced no staffing issues during the pandemic.

“Nobody leaves those positions because he takes care of his people,” Holz said, referring to his boss.

There is a larger lesson to be learned from the experiment run by this particular “Florida man,” if employers are willing to learn it. Research by the Economic Policy Institute confirms that lesson.

The author of the linked article concedes that, in a large and complex labor market like that of the U.S., there will periodically be pockets of bona fide labor shortages. But the article goes on to confirm “Florida man’s” conclusion: a far more common reason for such shortages is the reluctance of employers to pay enough to attract workers. “Employers post their too-low wages, can’t find workers to fill jobs at that pay level, and claim they’re facing a labor shortage.” A more precise formulation would be “I can’t find the workers I need at the wages I want to pay.”

The EPI analysis also points out that

when restaurant owners can’t find workers to fill openings at wages that aren’t meaningfully higher than they were before the pandemic—even though the jobs are inherently more stressful and potentially dangerous because workers now have to deal with anti-maskers and ongoing health concerns—that’s not a labor shortage, that’s the market functioning. The wages for a harder, riskier job should be higher.

“Florida man” proved the point…

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Taxes And Growth

One of the most reliable laments I post to this blog is the absolute refusal of many policymakers to base their decisions on evidence. We live in a time when experience and reality are no match for the preferred ideologies of our lawmakers. (In all fairness, that phenomenon is probably not new, but it has certainly become more obvious.)

Marketwatch is a business publication that focused upon that disconnect in an article from early May. The title was”Texas, California and Indiana offer surprising lessons about low taxes and economic growth” and the subtitle–which trumpeted the basic conclusion–was “Indiana slashed taxes. Yet wages have fallen even further behind the national average.”

If the subtitle was insufficiently clear, the introductory paragraphs left no doubt:

Among the most common claims of state economic development officials is that higher taxes drive down growth and cause businesses and people to relocate to low-tax states. If you listen to cable news, you are likely to hear dire stories of people fleeing high-tax states in droves.

Yet the high-tax parts of both California and Texas are growing faster than the low-tax parts of both states. And growth in Indiana, which has cut corporate and personal income taxes in the past decade as well as put a cap on property taxes, is dismal.

I tend to foam at the mouth whenever I encounter a reference to Indiana’s property tax cap–not only is the cap bad policy, not only does it disproportionately strangle urban areas in our rural-privileged state, but in an unconscionable move to elevate political game playing over responsible governance, former Governor Daniels constitutionalized the cap–ensuring that, even if subsequent evidence of its counter-productivity emerged, the measure would be virtually impossible to reverse.

The article wasn’t aimed at the multiple flaws of the tax cap, however, so I will leave my extended diatribe for another day.

Why is it that prescriptions for lower taxes, like other seemingly obvious economic “cause and effect” formulations, turns out to be contradicted by real-world evidence?

Modern economic research consistently reports that lower taxes tend to promote growth and migration, but only when all other factors are held constant.

Here’s the rub: It is straightforward to create a model holding all these other factors constant, but in the real world, they never are constant. So the role of taxes has to be weighed against the value of what tax dollars provide.

It took me a long time to recognize the importance of that insight. I used to think it was obvious that a higher minimum wage would depress job creation–until I realized that such a result required all things being equal–and all things are rarely, if ever, equal. The “obvious” result ignored–among other things–the effects of low-wage workers’ increased buying power. We now have real-world evidence from jurisdictions that raised the minimum wage that the “obvious” result isn’t necessarily the actual result.

In the case of economic growth, the article looks at the rivalry between Texas and California, and finds (surprise!) that the popular rhetoric doesn’t reflect reality.

Stories about people “fleeing” California for Texas are common, and Elon Musk’s high-profile announcement that he was moving to Texas fuels the anecdote-driven news cycle. Taxes per capita are higher in California than in Texas, giving weight to the story that low taxes are driving this migration.

In fact, in the last year for which we have data, two out of every 1,000 Californians departed for Texas, while 1.2 of every 1,000 Texans moved to California. This is hardly a notable exodus, and it hardly explains why a rational Texan would head to California. Something else has to be going on.

Furthermore, as the article notes, people are more likely to move from city to city within a state than they are to move out of state, and tax rates vary far more between local governments than between states.

In California, the total state and local taxes in the highest-taxed place were more than three times that of the low-tax county. In Texas, the difference is three times as large as in California.

Further contradicting the preferred story, it turns out that population growth in both California and in Texas is concentrated in the higher-tax places. That’s because–as city planners have long insisted–what matters most isn’t the tax rate (although it certainly factors in) but the quality of life. It’s value for the dollar.

Taxes represent one price for living in a particular city or town, but value — not price — is the key decision variable.

For the average family, value comes from tangible amenities like safe, livable neighborhoods, high-quality schools and great parks and trails. They go far beyond natural amenities such as beaches and mountains.

That’s a lesson I doubt Indiana’s gerrymandered legislators will ever learn.

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“The Poor You Have Always With You”

A few statistics about my state of Indiana (the state that Vice Presidential candidate Mike Pence brags is “a state that works”); these are facts that should “afflict the comfortable” and motivate the rest of us to support policies that will “comfort the afflicted”:

According to the latest Census numbers: More than 1 in 3 Hoosiers remain below self-sufficiency despite increased employment, 21.5% of Indiana’s children live in poverty, and the number of Hoosiers in poverty persistently hovers around one million.

A report on the Status of Working Families in Indiana 2015, issued by the Institute for Working Families, puts the information in an Infographic including state SNAP & TANF responses to poverty, and highlights what it calls the “21st Century Job Swap” from high & middle-paying to low-skilled, low-income jobs by industry;

The June data available from the Bureau of Labor Statistics shows that Indiana has a 108,400 jobs deficit when population growth since the recession is factored in.

The Annie E. Casey Foundation finds that Indiana ranks #30 in child well-being, having slipped 2 spots relative to other states since 2014.

Women are doing even worse than children in national rankings: Indiana is dead last in Work & Family rankings, 39th in Employment & Earnings, 37th in Poverty & Opportunity, and Indiana received a D- in the National Partnership’s Expecting Better report, “the most comprehensive analysis to date of state laws and regulations governing paid leave, paid sick days, protections for pregnant workers and other workplace rights for expecting and new parents in the United States”

Despite the fact that the minimum wage cannot support even a single adult in any county in the state, Indiana’s legislature has not only refused to raise that wage– but has preempted the authority of cities and counties to do so (or to provide paid leave, or enact environmental regulations, etc.)

To add insult to injury, in 2015, Governor Pence diverted three and a half million dollars of desperately needed TANF funds to anti-abortion crisis pregnancy centers.

There is much more, but rather than get bogged down in the details of one state’s inability to raise living standards–an inability that, unfortunately, is not unique to Indiana–we “comfortable” Americans need to ask ourselves some hard questions, beginning with one posed by eminent economist Robert Samuelson in a recent column for the Washington Post: Is ending poverty impossible?

Samuelson begins by pointing out that neither Presidential candidate has focused on the poor. Clinton’s proposals to decrease inequality are aimed primarily at the middle class, and Trump’s tax cuts would benefit the rich and upper middle class.

Samuelson cites two reasons for ignoring the plight of the truly poor: Poor people don’t vote (they are a disproportionate percentage of nonvoters); and there is no consensus on anti-poverty policies. (That shouldn’t come as a surprise; these days, when there is consensus on anything, that’s a surprise.)

The lack of will to attack poverty can be traced to attitudes about the poor and lack of faith in government. Americans’ widespread suspicion that social welfare recipients are “playing the system” (despite reams of data to the contrary) can be traced all the way back to Fifteenth Century English Poor Laws that forbid “giving alms to the sturdy beggar.” A bastardized Calvinism reinforced the belief that people are poor because they are disfavored by God, probably because they are morally defective. (Or, to use George W. Bush’s more recent formulation of that patronizing analysis in promoting his Faith Based Initiative, because the poor “lack middle-class values.”)

If we ever get serious about eliminating poverty, we will need to do two things, and neither will be simple or easy. We will need to marshal armies of community organizers who can persuade poor people to vote (despite the formidable barriers to their votes put in place by legislators who would not benefit from their participation); and we will need to educate the “comfortable” about the reality of poverty–and especially about the plight of the millions of hard-working Americans who put in forty hours or more a week for wages insufficient to sustain them.

Unless we can do those two things–and not so incidentally, fix our gridlocked political system–the poor will always be with us.

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Gravity is Serious….

Remember Gravity? The company that established a “minimum wage” of 70,000 a year, to the hoots and derision of more “serious” business experts?

According to Market Watch,

Gravity Payments, that Seattle credit-card-payments processing company that said all its employees would earn at least $70,000 in three years, is defying the doomsayers.

Revenue is growing at twice the rate it was before Chief Executive Dan Price made his announcement this spring, according to a report on Inc.com. Profits have doubled. Customer retention is up, despite some who left because they disagreed with the decision or feared service would suffer. (Price said he’d make up the extra cost by cutting his own $1.1 million pay.)

The company is doing so well that it has hired an extra ten people to handle the additional business. The only person who isn’t doing so well, evidently, is Price himself–at least, not in the short term.

Price, meanwhile, has invested another $3 million in the company after selling all his stocks, emptying his retirement accounts and taking out mortgages on two homes, according to Inc. (He told the New York Times three months ago that he was “renting out my house right now to try to make ends meet.)

How this will all play out over the long term is anyone’s guess, of course. Which approach will prove to be better business practice over the long haul–Price’s insistence on paying all employees a wage that allows them to live well, or the Walmart /McDonald’s belief that paying below-subsistence wages (and letting taxpayers make up the difference via food stamps and other social welfare programs) will continue to be best for the bottom line?

I think we already know which approach is more likely to sustain consumer demand and generate economic growth.

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The Brits are Right About Right to Work

I love the Guardian; as real newspapers have gotten rarer and actual reporting even rarer, it reminds me what journalism used to be.

Recently, the paper reported on an upcoming Supreme Court case, Friedrichs v California Teachers Association. That case, said the Guardian

will decide if right-to-work laws (designed to bankrupt unions by encouraging employees who benefit from collective bargaining agreements to not pay for them) will extend to all public employees nationwide – an outcome Justice Samuel Alito has all but promised to deliver.

The article proceeded to provide the context of the ongoing battles over Right to Work–a context rarely provided by today’s “McPapers”:

Economic arguments for right-to-work are, however, always highly speculative, proposing that the low-wage jobs that might be created by companies attracted by such laws would offset the very real, calculable income losses that inevitably accompany deunionization.

So if these laws don’t boost the economy, what else don’t they do?

Despite what their proponents say, right-to-work laws don’t put an end to “compulsory union membership.” There is no such thing, not since 1947, when closed shops – arrangements where union membership was a condition of employment – were banned under the Taft-Hartley Act. No one in the US can legally be fired for refusing to join a union, whether they are in a right-to-work state or not. Nor do such laws “protect” workers from having their dues diverted to political campaigns they do not support; workers already have that protection.

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