This week's must reads include two academic essays in the Boston Review on the evolution of American wealth: In the first, Stanford's Richard White looks at American progress and a discomfort with excessive wealth in the Gilded Age, and in the second Stanford's Gavin Jones takes a look at views of wealth during that period from a literary perspective. For a more conservative take on history, we have Fred Smith's book review of Bourgeois Dignity, looking at the role of entrepreneurs and "the free market" in America. And completing our history tour, we have this piece from the University of Pennsylvania's Thomas J. Sugrue at the Economic Policy Institute discussing the 1963 March on Washington and the current jobs' situation.
In this installment of the ongoing debate over the minimum wage, we have this analysis from Jordan Weissmann at the Atlantic looking at how McDonald's manages to turn a profit even in high-wage countries:
The company actually earns more revenue out of Europe than it does from the United States. France, with its roughly $12.00 hourly minimum, has more than 1,200 locations.
Ryan Chittum over the Columbia Journalism Review looks at the debate over the relationship between the chain's U.S. labor costs and burger prices more closely. Meanwhile, if you haven't come across is it, the Economist has the Big Mac Index, an interactive chart looking at burger costs and monetary exchange rates. You also might be interested in this letter signed by dozens of economists supporting a minimum wage of at least $10.50 per hour. If you want to see how your family would cope on the current wage, Mother Jones has this calculator. At the NTY's Economix blog, progressive economist Jared Bernstein looks at the economics of a higher wage floor:
A higher wage floor will hurt its intended beneficiaries, because it forces employers to lay them off. Ah, that old saw. Even most economists don’t believe that anymore. Remember way back at the beginning when I told you about all those different states and cities that have their own wage floors above the federal level? Well, that variation has provided something rare in economics: an opportunity for pseudo-experimental tests of the disemployment theory (i.e., we can compare employment outcomes in states with similar economies and different minimum wages). And while there’s lots of arguing among economists about the best way to run such tests (surprise!), their results almost all hover around zero.
On the other side of the debate, we have libertarian economics writer Megan McArdle discussing why she thinks the current debate "makes minimum sense":
Most of the efficiency wage arguments you read fundamentally misunderstand how efficiency wages work. For example, you periodically see people advocating for a national minimum wage because “Costco shows it’s possible.” Or they drag out the old saw about Henry Ford’s $5 a day wage. Raise the wage and people will work so much harder and better that you’ll still be awesomely profitable. One of my favorite sociologists has aptly characterized this argument thusly: “Why, Dorothy, you’ve had the power to solve inequality all along, just click your heels three times and say 'Efficiency wage, efficiency wage, efficiency wage.' ” Sadly, this is not how efficiency wages work. Paying a high wage can reduce turnover, get you better quality workers, and induce those workers to work harder, smarter, better. But there’s a catch: This only works if your wage is higher than the wage for other, similar jobs.
Last year in the Daily Beast, McArdle also argued it is unfair to compare Wal-Mart to Costco, and is worth reading for some interesting analysis on how the two stores operate. Check out this chart:
Meanwhile, the Center for Economic and Policy Research issued report on the demographics of the fast food industry. In the New Yorker, James Surowieki argues that the new demographics of the minimum wage are part of the urgency of improving it:
[O]ver the past three decades, the U.S. economy has done a poor job of creating good middle-class jobs; five of the six fastest-growing job categories today pay less than the median wage. That’s why, as a recent study by the economists John Schmitt and Janelle Jones has shown, low-wage workers are older and better educated than ever. More important, more of them are relying on their paychecks not for pin money or to pay for Friday-night dates but, rather, to support families. Forty years ago, there was no expectation that fast-food or discount-retail jobs would provide a living wage, because these were not jobs that, in the main, adult heads of household did. Today, low-wage workers provide forty-six per cent of their family’s income. It is that change which is driving the demand for higher pay.
Business Insider editor Henry Blodget argues via LinkedIn in favor of labor unions, even though he says he has always hated the idea of needing them:
One company's wages and investments are another company's revenues. America's big companies currently have the highest profits in history, while paying the lowest wages in history. The recipients of those low wages--American consumers--are strapped, so they don't have much money to spend. Until companies can be convinced to pay people more and invest more aggressively, this stagnation will continue (If you don't believe this, check out the charts at the bottom of this post). When you suggest that companies should share more of their wealth with the people who create it, though, this is often regarded as lunacy. Companies should pay people as little as possible!, the shareholder advocates roar. Employees are just costs! In other words, America's "owners" seem to be taking the view that unless or until they are FORCED to, they will never share their wealth with the people who generate it.
Demos' David Callahan makes a similar argument about worker pay and consumer spending at the Policyshop blog. And connected to the idea of consumer spending are savings rates. Investor Joseph Calhoun over at RealClearMarkets discusses the significant savings divide between the wealthy and everyone else.
Gallup has some new analysis of the U.S. employment situation, noting that the overall jobs picture has remained stable but the federal jobs market is contracting:
According to the CNBC, the federal budget sequester—causing the decline in federal jobs, is affecting people, who make $30,000 and under, the most. The NYT's Paul Krugman argues that the idea of market confidence is being used as "a tool of intimidation" to push for greater austerity:
The truth is that we understand perfectly well why recovery has been slow, and confidence has nothing to do with it. What we’re looking at, instead, is the normal aftermath of a debt-fueled asset bubble; the sluggish U.S. recovery since 2009 is more or less in line with many historical examples, running all the way back to the Panic of 1893. Furthermore, the recovery has been hobbled by spending cuts — cuts that were motivated by what we now know was completely wrongheaded deficit panic. And the policy moral is clear: We need to stop talking about spending cuts and start talking about job-creating spending increases instead.
Meanwhile, the Brookings Institution looks at suburban poverty by congressional district, arguing for a need to create "a stake in a broader agenda to reinvent place-based anti-poverty policy":
Robert Putnam at the NYT's Great Divide blog looks at the waning American dream through the lens of his Ohio childhood community where three quarters of his graduating high school class of four decades ago "surpassed their parents in education and in that way advanced economically as well" but their children and their children's children struggle:
The crumbling of the American dream is a purple problem, obscured by solely red or solely blue lenses. Its economic and cultural roots are entangled, a mixture of government, private sector, community and personal failings. But the deepest root is our radically shriveled sense of “we.” Everyone in my parents’ generation thought of J as one of “our kids,” but surprisingly few adults in Port Clinton today are even aware of R’s existence, and even fewer would likely think of her as “our kid.” Until we treat the millions of R’s across America as our own kids, we will pay a major economic price, and talk of the American dream will increasingly seem cynical historical fiction.
The Washington Post's Harold Meyerson looks at growing U.S. inequality through the lens of dwindling airline coach space. Meanwhile, this post in the NYT's Motherlode blog looks at the Economic Policy Institute's recent family budget calculator, focused on federal poverty measurements, with an eye toward urban living and the middle class.
Heron has been exploring how we can use data more effectively to meet our mission goals (join the conversation here). As noted by this blog post from the UN's Global Pulse project, the idea of "data philanthropy" is gaining traction. Check out their chart on how mobile companies could provide data:
You also may be interested in this New York Times article on the Global Pulse, which is essentially a big data for development project. Meanwhile, the Pioneer Post discusses a new British index "allowing socially innovative organizations to track their growth and impact." In the Stanford Social Innovation Review, Robin Rogers discusses whether "new philanthropy" can really reduce inequality:
The new philanthropy is built on the premise that the very, very wealthy—not just the top 1 percent, but the top .01 percent—are uniquely positioned to create social change by using their resources and networks to leverage public money and to create new infrastructure for public-policy design and delivery. But what are the pros and cons of a system built on that kind of largesse? How might an approach to philanthropy that places policymaking powers in the hands of an elite few affect democracy? If the government collects taxes to fund programs selected by megaphilanthropists, will it lose its legitimacy? At a more pragmatic level, what happens if these philanthropists are wrong? What if they select policies that don’t work (as Bill Gates arguably did with his small-schools initiative)? Are they accountable to anyone for those choices? And what happens to important programs that lose favor with the very rich?
And over at Slate, Ken Stern looks at the decline of corporate charitable giving:
In the age of instant communications and close public scrutiny of corporations, many companies have placed—at least rhetorically—an emphasis on contributing to society, both through community commitments to charity and by making their business practices more socially responsible. As Paul Polman, the CEO of Unilever, told Green Futures magazine in 2012, “CEOs don’t just get judged by how well their share prices are doing, but by what impact they are having on society.” In this context, the explanation of this decline in giving is hard to identify. In my conversations with experts on this subject, they expressed surprise, rejected it as a valid indicia of corporate giving (on the theory that quality of giving outweighs quantity of giving), had little plausible explanation for the trend, or some combination of the three.