Archive for the ‘Labor Economics’ Category

Biden: “Forget the $15 dollar minimum wage.”

November 16, 2021

He’s got better ideas for boosting labor costs.

I happened to be in the car last week when Biden was delivering his Infrastructure Bill remarks at the Port of Baltimore.

Most of the words that he read from the teleprompter were 50,000 feet high pablum… what I like to call political Muzak.

But, my ears perked up when he read aloud this line:


Say, what?

Lets start with some basic arithmetic:

40 hours per week times 52 weeks per year equals 2,080 hours per year … 2,080 hours per year times $45 per hour equals $93,600 per year.

Not bad work if you can get into a Dem-loyal union and bag one of the jobs.


Fringe Benefits

Oh, yeah … let’s not forget the part about good benefits.

In my old managerial days, we always figured that “fringe benefits” cost us about 25% on top of the base wages.

That puts the annual benefits-loaded cost of labor at $117,000 … not counting overtime (1-1/2 over 8 hours per day, double on weekends and holidays) … or the new freebies included in the “Biden agenda” (e.g. paid family leave time).



The Infrastructure Bill

Best that I can tell, the Infrastructure Bill has a couple of objectives: (1) fix some bridges and fill some pot holes, and (2) boost wages (especially for union loyalists)

Not necessarily in that order.

I guess the old goal of a $15 minimum wage is so yesterday.

Why fight that battle when you can:

(1) Set a floor on wages by paying people to stay home watching TV instead of taking “demeaning” entry-level jobs.

(2) “Create” thousands of $100,000 jobs … by ordering infrastructure contractors to staff up with a diverse army of union workers.

The best part: nobody will even notice.

Methinks we’re getting played…

Bummer: The middle class plight … in 2 charts.

May 1, 2013

Pew released a sobering report last week: An Uneven Recovery, 2009-2011

The central conclusion: the rich have gotten richer and the middle class has gotten crushed.


Upper and lower income groups have both increased by about 5 percentage points of the population mix.

In other words, the percentage of middle class folks – earning from 2/3s to twice the median income – has dropped by 10 percentage points.

What’s going on?


More “temps” is the workforce … is that good or bad?

March 15, 2013

Prof. Mark Perry of AEI crafted the below chart and observes …

Employment in temporary help services grew by 16,100 jobs in February, bringing the total number of temporary and contract workers to 2.58 million last month, the highest level since August 2007.

As a leading indicator of overall US labor market demand, the ongoing positive trend in temporary hiring is a sign that the labor market is gradually improving and suggests an increased pace of broader-based hiring for workers going forward in 2013.

It’s also likely that many employees who initially get hired on a temporary basis will be offered employment on a full-time permanent basis as the economy improves.

Prof Perry sees the glass as half full


Predictably, I see the glass as half-empty …


New study: Don’t blame the immigrants.

October 30, 2012

Punch line: While many poor immigrants from Latin America have been leaving the United States because of an inability to find decent jobs,

American workers might want them back.

This is because new studies have found that immigrants have a positive impact on the economy in the long run.

* * * * *
Excerpted from New York Times Economix’ blog’s, “Immigration and American Jobs”


Of all the economic dynamics buffeting the American middle class, immigration might seem the easiest to explain: as millions of poor immigrants from Latin America poured illegally into the country … they displaced American Workers from their jobs and undercut their wages.

But this typical explanation of the impact of immigration is mostly wrong.

The most recent empirical studies conclude that the impact is slight … they suggest that immigrants have had, at most, a small negative impact on the wages of Americans who compete with them most directly.

Meanwhile, the research has found that immigrants … have a big positive impact on the economy over the long run, bolstering the profitability of American firms, reducing the prices of some products and services … and creating more opportunities for investment and jobs.

Those nostalgic for strawberry fields harvested by well-paid Americans ignore the fact that without the cheap foreign labor, there might not be American strawberry fields.

Edit by JDC


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What’s $65 among friends?

February 28, 2012

There was a piece recently in  the NY Times — titled How the U.S. Lost Out on iPhone Work.

The article stirred up some flak against Apple for producing the iPhone in China instead of the U.S.

The author argues that lower Chinese wages are, at best, only a partial explanation:

It is hard to estimate how much more it would cost to build iPhones in the United States.

However, various academics and manufacturing analysts estimate that paying American wages would add up to $65 to each iPhone’s expense.

The article concludes: “However, labor is such a small part of technology manufacturing …and since Apple’s profits are often hundreds of dollars per phone, building domestically … would still give the company a healthy reward.”


Apple sells about 100 million iPhones annual … times $65 is $6.5 billion.

So, the answer is for Apple to suck it up, lower its profits, and dish the dough to high cost American workers.

Or, maybe Apple could just jack up the price of each iPhone by $65.

Certainly folks would be willing to pay that much of a premium to get an American made phone that works almost as well as the Chinese made one, right?

I’ll take the under on that bet.

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The problem is that the market for unskilled labor is too efficient … say, what?

February 23, 2012

Punch line: Fmr. Labor Secretary Robert Reich says that the problem isn’t that there are too few manufacturing jobs in the U.S., it’s that unions don’t have the sway they used to have.

Excerpted from Salon; “The factory jobs aren’t coming back”

The U.S. has 5.5 million fewer factory jobs today than in July 2000 – and 12 million fewer than in 1990.

Blame that on lower-wage workers overseas … and  numerically-controlled machine tools and robotics. 

Not to worry, though, because bringing back American manufacturing isn’t the real challenge, anyway.

The real challenge is creating good jobs for the majority of Americans who lack four-year college degrees.

Manufacturing used to supply lots of these kind of jobs, but that was only because factory workers were represented by unions powerful enough to get high wages.

That’s no longer the case.

In the 1950s, more than a third of American workers were represented by a union.

Now, fewer than 7 percent of private-sector workers have a union behind them.

If there’s a single reason why the median wage has dropped dramatically for non-college workers over the past three and a half decades, it’s the decline of unions.

Let me make sure that I understand.

Folks who don’t finish college can’t compete with equally skilled (or unskilled) foreign workers who charge a lot less for their services.

And, they can’t compete with high tech machines that crank out consistent quality at low cost.

So, the answer is to introduce a market inefficiency — a labor cartel – that forces U.S. companies to pay unskilled laborers more than their true economic value.

And then, when the companies pass along the added costs to consumers …  we’re all some how better off.

Do I have it right?

Wouldn’t it make more sense for unskilled laborers to get paid their true economic value … and enhance their educational and skills’ bases if they want to be paid more?

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Reich: “Pay workers more than they’re worth” … say, what?

December 7, 2011

Former Secretary of Labor Robert Reich thinks so …

Reich is a smart economist, so I can’t imagine he really believes his own mumbo jumbo:

Excerpted from Instead of New Deal, workers get raw deal

For most of the last century, the basic bargain at the heart of the American economy was that employers paid their workers enough to buy what American employers were selling.

That basic bargain created a virtuous cycle of higher living standards, more jobs and better wages.

Back in 1914, Henry Ford announced he was paying workers on his Model T assembly line $5 a day – three times what the typical factory employee earned at the time.

Ford knew it was a cunning business move.

The higher wage turned Ford’s autoworkers into customers who could afford to buy Model Ts. In two years, Ford’s profits more than doubled. 

That was then.

Now, Ford  is paying its new hires half what it paid new employees a few years ago.

The basic bargain is over – not only at Ford but all over the American economy.

In the years leading up to the Great Crash, most employers forgot Henry Ford’s example.

The wages of most American workers remained stagnant. The gains of economic growth went mainly into corporate profits and into the pockets of the very rich.

* * * * *
Corporations don’t need more money.

They have so much money right now they don’t even know what to do with all of it.

They’re even buying back their own shares of stock.

This doesn’t create a single new job, and it doesn’t raise the wages of a single employee.

Get it? Corporate profits are up right now largely because pay is down and companies aren’t hiring. But this is a losing game even for corporations over the long term. Without enough American consumers, their profitable days are numbered.

After all, there’s a limit to how much profit they can get out of cutting American payrolls or even selling abroad. European consumers are in no mood to buy. And most Asian economies, including China, are slowing.

We’re in a vicious cycle. The only way out of it is to put more money into the pockets of average Americans.

A basic economic principle is pay “market prices” for inputs and to add inputs – like labor – whenever its “marginal profitability” is greater than zero.

That means, if an added (“incremental”) employee doesn’t contribute enough to cover his / her costs, the company is worse off than if it hadn’t added the employee.

That’s economics 101.

Reich says to discard that principle and just pay employees a lot – whether or not they cover their associated costs.  Just pay them because they might be stimulative to the overall economy.


More of this in subsequent posts

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