Category: Economics & Business

What Is a Living Wage?

This from an article in the New York Times Magazine:

Certainly most Americans do not support higher wages out of immediate self-interest. Probably only around 3 percent of those in the work force are actually paid $5.15 or less an hour; most low-wage workers, including Wal-Mart employees, who generally start at between $6.50 and $7.50 an hour, earn more. Increasing the minimum wage to $7.25 an hour would directly affect the wages of only about 7 percent of the work force. Nevertheless, pollsters have discovered that a hypothetical state ballot measure typically generates support of around 70 percent. A recent poll by the Pew Research Center actually put the support for raising the national minimum wage to $6.45 at 86 percent.
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It was then that the living-wage proponents hit on a scorched-earth, tactical approach. “What really got the other side was when we said, ‘It’s just immoral to pay people $5.15, they can’t live on that,’ ” Oppenheimer recalls. “It made the businesspeople furious. And we realized then that we had something there, so we said it over and over again. Forget the economic argument. This was a moral one. It made them crazy. And we knew that was our issue.”

The moral argument soon trumped all others. The possibility that a rise in the minimum wage, even a very substantial one, would create unemployment or compromise the health of the city’s small businesses was not necessarily irrelevant. Yet for many in Santa Fe, that came to be seen as an ancillary issue, one that inevitably led to fruitless discussions in which opposing sides cited conflicting studies or anecdotal evidence. Maybe all of that was beside the point, anyway. Does it – or should it – even matter what a wage increase does to a local economy, barring some kind of catastrophic change? Should an employer be allowed to pay a full-time employee $5.15 an hour, this argument went, if that’s no longer enough to live on? Is it just under our system of government? Or in the eyes of God?

The minimum wage in Santa Fe became $8.50 an hour in 2003, and $9.50 on January 1, 2006. Is it “The City Different” or a model? As the article notes, the initiative to raise the minimum wage in Albuquerque to $7.50 failed at the polls last October. The federal minimum wage is $5.15 an hour.

NewMexiKen’s position remains as posted previously:

The federal minimum wage is $5.15 an hour. It’s been $5.15 since 1997; loss of purchasing power in that time, nearly 20%. In 1997, Congressional salaries were $133,600. If the federal minimum wage was raised by the same percentage as Congressional salaries have been raised since 1997 (nearly 24% to $165,200), the federal minimum would be $6.37 an hour.

The other cartel

Freakonomics co-author Stephen J. Dubner brings us up to date on Those Poor Realtors:

If I were a Realtor, I might feel right about now that the entire free world has turned against me, having decided I’m a sharp-elbowed, greed-driven hustler trying to preserve an advantage that I don’t deserve. And I’d probably be right. In today’s New York Times is yet another chronicle of how the National Association of Realtors has used its muscle to keep all kinds of competitors, including banks, from taking a dip in its 6% commission pool. The U.S. Justice Dept. has already sued the N.A.R.; now comes word that the Consumer Federation of America is coming after the N.A.R. Here’s the money quote, from the C.F.A.’s executive director, Stephen Brobeck: “Because the industry functions as a cartel, it is able to overcharge consumers tens of billions of dollars a year. Consumers are increasingly wondering why they are often charged more to sell a home than to purchase a new car.”

When NewMexiKen had an agent out, she suggested the commission might be 7%. Probably to pay for more of those obscene signs and business cards realty people have with the glossy glamour shots. They ought to be investigated and sued for those, too.

The $5 day

As The New York Times reported, on this date in 1914:

Henry Ford, head of the Ford Motor Company, announced…one of the most remarkable business moves of his entire remarkable career. In brief it is:

To give to the employees of the company $10,000,000 of the profits of the 1914 business, the payments to be made semi-monthly and added to the pay checks.

To run the factory continuously instead of only eighteen hours a day, giving employment to several thousand more men by employing three shifts of eight hours each, instead of only two nine-hour shifts, as at present.

To establish a minimum wage scale of $5 per day. Even the boy who sweeps up the floors will get that much.

Before any man in any department of the company who does not seem to be doing good work shall be discharged, an opportunity will be given to him to try to make good in every other department. No man shall be discharged except for proved unfaithfulness or irremediable inefficiency.

Read the complete Times article.

Big Box Balderdash

Paul Krugman disputes Wal-Mart’s latest claim, that it creates jobs. He begins:

I think I’ve just seen the worst economic argument of 2005. Given what the Bush administration tried to put over on us during its unsuccessful sales pitch for Social Security privatization, that’s saying a lot.

The argument came in the course of the latest exchange between Wal-Mart and its critics. A union-supported group, Wake Up Wal-Mart, has released a TV ad accusing Wal-Mart of violating religious values, backed by a letter from religious leaders attacking the retail giant for paying low wages and offering poor benefits. The letter declares that “Jesus would not embrace Wal-Mart’s values of greed and profits at any cost.”

You may think that this particular campaign – which has, inevitably, been dubbed “Where would Jesus shop?” – is a bit over the top. But it’s clear why those concerned about the state of American workers focus their criticism on Wal-Mart. The company isn’t just America’s largest private employer. It’s also a symbol of the state of our economy, which delivers rising G.D.P. but stagnant or falling living standards for working Americans. For Wal-Mart is a huge and hugely profitable company that pays badly and offers minimal benefits.
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But instead of resting its case on these honest or at least defensible answers to criticism, Wal-Mart has decided to insult our intelligence by claiming to be, of all things, an engine of job creation.
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But adding 100,000 people to Wal-Mart’s work force doesn’t mean adding 100,000 jobs to the economy. On the contrary, there’s every reason to believe that as Wal-Mart expands, it destroys at least as many jobs as it creates, and drives down workers’ wages in the process.
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So Wal-Mart has chosen to defend itself with a really poor argument. If that’s the best the company can come up with, it’s going to keep losing the public relations war with its critics. Maybe it should consider an alternative strategy, such as paying higher wages.

The Joyless Economy

Excerpt from Paul Krugman in today’s New York Times:

Behind the disconnect between economic growth and family incomes lies the extremely lopsided nature of the economic recovery that officially began in late 2001. The growth in corporate profits has, as I said, been spectacular. Even after adjusting for inflation, profits have risen more than 50 percent since the last quarter of 2001. But real wage and salary income is up less than 7 percent.

There are some wealthy Americans who derive a large share of their income from dividends and capital gains on stocks, and therefore benefit more or less directly from soaring profits. But these people constitute a small minority. For everyone else the sluggish growth in wages is the real story. And much of the wage and salary growth that did take place happened at the high end, in the form of rising payments to executives and other elite employees. Average hourly earnings of nonsupervisory workers, adjusted for inflation, are lower now than when the recovery began.

So there you have it. Americans don’t feel good about the economy because it hasn’t been good for them. Never mind the G.D.P. numbers: most people are falling behind.

Krugman goes on to say it’s “harder to explain why.”

Wages and median family income often lag behind profits in the early stages of an economic expansion, but not this far behind, and not for so long. Nor, I should say, is there any easy way to place more than a small fraction of the blame on Bush administration policies.

Financial advice

… from Andrew Tobias:

I’m bearish because I think both consumers and the government have gotten too heavily in debt, and that a decline in home prices could get ugly. (And because we have three years, one month, and fifteen days to wait to get a better CEO, even though a majority of the shareholders would like to fire him now.) Then again, it is notoriously difficult to time the market. So if especially if you’re young, with a steady program of investing – keep it up!

The richest and poorest counties

Median household income 2003 (Census Bureau)

Top 10

  1. Los Alamos County, N.M. $93,089
  2. Douglas County, Co. 92,732
  3. Loudoun County, Va. 89,890
  4. Hunterdon County, N.J. 84,016
  5. Fairfax County, Va. 82,481
  6. Hamilton County, Ind. 80,691
  7. Morris County, N.J. 79,977
  8. Howard County, Md. 79,455
  9. Somerset County, N.J. 77,988
  10. Montgomery County, Md. 76,546

Bottom 10

  1. Wilcox County, Ala. $19,524
  2. Hancock County, Tenn. 19,228
  3. Starr County, Texas 19,127
  4. Holmes County, Miss. 19,057
  5. Clay County, Ky. 18,724
  6. Zavala County, Texas 18,553
  7. McDowell County, W.Va. 18,344
  8. Ziebach County, S.D. 17,753
  9. Owsley County, Ky. 17,344
  10. Buffalo County, S.D. 17,003

Among the states Connecticut had the highest state household median at $56,409, edging out New Jersey at $56,356. New Mexico was 45th at $35,091. Mississippi 50th at $32,397.

Is it evil?

In a review of The Google Story, Richard Lowenstein chastises the authors for failing to probe deeply enough. He provides the following as an example:

For instance, they note – without comment – that Google earns millions of dollars a year from pornography ads. (Yes, this is the same company whose motto is “don’t be evil.”)

NewMexiKen asks: Is accepting pornography advertising evil? Is this just an economic fact, or is it a sociological phenomenon that requires analysis?

Ouch!

Gasoline has become cheaper — NewMexiKen paid just $2.099 for regular Friday in Virginia. (So why is it 40-50 cents more a gallon in New Mexico?)

However, and it’s a big however, my October natural gas bill has arrived. I used 2.6 percent less gas than a year ago, but the cost was 50 percent more.

With gasoline cheaper and natural gas up, when it gets really cold I may have to sit in the heated car in the garage.

Money and Other Subjects

“The great spiritual leader Gandhi walked barefoot most of the time, causing his feet to be quite sore and calloused. His unusual and spare diet made him physically weak and gave him bad breath [at least for the purposes of this riff]. Thus, it is said of Gandhi, that he was a super-calloused fragile mystic hexed with halitosis.”

— Via Andrew Tobias, who also says “to have in the stock market only cash we won’t actually need (for things like rent and food) for several years.”

Always Low Wages, Always

An internal memo sent to Wal-Mart’s board of directors proposes numerous ways to hold down spending on health care and other benefits while seeking to minimize damage to the retailer’s reputation. Among the recommendations are hiring more part-time workers and discouraging unhealthy people from working at Wal-Mart.
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To discourage unhealthy job applicants, Ms. Chambers suggests that Wal-Mart arrange for “all jobs to include some physical activity (e.g., all cashiers do some cart-gathering).”

— The New York Times

Online Banking

Functional Ambivalent has discovered that his bank is not sending his payments to his creditors as quickly as they claimed to be. Interesting.

NewMexiKen realized there was a float in the bank’s favor when you use electronic banking. They deduct the amount when they make the payment, not when the check is cashed. I figured that was my cost for the service (there are no other charges). There is so little interest paid on my checking account it hardly mattered to me if my mortgage payment, for example, was deducted from my account when the bank wrote the check or when the mortgage company deposited it. And actually, with electronic banking, I tend to pay bills closer to the due date because I can enter the transaction when I get the bill, but with a payment date weeks later when the bill is due.

But F/A says his bank wasn’t paying the bills on time — and that it was using paper checks and ground mail for transactions one would assume were electronic. Has anyone else seen this? Are we all being scammed? Or is F/A just using the wrong bank?

Spoilsport

Like many shoppers, attorney Stephen Diamond buys lots of stuff online. But unlike other consumers, he sues retailers that don’t charge him state and local sales taxes — and is making a profit doing it. …

Online buyers are required to pay local and state sales taxes on purchases made over the Internet, but are rarely asked to do so. States and online retailers have argued for years over whether the retailers should and could collect the taxes, but now states are becoming increasingly aggressive. This month, 18 states formed a coalition to make it easier to collect taxes on Web sales.

State laws allow for the collection of taxes on Internet purchases if the retailers have a physical presence — a “nexus” in legal terms — in the state. But different states define “nexus” differently. In some states, the regular presence of a single sales person, even a traveling one, is enough to establish a nexus. In Illinois, a retailer is considered to have a physical presence if a customer can return an item purchased online to a retailer’s physical location.

The Wall Street Journal

Worse Than Wal-Mart?

Unions hate Wal-Mart, accusing the world’s No. 1 retailer of paying paltry wages and making workers spend too much on health care. Few would describe working as a Wal-Mart greeter as a dream job, but a union protesting work conditions at a Wal-Mart store in Nevada is giving the chain a run for its money, according to Las Vegas Weekly: Temp protesters, hired by the United Food and Commercial Workers International Union to carry anti-Wal-Mart placards in the 104-degree heat, earn a measly $6 an hour, with no benefits at all. “It don’t make no sense, does it?” said one picketer. “We’re sacrificing for the people who work in there, and they don’t even know it.” Another rent-a-protester, who worked for Wal-Mart in the past, had few harsh words for his former employer. “I can’t complain,” he said. “It wasn’t bad.”

Wired News: Furthermore

What a gas

The average price for a gallon of regular gasoline nationwide was “only” up one cent over the weekend according to AAA. That puts it at $2.614. Extra averages $2.774 and premium $2.875. Premium is averaging over $3 in California, Hawaii and Illinois.

I can remember buying a dollar’s worth — and someone else pumped it.

Peter Maass had an informative article in Sunday’s New York Times Magazine — The Breaking Point. A few observations and factoids excerpted from Maass:

• Unlike the 1973 crisis, when the embargo by the Arab members of the Organization of Petroleum Exporting Countries created an artificial shortfall, today’s shortage, or near-shortage, is real. If demand surges even more, or if a producer goes offline because of unrest or terrorism, there may suddenly not be enough oil to go around.

• The consequences of an actual shortfall of supply would be immense. If consumption begins to exceed production by even a small amount, the price of a barrel of oil could soar to triple-digit levels. This, in turn, could bring on a global recession, a result of exorbitant prices for transport fuels and for products that rely on petrochemicals — which is to say, almost every product on the market. The impact on the American way of life would be profound: cars cannot be propelled by roof-borne windmills. The suburban and exurban lifestyles, hinged to two-car families and constant trips to work, school and Wal-Mart, might become unaffordable or, if gas rationing is imposed, impossible.

• The eventual and painful shift to different sources of energy — the start of the post-oil age — does not begin when the last drop of oil is sucked from under the Arabian desert. It begins when producers are unable to continue increasing their output to meet rising demand. Crunch time comes long before the last drop.

• “The problem is that you go from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004. You’re leaping by two million to three million a year, and if you have to cover declines, that’s another four to five million.” In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day — at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. “That’s like a whole new Saudi Arabia every couple of years,” Husseini said. “It can’t be done indefinitely. It’s not sustainable.”

It’s an interesting article that, while fearing the worst, does a lot to explain both sides; that is, that there’s plenty of oil or that we’ll be freezing in the dark soon.

Ever wonder what they’re talking about

… when they mention the price of a barrel of oil? Here from the New York Mercantile Exchange is a description:

Crude oil is the world’s most actively traded commodity, and the NYMEX Division light, sweet crude oil futures contract is the world’s most liquid forum for crude oil trading, as well as the world’s largest-volume futures contract trading on a physical commodity. Because of its excellent liquidity and price transparency, the contract is used as a principal international pricing benchmark. …

The contract trades in units of 1,000 barrels, and the delivery point is Cushing, Oklahoma, which is also accessible to the international spot markets via pipelines. The contract provides for delivery of several grades of domestic and internationally traded foreign crudes, and serves the diverse needs of the physical market.

Light, sweet crudes are preferred by refiners because of their low sulfur content and relatively high yields of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel.

NewMexiKen thought this paragraph was interesting as well.

The Exchange also lists for trading electronically a financially settled futures contract for Dubai crude oil; a futures contract on the differential between the light, sweet crude oil futures contract and Canadian Bow River crude at Hardisty, Alberta; and futures contracts on the differentials of the light, sweet crude oil futures contract and four domestic grades of crude oil: Light Louisiana Sweet, West Texas Intermediate-Midland, West Texas Sour, and Mars Blend.

Mars Blend? Is that the planet Mars or, with all that sweet talk, the candy company Mars?

Closing price Friday for September delivery of 55 gallons of light, sweet crude: $65.35.

Outsourcing your own job

“About a year ago I hired a developer in India to do my job. I pay him $12,000 out of the $67,000 I get. He’s happy to have the work. I’m happy that I have to work only 90 minutes a day just supervising the code. My employer thinks I’m telecommuting. Now I’m considering getting a second job and doing the same thing.”

The Times of India