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$15 per hour: How's that going to work for you, Seattle?

Guest Opinion: May Day marches, $15 proposals and immigration reform efforts all have a common source. And it's one that is the very enemy of sustainability.
Marchers have their say on a Seattle issue.

Marchers have their say on a Seattle issue. John Stang

Maybe our society needs a refresher course on just what supply and demand means in order to fully understand what has created both the May Day demonstrations and the push for a $15 an hour minimum wage in Seattle.

It has been well understood that if demand outpaces supply, costs rise.

But that understanding seems to have faded. In today’s world dominated by political and economic thinking that believes unlimited growth is possible — even as demand inexorably continues outpacing the supply of all resources — that economic truism has faded from consciousness. To pursue this growth is the basis of our economic policy. Those with money and political power push for whatever fuels demand-enhancing rapid population growth, while ignoring the fact that the demand is created amid an ever-diminishing supply.

So we print more and more money inflating the value of the top few percentages, and that makes the unrest among the increasing numbers on the margins understandable. And this is exacerbated politically as the more malleable middle class continues diminishing.

This increase in demand has made a mockery even of the use of the word inflation. It is probably why we put out “official” statistics on inflation that essentially ignore most of what people spend money on, from food and energy to living quarters, and we constantly ignore the meaning of compounding.

The compounding of the rate of growth means that what appears to be a small percentage gain, say 2 percent, actually produces a doubling of growth that will occur in about a third of a lifetime. One becomes two, and 150 million becomes 300 million in 36 years. Thus a small sounding percentage gain sounds like minimal growth when it actually is producing rapid growth.

Rapid growth profits those who have at least some form of ownership over extensive resources, whether money, land or industrial capability, and the political and economic system makes sure their interests have a constant priority.

The push for more of everything, and the thinking that abundantly available people provides what is needed, permeates every level of society today. Consequently there is a push for whatever policy maximizes access to more and more people. Because this population creates ever-more economic demand while at the same time providing profit-enhancing cheap labor, it develops special traction. All these economic and political forces are now mobilizing behind the banner of Comprehensive Immigration Reform, a kind of Obama “reform”  that is a regurgitated George W. Bush reform. It would change our past inundation of illegal immigrants to a policy of legalizing the status of millions of those immigrants every year while also significantly increasing legal immigration.

This results in population growth at an “explosive” rate, and that causes essential resources to be consumed ever more rapidly. To understand how absurd our policy is, consider two things: The explosive population-growth rate provides the biggest contributor to our poverty rate while at the same time it rapidly increases ecological degradation. And ecological health is the most essential factor necessary for an expanding population.

What does this have to do with a $15 minimum wage?

First, in order to societally finance the accumulation of debt that results from maximizing this demand, we ignore the relationship of money to value. How much we can “borrow” is now determined by how much “value” we can declare already exists — by printing more money, we give that value an appearance of being. As a consequence, a 1 percenter millionaire from the 1940s now has to be a billionaire to be a 1 percenter. And those 1 percenters now allocate to themselves whatever they wish, and this especially involves ignoring limits.

Second, the knowledge of this has slowly sunk into the 90-plus percent who find themselves slipping downward in value. Believing they have a voice in an assumed democracy, they now use whatever is at their disposal to get at least some room in the trough. Thus, previous promises of democracy — that a society is of, by, and for the people — justifies making and demanding more.


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Comments:

Posted Mon, May 5, 8 a.m. Inappropriate

Please let us know when the Thesis Grading Committee will be online so we can hit them up for a translation.

I think I get it - raise the minimum wage to $15 and the pool of people willing to take the jobs goes up and employers get to be more picky about who they hire. IAnd businesses flee Seattle meaning less jobs to go around. So those in or near poverty are hit even harder. Is that about the gist of it?

tvjames

Posted Mon, May 5, 8:31 a.m. Inappropriate

I'm not sure about the gist either. In one place Pelto says that bringing in more immigrant or unskilled labor brings down wages (which seems to make sense) and in another place he seems to put down Sawant for wanting a $15 minimum wage. Maybe what he's trying to say is that a $15 minimum wouldn't be necessary if we stopped supplying cheap labor (by allowing immigrants).

Or take a look at the closing paragraph. He talks about appearance of value by printing money, $15 minimum for uneducated, unskilled people, and rapid economic change. I can draw my own conclusions about how these concepts relate but I really don't know what Pelto was trying to say.

Or maybe I'm not academic enough for this :)

pragmatic

Posted Mon, May 5, 11:38 a.m. Inappropriate

James,
We IS the Thesis Grading Committee, so please put your mind to it!

Grade Mike?
Mike Nickerson, 2009, Life, Money, and Illusion:

"[I]n our present debt-based economic system, money is created when banks make interest-bearing loans. Such money must always be repaid in greater measure than was created, since the interest component is not created at the time the loan is made and must be gathered from money put into circulation by other loans....After 9/11...when the response to low interest rates was insufficient, sub prime mortgages filled the void... The economy was saved, for a while. With the oil price shock and interest rate hikes in the Summer of 2008, however, the subprime mortgage bubble burst... Enormous pyramids of wealth were found to have no basis in material reality.... While money has long been scarce when needed for education or health care, trillions of dollars are suddenly available to try to inflate the passing order.”

Or my take: In the system-in-use, futures Individually and collectively, must be greater than the past. Reality invented default. And when that looks too costly, Uncle Sam lends a helping hand, albeit selectively.

afreeman

Posted Mon, May 5, 8:52 a.m. Inappropriate

Immigrants! As we have falling birth rate, must be some reason for all this demand. Must be explosive population grown due to illegal immigration. These immigrants, it's just more, more, more. But there's really ever-diminishing supply. (Less of what isn't clear.)

So, %15 minimum wage is due to all these illegal immigrants raising demand? Well, that and 2% a year compounded means money doubles in 36 years - hyper growth caused by too much debt! (Does this mean a more conservative 1% a year growth would be better, or maybe ultra conservative 0% a year?) And that's why the push for $15 minimum wage, so the average guy can also get more more more like the illegal immigrants. All of the above - average guy, illegal immigrants, are getting less in real dollars than minimum wage in 1965, even if they went up to $15. So, I see, less is more!

Then I read a comment saying, if minimum wage goes up to $15 everything else stays exactly the same and so employers will be more picky about who they hire, hurting the poor. So, that would mean, every time there's been an increase in minimum wage, it causes higher unemployment, right? Sounds good, except, it doesn't actually turns out that way; you can't document a case where increasing minimum wage actually caused unemployment to rise. All of this does not happen in a vacuum. When you raise the minimum wage, it gives more money to local people who are strapped for cash, and they spend it, which has a multiplier effect in the local economy. (Unlike, for example, an increase in energy prices which mostly sends money out of our local economy to exotic places like Texas and Qatar.) More spending tends to create business growth which encourages employers to create more jobs. I for one think employers being picky about having capable employees is a good thing, but we do want them to be picky more often.

Ken Shear

Posted Mon, May 5, 3:41 p.m. Inappropriate

Richard Pelto's view of Seattle through a rose colored monocle is refreshingly absurd. A populist reaction to decades of wage stagnation for everyone except those that profit from "resources" finally caught the attention of the "resources". The "resources" are demanding a living wage.

We've gone mad, and not soon enough.

What's really going on here is that we are shifting the cost of living off of public housing, public health care, off of food stamps, and back onto the job secretors. Inflating profits off stagnant wages and the public purse is politically unsustainable.
People that make $15 an hour consume less government than the corporations that rely on sub $15 an hour "resources".

Back by popular demand, democracy.

Mr Baker

Posted Mon, May 5, 4:20 p.m. Inappropriate

I think it's a good article (and some good comments) but the author does not succeed in connecting the money printing activities of the Federal Reserve to the minimum wage issue. They appear to be totally separate to me but the claim that unskilled immigrants drive down wages is irrefutable. If you favor protecting and employing illegal immigrants while at the same time support a significantly higher minimum wage you are pursuing two contradictory policies. We could become a major attraction and a cause of a surge in applicants for minimum skill jobs that pay relatively well leaving many to remain unemployed or forced to find jobs in the lower wage suburbs. Is that a bad thing? I think it is but those of us who are well employed and well paid will probably not notice it. The City can declare success and move on.

kieth

Posted Tue, May 6, 8:31 a.m. Inappropriate

Well at least some brain cells are activated here. Basic point--illegal and legal immigration plus children has resulted in over 90 percent of the population growth of this country since 1970. Illegal immigration supported by Sawant and One America and big business are what have helped create the many laws passed by the city and county enabling and attracting ever more illegals. The push for an assumed unlimited growth by business is what is also creating the push for ever-higher wages. More and more people within the 90 percent cohort is what is driving the political unrest, and enable Sawant to gain political power. The population factor alone is what drives down value as its substantive value is maintained more and more by the printing press rather than that which has real value.
Of course the unsustainability of depleting resources, continuing degradation of the ecosystems sustaining life, and unsolveable congestion problems and decaying infrastructure apparently gets little brain cell attention.

Posted Tue, May 6, 11:45 a.m. Inappropriate

You make it sound like "ever-higher wages" is a bad thing.

kieth

Posted Tue, May 6, 5:50 p.m. Inappropriate

Ken Shear says: "Sounds good, except, it doesn't actually turns out that way; you can't document a case where increasing minimum wage actually caused unemployment to rise."

State Treasure McIntire, a former UW Economics professor, did study the impacts of raising the minimum wage. He says it would increase unemployment by 10%.

http://blogs.seattletimes.com/opinionnw/2013/12/06/minimum-wage-seattle/

Cameron

Posted Tue, May 6, 9:09 p.m. Inappropriate

I don't think the author understands that there is no "Grand Big Picture". There are a lot of little pictures that may or may not be interconnected and if they are connected, it may not be in a manner that any of us, including Pelto, comprehends.

Humans have lived in a global economy since Marco Polo's time and nothing about a global economy is simple and it certainly can't be reduced to a long winded essay. Nice try though, give it a C-.

Djinn

Posted Fri, May 9, 11:29 p.m. Inappropriate

What is corruption and how does it cause capitalism and socialism to fail?

Capitalism has been the great driver of economic progress forward. It has been the most progressive of all economic systems. Socialism has its place, but as just a side benefit in the fringe areas of the economy where the reach of Capitalism fails to stimulate growth or safety or health. The minimum wage is such an area. But minimum is the keyword. It should grow at the minimum rate. One would use socialism to control only the extremes of the economy. Overtax the very rich, feed and house the very poor.

Wage controls will never benefit the poor without price controls. It is basic economics that media and political pundits seem to be very very ignorant of. All that will be achieved is a temporary bandaid before inflation sinks the poor further. All gains will be lost. Except on the resumes of the politicians. The studies implying there are no negative effects of raising the minimum wage are bogus. An economy is fundamentally based on predictability and confidence. Neither of which are being enhanced by the current debate. How do the poor really live? What do the poor really need? Cheap beer? Lax cigarette rationing? Better sugar? Lighter drug sentencing? Better mobility via free buses? Health care without all the bureaucracy and lack of choice? Mental health services with no stigma? Denial to ATT and Comcast the ability to turn a poor person over to a debt collector? Banks with free accounts and no ATM fees? Charge all that stuff back to Bill Gates.

Politicians and the media avoid what the poor really need to live better lives.

pdx

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