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Missouri NEA Legislative Update Week 10, No. 1, March 9, 2015
By Otto Fajen MNEA Legislative Director
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Newsweek takes on the  issue of wage stagnation with Ten Reasons Workers Should Be Paid More..

Economists have long argued that increases in worker pay can lead to improvements in productivity—indeed, that it can actually be profitable to pay workers higher wages.

As Alfred Marshall, the father of modern economics, argued almost 125 years ago, “any change in the distribution of wealth which gives more to the wage receivers and less to the capitalists is likely, other things being equal, to hasten the increase of material production.”

Since then, economists have compiled rich data validating Marshall’s hypothesis that paying higher wages generates savings:

In addition to the 10 reasons listed…

Other mechanisms by which higher wages can yield offsetting benefits include:

  • Higher wages are associated with better health—less illness and more stamina, which enhance worker productivity.

  • Greater job satisfaction can result in less conflict between employers and labor groups.

  • Enhanced reputation with consumers (compare the reputations of Costco and Walmart).

ALEC update

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The New York Times answers the above question in Living Wages, Rarity for U.S. Fast Food Workers, Served Up In Denmark.

On a recent afternoon, Hampus Elofsson ended his 40-hour workweek at a Burger King and prepared for a movie and beer with friends. He had paid his rent and all his bills, stashed away some savings, yet still had money for nights out.

That is because he earns the equivalent of $20 an hour — the base wage for fast-food workers throughout Denmark and two and a half times what many fast-food workers earn in the United States.

“You can make a decent living here working in fast food,” said Mr. Elofsson, 24. “You don’t have to struggle to get by.”

With an eye to workers like Mr. Elofsson, some American labor activists and liberal scholars are posing a provocative question: If Danish chains can pay $20 an hour, why can’t those in the United States pay the $15 an hour that many fast-food workers have been clamoring for?

But don’t American conservatives say business and the economy will collapse if workers are paid a living wage?

“We see from Denmark that it’s possible to run a profitable fast-food business while paying workers these kinds of wages,” said John Schmitt, an economist at the Center for Economic Policy Research, a liberal think tank in Washington.

But as Denmark illustrates, companies have managed to adapt in countries that demand a living wage, and economists like Mr. Schmitt see it as a possible model.

Denmark has no minimum-wage law. But Mr. Elofsson’s $20 an hour is the lowest the fast-food industry can pay under an agreement between Denmark’s 3F union, the nation’s largest, and the Danish employers group Horesta, which includes Burger King, McDonald’s, Starbucks and other restaurant and hotel companies.

By contrast, fast-food wages in the United States are so low that half of the nation’s fast-food workers rely on some form of public assistance, a study from the University of California, Berkeley found. American fast-food workers earn an average of $8.90 an hour.

Is it possible for American businesses to change?

“We would need to phase this in,” said Mr. Schmitt, who is co-editor of the book “Low-Wage Work in the Wealthy World.” “We’ve created a low-road economy, and it’s going to take us some time to build up the speed to get onto the high road.”

Even so wages aren’t the only difference.

In Denmark, fast-food workers are guaranteed benefits their American counterparts could only dream of. Under the industry’s collective agreement, there are five weeks’ paid vacation, paid maternity and paternity leave and a pension plan. Workers must be paid overtime for working after 6 p.m. and on Sundays.

Is your mind blown yet, how about this for responsibility and respect for your fellow citizen?

Unlike most American fast-food workers, the Danes often get their work schedules four weeks in advance, and employees cannot be sent home early without pay just because business slows.

Sure Danish fast-food workers don’t need public assistance because employer’s accept responsibility for their employee’s but are their any fast food chains like McDonalds still operating?

Denmark’s high wages make it hard, though not impossible, to maintain profitability at his restaurants, said Martin Drescher, the general manager of HMSHost Denmark, the airport restaurants operator.

“We have to acknowledge it’s more expensive to operate,” said Mr. Drescher. “But we can still make money out of it — and McDonald’s does, too. Otherwise, it wouldn’t be in Denmark.”

He noted proudly that a full-time Burger King employee made enough to live on. “The company doesn’t get as much profit, but the profit is shared a little differently,” he said.

We don’t want there to be a big difference between the richest and poorest, because poor people would just get really poor,” Mr. Drescher added. “We don’t want people living on the streets. If that happens, we consider that we as a society have failed.”

If you share this with your conservative uncle be prepared for some Fox News backlash, everyone else will see change is possible.

Economist Dean Baker summarized how the wealthy can’t figure out what causes income inequality.  How convenient.

In other words, we have the central bank of the United States acting deliberately to keep workers from getting pay increases. They justify their actions over concerns about inflation, but we need not take these seriously. Who knows what they believe, but the real world risk of a dangerous inflationary spiral ranks alongside the risk of attacks by Martians. It ain’t going to happen and they should know this.

Of course high unemployment is not the only policy that has kept wages down over the last three decades. Trade policy has also been designed for this purpose. Our manufacturing workers have to compete with low paid workers in the developing world; our doctors are protected from this competition. The downward pressure on the wages of ordinary workers is worsened by our high dollar policy which puts domestic workers at an even greater disadvantage.

Government policy has also made it almost impossible for workers to organize unions. And of course we have let the minimum wage fall way behind the cost of living and even further behind productivity.

The other item in the news last week was the anniversary of the collapse of Lehman and the beginning of the bailout. This is the other essential part of the picture. While the government is prepared to act to keep wages from rising, when the Wall Street banks effectively put themselves into bankruptcy, the government was very quick to come to the rescue. Both the Fed and the Treasury Department made it their central mission to keep the Wall Streeters alive. As former Treasury Secretary Timothy Geithner said repeatedly in his autobiography, there would be no more Lehmans.

So that’s the basic story in the simplest possible terms. The government openly acts to ensure that wages don’t rise and also to protect Wall Street high flyers who managed to sink their banks with their bad bets. Maybe an economist will win a Nobel prize for figuring out why inequality is increasing.

Kevin Horrigan notes the apparent irony in the location of the Ferguson protests and home of one of the highest paid CEO’s in America, Emerson Electric in Two Worlds, A Mile Apart.

The macro-global-economy is cheek-by-jowl with the micro-local-economy. Winners and losers side by side. Talk about your accidents of geography.

Emerson is No. 121 on the Fortune 500 with 2013 revenues of $24.6 billion. Some 1,300 St. Louisans are employed at the Ferguson campus, most of them doing highly skilled financial and management work.

Emerson employs a lot of less-skilled people to make a lot of different stuff, but not in Ferguson. In Mexico, Central America, South America, Germany, France, Romania, Russia, Turkey, Ukraine, Poland, China, India, Japan, the Philippines and other nations, in 230 manufacturing centers, Emerson employs 130,000 people, including 33,000 at 80 locations in the U.S. and Canada.

Of course, this is only ironic if these multinational firms brag about helping the community, in this case Ferguson and in the larger sense America, while they outsource the jobs needed for a vibrant economy.

In 2009, David Farr, then as now Emerson’s chairman and CEO, told analysts in Chicago that President Barack Obama’s ideas for the environment, health care reform and labor could “destroy” U.S. manufacturing.

“What do you think I’m going to do?” Farr asked his audience. “I’m not going to hire anybody in the United States. I’m moving.”

For Farr’s bosses — Emerson’s board of directors and its shareholders — this was precisely the right attitude. Every dollar the company can save by employing foreign labor instead of American labor is a dollar that goes right to the bottom line.

Emerson has enjoyed 57 straight years of dividend increases. It creates dependable, if not spectacular, returns for investors. If it has done so in part by offshoring America jobs, well, welcome to the globalization NFL.

I have not seen many analysts trace the frustration in Ferguson and many major American cities back to the Free Trade policies that put U.S. labor in competition with labor around the world to the benefit of transnational corporations.  Coupled with the disconnect between compensation and productivity trade agreements like NAFTA and PNTR with China have fueled income inequality.  There is an answer.

But what a great story if Emerson, with all of its management talent, would reach out to its neighbors left behind by the globalization, automation and computerization that has enriched its shareholders and executives.

David Farr has said he sees great potential in high-end American manufacturing, the sort that requires refined technical skills.

Michael Brown was shot to death on Aug. 9. His family said he had plans to start tech school on Aug. 11. A lot of tech schools promise more than they deliver, and a lot of students don’t follow through. Emerson already invests in technical education. Maybe it could do more of it in Ferguson.


This week’s audio netcast: It’s income tax time, and the inequality of income in America has never been a bigger issue. Economist James K. Galbraith says it is a sign of economic instability. Economic inequality also manifests itself at the ballot box, where the rich vote more than the poor — and vote their self-interest, says political scientist Jan Leighley. And Bill Press interviews Rep. Jim Clyburn about the 50th anniversary of the Civil Rights Act of 1964.

Too Much Online has this review of a Canadian project to promote enterprises must pay their top earner no  more than eight times the pay of their  workforce’s lowest-paid 10 percent.

The 32,400  employees at Goldman Sachs averaged $383,374 each last year, the Wall Street banking giant disclosed last week.

Typical  employees at Goldman, of course, didn’t  take home anything near that  $383,374. How much do  typical Goldman employees actually make? We don’t know. U.S. banks and corporations don’t have to reveal how much they  pay their workers. They do have to reveal how much they pay their top execs.

In 2012, Goldman  CEO Lloyd Blankfein took home  $26 million. Bank clerks nationally, the  University of California at Berkeley’s Labor Center reported last month, only average $24,100 a year. Lloyd Blankfein last year likely took  home somewhere close to 1,000 times the pay of his bank’s lowest-paid workers.

Elsewhere in America, CEOs at major financial and corporate enterprises are pulling down over 350 times average U.S.  worker pay. No other nation sports a  pay gap that wide. But  other nations are catching up. Canadian CEOs  took home 105 times   average Canadian pay in 1998. They’re taking home 171 times today.

What  can we do to  reverse these widening gaps? Toronto-based public policy analyst Peter MacLeod has one idea. We need, he says, to start “naming and normalizing” a  more rational and equitable standard for who gets what.

We  need, in effect, to start honoring enterprises that practice fair pay and stop  rewarding — with our consumer and tax dollars — those enterprises that are  making our societies ever more unequal.

Last  summer, with support from the Canadian foundation world, MacLeod founded a new international effort to put this new standard in  place. His new initiative — Wagemark —  has already begun certifying those enterprises  that pay “competitive,  responsible and sustainable wages.”

Wagemark logoTo  gain this Wagemark certification, enterprises must pay their top earner no  more than eight times the pay of their  workforce’s lowest-paid 10 percent.

This eight-times standard may seem hopelessly  utopian in  a world where  corporations routinely pay  executives hundreds of  times what they pay workers. But  at least 90 percent of all businesses, MacLeod  last week told Too Much, are currently operating “in a 15-to-1 or better universe.”

Have fun with this video from Crooks and Liars as they bring you Bill Mahers’ New Rules.  Bill takes Ronald Reagan apart and rubs the bronze right off the statue that has been falsely erected in his name.

Ronald Reagan was an anti-government, union busting, race baiting, anti-abortion and anti-gay, anti-intellectual, who cut rich people’s taxes in half, had an incurable case of the military industrial complex, and said Medicare was socialism, that would destroy our freedom.

Sounds to me like he would fit in just fine. [...]

But what they cannot contest is even though Ronald Reagan did a few things today’s GOP would not like, he wrote the playbook for them on every issue of consequence. Sure he raised taxes a few times, but when you look at where he started with taxes and where he ended, this is where our income inequality problem began. He invented Voodoo economics.

On race, his ideas couldn’t have been more tea party if he shouted them from a Rascal scooter. He ran on states’ rights. He invented the notion that black people get all the breaks. [...] Reagan just made shit up. Something else, he pioneered for his party of today.

He described the New Deal as fascism, Medicaid recipients as waiting for handouts, unemployment insurance as pre-paid vacation for freeloaders, and once said, “A tree’s a tree, how many more do you need to look at?”

He was the original, official pitch man for bat-shit, where they hold up signs that say “No socialized medicine.” Where do you think they got it from? We got it from you dad. We got it from you.

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