Elizabeth Warren is an economic idiot… Or a brilliant politician… From Yahoo! news:
Should the minimum wage be $22 an hour? That’s what Sen. Elizabeth Warren (D) of Massachusetts suggested at a recent hearing of the Senate Committee on Health, Education, Labor and Pensions.
Here’s her logic: If you took the minimum wage from 1960 and indexed it for workers’ gains in productivity, it would be $22 an hour today. And why shouldn’t employees reap the benefits of their own improved labor practices?, she asked at the hearing, rhetorically. Today, the actual minimum wage is $7.25 an hour.
“What happened to the other $14.75? It sure didn’t go to the worker,” Senator Warren said.
Those gains went to corporate and top-executive profits, said a witness at the hearing, Arindrajit Dube, an economist from the University of Massachusetts, Amherst. That’s simply more evidence of how income inequality has grown in America, he said.
“It is quite remarkable that had the minimum wage kept up with overall productivity, it would have been $22 per hour in 2011,” Dr. Dube said in his prepared remarks. “Had it kept up with the growth in income going to the top 1 percent, it would have been even higher, at $24 per hour; and the wage would have exceeded $33 per hour at its peak in 2007.”
Ummm… This is so stupid I can’t believe it. First of all, the people who were making minimum wage in 1960 ARE NOT THE SAME PEOPLE making minimum wage today. The wages (for unskilled workers, who are the people making minimum wage) that they made when they were unskilled, less productive workers DID increase greatly. Probably, for one hell of a lot of them, they became the people that are now at the top of the earnings ladder. Do you really think that no one who had a minimum wage job in 1960 is not now a successful 1 percenter?
Elizabeth Warren wants us to think that the SAME PEOPLE who start out at minimum wage are stuck with minimum wage their entire life and the only raise they get is when the government gives them one. Do you think that’s true? Have any of you held minimum wage jobs? Is your current salary closer to your minimum wage salary, or to the $33/hr figure?
Secondly, the really productive people in the economy (since we are talking about productivity increases) are not minimum wage workers. This is particularly true in an information economy. Businesses aren’t built on the productivity of their lowest paid employees. And, when the lowest paid employees prove themselves to be productive, they don’t stay the lowest paid employees.
Third, what about the wealth created? There have been productivity gains, so there should be a rise in minimum wage, Warren seems to argue. So should we tailor it all to the times? What would someone in 1960 have paid for a cell phone? Oh… that’s right… There were no cell phones. How about cable TV, or a flat screen? That’s right… those things didn’t exist. The 1960 equivalent of Bill Gates couldn’t have purchased one at any price. Now, the minimum wage recipient probably lives in a house with a microwave, central air conditioning, and they have a cell phone, iPod, game console, and a big TV to play it on. In 1960 they wouldn’t have had any of that stuff. Perhaps THAT is where the “$14 went”.
Is this the kind of economic thinking we get out of Washington? Or at our universities? My 16 year-old son will get his first job this year, probably for minimum wage. He will NOT be productive. The contribution he will make to whatever business hires him will be that he can learn to do simple things for the business and do them well. Once he proves that, he’ll probably get a raise. Why in the world would he be worth $22 per hour just because productivity has increased overall in the country? He didn’t increase it. He is already benefiting from it, with his cell phone, iPod, X-box, etc. But HIS productivity will not be worth more than minimum wage when he starts. I’m very much hoping that he’ll get a resume’ going (along with an education) and that he’ll put minimum wage jobs far in his review as his knowledge, skill, and work ethic allow him ever higher earning potential… Because he’ll be productive!
I hear things like this and shake my head in wonder. The problem is, many people will hear Elizabeth Warren and say, “Damn right! It isn’t fair!” Of my three simple points on what Elizabeth Warren said, how many do you think the “Damn right” people would have any clue about? How many do you think Elizabeth Warren has any clue about? How many MORE could you give?