Saturday, April 19, 2014

In Defense of a Living Wage

When I was a boy, I ran a lemonade stand in front of our house.  I made the lemonade from frozen concentrate that my mother had bought at the market.  I was able to pocket a few bucks, because my mom didn't charge me for using her groceries.  But I'm not sure my business was actually profitable, and it certainly was not as profitable as it seemed to me because my cost of lemonade was zero.  Mom was subsidizing my business.

Similarly, any company that pays less than a living wage is, in effect, on welfare.  Such a company is not really profitable, but rather is being subsidized by tax dollars, just as my lemonade stand was subsidized by my mom.  

A company that employs workers uses labor, in the same way my lemonade stand used concentrated lemonade.  Labor requires people.  If a company does not pay the worker enough to survive at a minimum level, then that company is not really paying for what it is using.  And, it is usually the government that makes up the shortfall by way of welfare, food stamps and subsidized medical care.  

Each of us is capable of certain number of hours of work in our lifetime.  For example, let's say a man starts working full time at 18 years of age, and retires at 68, and lives to 80.  Let's call full time 40 hours per week, 50 weeks per year.  That's a total of 100,000 hours of labor.  If he receives $10 per hour, that is $1,000,000 earned over a lifetime, or about $12,500 per year.

A living wage must provide enough to support a person at whatever standard society decides is the minimum acceptable level.  This must include the cost of the person's education, medical expenses and taxes.  Taxes pay for things like police, roads and defense which we all use.  If a wage is not sufficient to allow a person to pay their fair share of these expenses then someone else must pay.

The Federal government collects on the order of $5,000,000,000 in taxes each year from about 300,000,000 people, an average of something like $17,000 per person per year.  Thus, $10 per hour is not enough to pay one's fair share of taxes, let alone to eat, even if one works full time for one's entire life.  

I realize that some of those taxes pay for welfare and social security, and that those amounts must be deducted from the calculation.  But even so, my back of the envelope calculation shows that $10 per hour is clearly insufficient to support a person.   My best estimate is on the order of $20 per hour, although I certainly do not pretend to have conducted a rigorous calculation.

Companies that pay less than a living wage may argue that some people simply are not capable of work that is worth $20 per hour.  And, better to pay such a person $10 per hour than to pay him nothing.  In extreme example, such as a person with Down Syndrome, this may indeed be admirable.  But a company who relies on such a labor force in a substantial way must recognize that it is getting cheap labor as a result of the misfortune of others, and that their worker would not be able to survive but for the generosity of society at large.

In the vast majority of cases, however, there is no excuse for paying less than a living wage.  What work is "worth" is a function of what it costs to create.  The calculation above shows what it costs to create an hour of labor.  

Tuesday, April 16, 2013

Responding to Terror in Boston

How should we respond to the attack on yesterday's Boston Marathon? In very large part, we should not respond at all. Of course, those who know the victims should comfort them, and law enforcement should investigate. Those who felt the emotional sting (as I did) should take this as a reminder that life is short and uncertain, and reach out to their loved ones for comfort. But beyond that, however,we should not respond at all.

The manner in which we respond to adversity defines us. The running community understands that better than most. We should not allow the crazy/hateful people behind the attacks to turn us into fearful/angry people. Instead, we should go on with our wonderful lives. We should start training for next year's Boston Marathon; I'm proud of my friend who announced, with hours of the attack, that he will not alter his plans to run next year if he can qualify.

Some will urge that we implement more security measures, but that would only be counter productive. It is impossible to stop terrorist attacks of this nature. If we place security at the marathon, they will go to the ballpark, the shopping mall, the supermarket, the freeway or any other place where people congregate. We would have to shut down society to prevent such attacks, and even then it probably wouldn't work.  Indeed, by responding to the attacks we encourage the next crazy/hateful group seeking attention.

And for what? Terrorism accounts for a minute portion of injury and death in this country. Far better to shut down the freeways to prevent car accidents than to shut down a marathon to prevent terror attacks.

So, how should we respond? Perhaps by getting in shape, qualifying for Boston next year and then making plans to join in that wonderful celebration of life, health and a free and open society with thousands of like minded friends.

Friday, November 23, 2012

Enough!

Republicans lost the 2012 presidential election. Yet, they still seem to believe that they are entitled to rule this country with an iron fist. I'm talking about Grover Nordquist and his pledge - signed by the majority of Republicans in Congress- never to raise taxes at all. What a foolish pledge, swearing never to compromise one iota, no matter what. Did it not occur to these people that they might not control the government forever?

These Republicans have pledged themselves into a corner. They now have a choice between violating their oath or making themselves irrelevant. Having lost the White House and the Senate, they cannot expect the Democrats to simply roll over and give up on even one penny of new revenue just because the minority party made a unilateral promise. This pledge will eventually spell disaster for the Republicans who will be shown up as the extremists they have sworn to be.

And for what grand purpose did these Republicans swear never to compromise? To protect the very wealthiest among us from having to pay their fair share. Taxes on the wealthy are lower than they have been in decades, way lower, and our government is deep in debt - in very large part because of wars started by the last Republican administration. We also have a failing infrastructure, declining educational system and inadequate health care. These things cost money to fix.

Yet, the Republicans insist that not raising taxes on the rich is more important than any other priority: balancing the budget, funding education or defense, health care, roads - none of these are as important as making sure robber barons like Jack Welch and Mitt Romney don't have to pay taxes at the same rate as the people who pick up their garbage. It is simply disgusting.

Furthermore, these Republicans are, for the most part, Christians. In other words, they purport to follow the teachings of Jesus Christ. Christ would be sickened by the policies of these Republicans. What hypocrites!

It is time to say "Enough!" to the Republicans!

Tuesday, October 9, 2012

Why All Good Capitalists Should Support a Gasoline Tax

The free market works because it allows people to decide for themselves what they value.   Suppose I buy a loaf of bread from the baker for $2.  I make the decision that the loaf is worth $2 -- or more -- to me.  Otherwise, I wouldn't buy it.  No one tells me what I like, want or need, nor what bread is worth or should cost.  Similarly, the baker decides that it is worth it to him to sell his bread at $2 per loaf.  He probably takes into account his rent, the cost of flour, labor costs and many other factors, but in the end both he and I conclude that the transaction makes sense -- otherwise there is no deal.

The baker decides how much bread to bake, and how much to offer for flour, based on what we are willing to pay for his bread.  The combined effect of everyone's willingness to pay for goods and services sets prices and allocates resources across the entire economy.  It is a bottom-up method, which allows everyone to make their own decisions, but it results in the most efficient allocation of resources and the greatest good for the greatest number.

While this may sound like some new search method instituted by Google, it is in fact old news, famously summarized in 1776 by a Scot named Adam Smith, in The Wealth of Nations.  Smith was born in Kirkcaldy, Fife, about 25 miles from where I studied at St. Andrews.

But, like any theory, the "invisible hand" of the free market only works its magic under certain specified conditions.  This, too, is old news, dating back a couple of centuries and taught without controversy in every Econ 1 class across the nation and indeed around the world.

The most important exception, for the purposes of this post, is something economists call "externalities," i.e., the impact of my buying decisions on other people.  There are few, if any, externalities related to my purchase of bread.  I buy the bread, I make toast, I have breakfast -- end of story.  I pay the $2 price; you pay nothing and my decision to eat bread does not change your life.

But let's say I decide to pay my gardener to remove the leaves from my driveway, using a leaf blower.  I pay $50, and I put up with the infernal racket those leaf blowers make.  It is worth it to me to get the leaves out of my yard.  Unlike my purchase of bread, however, my decision has consequences for ten of my neighbors.  They, too, must put up with the outrageous sound made by that leaf blower, but their concerns are not mine and do not play a role in my buying decision.  This externality blows away more than just leaves, it blows away the entire theory of the free market.  The free market's "invisible hand" no longer works.

As I said, this is not advanced economics, far from it.  It has been known since 1776, if not before, and is not in the least controversial.  You cannot find an economist who would not agree with this analysis, although you could no doubt find many who could explain it more eloquently!

Let's apply the concept of externalities to gasoline.  Burning gasoline dirties the air, air which we all breath.  If you burn a gallon of gas, the impact on you is small.  But, the combined impact on the millions (or billions) of people who breath the air is millions (or billions) of times greater.  You also raise the temperature of the entire planet, however slightly.  This may not matter to you, but multiply your decision by the 6,000,000,000 people who must live with it, and the math changes significantly.  And, your decision to buy gas also drives our foreign policy.  Your decision to buy a gas-guzzler impacts the entire world, not just you.

If it were just you and your one gallon of gas, it wouldn't make any meaningful difference.  But the situation is different when we all buy gasoline.  Billions of us make the same decision to burn a gallon of gas; each of us worries only about the gallon we are burning because, after all, that is all we can control with our buying decision. The result is a market that is massively out of whack.

There is a way to adjust for this imperfection in the free market: impose a tax on the consumption of gasoline.  The tax must be high enough to balance the harm caused to others by your decision to burn a gallon of gasoline.  Ideally, the money would go to eleviate the impact, i.e., to clean the air or to combat global climat change, but even if the money just goes into the general tax fund, it still serves the purpose of keeping the free market in balance.

But our government actually subsidizes oil production.  If you believe in the free market, that decision makes no sense.  Burning oil does not benefit others; it harms others.  The government should not subsidize oil, it should tax it heavily, enough to compensate for the harm done by the consumption of oil.





Wednesday, July 25, 2012

Tragedy Amplified; Lessons Not Learned

The shooting in Aurora, Colorado has dominated the national news for the past week, but why?  Yes, the shooting was a tragedy for those involved, their friends and their families.  I do not mean to minimize that.  But we are a country of 300,000,000 people, while 12 people died in Aurora.  Approximately the same number die ever day in car accidents.  Those deaths are just as painful and tragic.  Even more people die each day from cancer, heart disease and other causes.  So why do we spend so much time focusing on an incident like what occurred in Aurora, while the real dangers to public health are relegated to the bottom of the news?

The simple answer is that the theater shooting was spectacular and unusual.  An unusually disturbed man took action in a very unusual and violent way.  Such incidents get people's attention, sell newspapers, create hits on websites and get eyeballs on TV screens.  That is the obvious reason why the news media pays so much attention to Aurora.  It gets people's attention; it is entertainment that sells.

This perverse form of entertainment is not good for us as a society.  It scares the daylights out of some people, making them unhappy and causing them to do silly things like not got to the movies for fear of being shot.  It makes people believe that we live in an incredibly violent society.  Perhaps our society is violent, but the manner in which the media replays a single violent over and over makes it feel far more violent than it really is.  And, in the end, it may make society more violent; recent news reports reveal that gun sales are up almost 50% in Colorado since the shooting.

The real lessons of Aurora, such as they are, seem to go unnoticed.  The shooting occurred because a highly disturbed individual was able to get his hands on guns and ammunition.  The only ways to prevent future incidents is to limit access to guns and ammunition, and to improve our mental health care system.  But those lessons seem to have gone by the wayside.


Wednesday, June 20, 2012

An Old Story with a New Twist: Weapons of Mass Technology

Long ago,  the amount of harm a single individual could do was relatively limited.  A man with a club could kill, but not very efficiently.  Over time, humans developed arrows, metal armor, guns and tanks.  In the last century, we invented nuclear weapons that could destroy entire cities, and indeed threatened to wipe out all of human civilization.  Somehow, we managed to avoid that fate, at least so far.  Yet, the mere existence of nuclear weapons alters the way in which we respond to rogue states, such as North Korea.

Recently, the story of ever-increasing power to destroy has taken a new twist.  High tech weapons such as drone planes, cyber attacks and biological weapons have been in increasingly in the news.  This morning, NPR suggested that drone planes may soon be the size of insects.  While the specifics of these new weapons and methods of attack are unclear, at least to me, the overall path of history is plain for all to see.  As we humans become more sophisticated in general, we will become better and better at inflicting damage on each other.  It will become easier and easier for fewer (and less intelligent and less well-financed) individuals to inflict more harm on others.

Certainly, we can work on defensive measures.  Cyber security can counter cyber attacks, at least to some extent.  Radar can, one hopes, detect some drone planes.  But it seems clear that offensive weapons will always outstrip defensive ones.  And, as weapons become more effective, the damage done when just one offensive weapon gets through increases.  

The only solution I can see is to discourage people from using these weapons in the first place.  We must create a world in which people see all other humans as part of the "in-group."  We must create more wealth equality, so that everyone has something to lose.  It is not an easy solution, by any means, but it is the only one that can work.  

Sunday, January 29, 2012

Why Words Hurt

I've had this post in my mind for some time, but have hesitated writing it because I am afraid some will find it unnecessarily offensive. I apologize in advance if your sensibilities are hurt; I assure you, that is not my intention, although perhaps that is inevitable in some cases. On balance, however, I believe it is important enough to justify some hurt feelings. So here goes:

This post is about the word "nigger," a word that has become so offensive that most people will not utter the word, nor write it down. For example, the media learned that presidential candidate Rick Perry owned a property that a previous owner had dubbed "Niggerhead." Perry owned the property for years before changing the name. In reporting the story, the media almost uniformly refused to use the word "nigger." Instead, they used euphemisms that suggested the real name.

I find the refusal to utter a word to be highly counterproductive because it only serves to make the word more offensive and shocked when it is used by those who seek to offend.

To be perfectly clear, I find the word "nigger" to be highly offensive, and I certainly do not condone anyone actually using the word, e.g., calling someone a "nigger" or referring to someone as a "nigger" behind their back. But saying the word, as in reporting that, "Rick Perry's failure to change the name of his ranch from 'Niggerhead' to something else shows that he is grossly incentive to Blacks" is not in the least bit offensive nor racist.

The word "nigger" comes from the word "negro," spoken with a Southern accent. While the word "negro" was not in any way offensive at the time, most Southerners who spoke the word no doubt held Blacks in disdain and treated them like sub-humans. It is easy to see how the Southern utterance "nigger" soon came to make people's skin crawl.

The socially correct word for people of African descent has changed over time, as has the socially correct for disabled people and many other groups. The reason for this is related to the origin of the word "nigger." A group of people is mistreated or looked down upon by society in general. As a result, when the then-current word is used in conversation, it is usually in a negative fashion. Eventually, negative connotations build up around the word. Those who are more sympathetic to the group in question become offended, and demand a new word.

But, if society does not change, the new word also eventually builds up negative connotations as well. Those who are more sensitive or sympathetic demand another new word. And so a word that was introduced in order to avoid an older and offensive word can itself become offensive. I love how Berkeley Breathed played on that cycle of new words in an old Bloom County cartoon. The dialogue below involves the character Steven Dallas, who is learning to be more sensitive, and his older parents, who just doesn't seem to get it:

Mom: That's the most adorable little colored girl playing outside.
Steve: "Colored"? You're saying "colored people" in 1988? You know better, Ma.
Mom: Then why the "National Association for Colored People? I don't think Negroes mind at all.
Steve: Don't say "Negroes," Ma! You can't say "Negroes"!
Mom: Can I say "United Negro College Fund"?
Steve: You are baiting me, Ma!
Dad: That's it. We're leaving.
Mom: Stay put, Reginald. "Mister Socially Sensitive"isn't finished shaming his parents into enlightenment.
Steve: Everybody just calm down. Let's agree to use the the New-Age term "People of Color."
Mom: People of Color.
Steve: People of Color.
Mom: Colored people.
Steve: NO!!
Dad: We're leaving.

An interesting counter-example is the word "queer." Gays took this word and made it their own, thus changing the negative connotation. Similarly, the Republican party has taken the positive word "liberal" and managed to give it a negative connotation by repeating the word in a negative light, over and over. I certainly do not believe that we need to try that with "nigger"; better to leave that word to die off. But we can understand that not saying the word is not making things any better.

Perhaps the bigger and more important lesson is that words only mean what we agree that they mean. Changing the words does not change reality. Calling the Navaho "Native Americans" or "First Nationers" rather than "Indians" is not going to get us anywhere if we do not start treating Navaho people better. Absent better treatment of the group, we can expect the name to keep changing every ten or twenty years.