Saturday, November 21, 2015

Race to the Bottom: Trump's Minimum Wage Cuts and the Competitive Hoax

by Nomad

Ever imagine a day would come in America when a candidate for president would tell voters that the lowest wage was too good for them. The moment came in the last Republican debate.

At the last Republican debates, we heard GOP candidate Donald Trump trying to explain why he was against an increase in the minimum wage. Trump told the audience that that wages are “too high” in the United States. 
A lot of audacious things come out of the mouth of The Donald, but, coming from a one of the wealthiest candidates in US history, this remark had to be the hardest to hear for people making the lowest wage in the country.

Trump's Tactical Blunder

In response to a question about the New York decision to raise the minimum wage for certain workers to $15 an hour, he said
“Taxes too high, wages too high. We’re not going to be able to compete against the world.”
Cutting wages may have been something Republicans often implied but never dared to say outright. For good reason. For a lot working men and women, a remark like that puts you smack dab in the category of the oligarchical class.
The following day, Trump remained adamant in his declaration and insisted he had nothing to retract.

Almost immediately Trump's foes- a group not limited to the left- jumped on the remark, calling it a colossal blunder. Not in terms of  economic policy. If it were left to conservatives, wages would decrease, and there are probably plenty of CEOs out there who dream of wages dropped to zero. 

After all, nobody seemed to mind the fact that for most workers, wages have remained stagnant for the last two decades. Everything else, like food and housing costs, retail prices and medical costs, all these have soared.

So, few commentators on the Right considered Trump actually be wrong but only that his remark was a tactical misstep. You can think it, you can hint at it, and you can camouflage it with trickle-down redux but if you want to get elected, you sure as hell shouldn't say it. 

It showed, his critics said, a lack of understanding of where his core support originates. The angry working class.

The National Journal puts it this way.
Trump’s polit­ic­al base is dom­in­ated by work­ing-class voters who have been dev­ast­ated by the re­ces­sion and sub­sequent slow re­cov­ery. Many of them are drawn to Trump be­cause they be­lieve his tough per­sona and ne­go­ti­at­ing prowess will re­verse Amer­ica’s eco­nom­ic de­cline—and with it, raise their own wages. Trump is run­ning against the Wall Street wing of the Re­pub­lic­an Party, but with his af­fin­ity for low cor­por­ate wages, he pit­ted him­self against many of the pop­u­lists he’s woo­ing.
These people now have every reason to question who he really represents. They may (but probably not) begin to question the wisdom of a CEO billionaire representing the interests of the common working man.
Whether his followers have the intelligence to recognize Trump as a hypocrite is an altogether different question.

Carson: In Over His Head

During the same debate, Candidate Carson joined in, adding more of his usual faked facts. He said:
Every time we raise the minimum wage, the number of jobless people increases.”
In reality, there is very no evidence of any correlation between the two. Fact-checkers noted that there was no way one could make such a sweeping generalization. A candidate making such a claim is either dishonest or extraordinarily ill-informed.

In mindless parrot mode, Dr. Carson then confused he proposed a minimum wage increase with the usual conservative gripe against liberals spending too much on social programs.
“How do we allow people to ascend the ladder of opportunity rather than how do we give them everything and keep them dependent?”
This kind of nonsense is the inevitable outcome of an unqualified candidate in over his head.

Providing citizens with a wage they can actually survive on, a living wage, a wage they can reasonable raise a family on is not giving them "everything." 
That's a really offensive thing to claim for people who are may be working two jobs just to make ends meet. Guaranteeing a living wage is simply giving lower-wage workers a chance at the American Dream

A minimum wage is not, and has never been, considered a wage that workers could necessarily survive on. It's only the lowest level that employers are mandated by the government to pay. (There are, even then, plenty of loopholes.) 
Far from keeping anybody dependent, an increase in wages will allow families to be more independent, by allowing the chance to pay off their debts and perhaps even save money. And what better way is there for people to ascend the ladder of opportunity.

The Competitive Boogeyman

We have all heard conservative bang the drum that America is losing its competitive edge against the likes of China and India and other emerging economies. 
It was a political claim that served Ronald Reagan well and in the years since then, this particular rationale has over the years gotten a lot of mileage in the conservative movement. 

Increasing competitiveness was the primary rationale behind the Bush tax cuts for the  job providers. Even as the US economy was seeing its greatest losses in manufacturing... to China.

The reality is that this claim was a once just a useful myth which has now become a campaign hoax.

Back in 2010, the Wall Street Journal discredited the claim that Chinese economy would soon overtake the US economy.
According to a November poll by the Pew Research Center, 44 percent of Americans believe that China is already the world's top economic power while 27 percent put the United States in that position. That perception is completely at odds with the facts.
The same article pointed out that. if the China economy seemed impressive, much of it was an illusion. 
One reason China's economy is so big is simply that it has 1.3 billion people. But China's per capita gross domestic product is only one-seventh the U.S. level. And in household living standards, China lags even further. Each year, an average Chinese household consumes one-fourteenth the value of goods and services purchased by an average American household.
Five years later, China is doing better but then it had so much further to go to match the US.
Forbes- hardly a liberal bastion- said last year.
China does have a chance to become the world’s largest economy. Such aggregate strength would mean something, but less than one may think, given that its GDP per capita is only about 90th in the world. And India lags about 30 spots behind China, for that matter. For them to overtake the United States in terms of quality of life for the bulk of their citizens, they would need to grow at a spectacular pace for decades, while the U.S. would need to stagnate indefinitely.
No matter what Trump and Carson or any of the other fear-mongering candidates say, America is not being left behind. Its infrastructure may be crumbling, abandoned in the name of Republican austerity, but in terms of competitiveness, we have nothing to be ashamed of.

Even the ultra-conservative Fox News doesn't believe China -for all its impressive growth- will become the world’s largest economy in the next decade.
By 2019 (the end-point of IMF projections), its estimate for U.S. GDP shows the U.S economy will be nearly 60% greater than China’s, $23.4 trillion versus an estimate of $14.8 trillion for China. Unless China completely liberates its economy by 2019 to suddenly blow its GDP out by 60% within a short five-year time frame, the U.S. will still top.
So let's not worry excessively about a loss of American competitiveness.

The Competitiveness of CEOs

If the Republican party were so genuinely concerned about having competitive wages, perhaps we need to start with the salaries of CEOs. 
That's not some Marxist protest marching slogan. 
Consider that in 1965, CEOs of America's largest corporations were paid, on average, 20 times as much as average workers. Now, the ratio is over 300 to 1.The share of corporate income devoted to compensating the five highest-paid executives of large corporations ballooned from an average of 5 percent in 1993 to more than 15 percent by 2005 (the latest data available).
And, in contrast to increasing the minimum wage, this imbalance actually does affect American competitiveness. Corporations that devote such fortunes to the top management must spend much less on things like research and development, retraining or improving productivity, increasing worker wages or dividends to shareholders. 

That's not something that we can reasonably expect Trump whose salary to moan about. With more than 150 listed income sources. and positions in more than 500 companies, Trump reportedly earns $250 million-plus annually.

In fact, despite all that personal wealth, Trump has actually complained about other CEOs and their enormous salaries. He called it "disgraceful."
When this hypocrisy was brought up, Trump shrugged his enormous salary off saying, it’s difficult to do anything about it because of the free enterprise system.

The Real Question We Must Be Asking

Actually, the question we should be asking people like Trump and Carson is different. Trump needs to answer: How low do they think wages must fall in order for America to be competitive with China?

Would $300 dollars a month be enough to satisfy them? Imagine a take home salary like that. 
Well, that figure would still be higher than the minimum wage in China.  As one source noted:
Starting in April, the minimum wage for workers in Shanghai will rise to $293 per month (1,820 Chinese yuan), the highest in mainland China.
That's the highest, keep in mind.
The hourly wage, which changes from region to region, can range anywhere from $1.23 in the Guangxi province to $2.51 in Beijing. It doesn't get any higher than that.

What about India, another developing nation that the US is supposed to be in competition. What's the minimum wage there? That's only $1.47 per hour. 
India has more than 1,200 different minimum wage policies, varying from state to state and sector to sector. According to one website, the National Floor Level of Minimum Wage has been raised to $1.84 per day. That's what a minimum wage increase looks like there. 
And doubtless there were many wealthy business owners in India feeling miffed about that increase too. 

The truth of the matter is that the US economy could not possibly compete with India or China when it comes to wages. 
In fact, the complete opposite is true. It is China and India that are looking to the US as a model, as what success looks like. That may be hard to believe sometimes, but it's true.

Deregulation and A Return to the Gilded Age

Not just when it comes to wages. Deregulation of industry in the name of competitiveness is a race to the bottom. A failure to regulate Chinese industry has caused the air to be unbreathable in the Chinese capital. It has led to hazardous materials being unsafely stored, in turn causing spectacular explosions in residential areas.

It has also led to hardship and social unrest that necessitates a kind of civilian control that Americans would never stand for.

Take the textile industry in China, from which the nation draws 18.9 percent of the country’s total manufacturing employment. In that industry, the working conditions were marked by "low hourly pay, long and unstable working hours and detrimental environmental impacts." 

Those are the kinds of conditions that haven't existed for a hundred years in the US. To imitate that would be a major step backward. Do we really want to return to the age of the robber barons and the Gilded Age? 
Whatever growth we are seeing in developing nations is just a mirror of what America went through in the late 19th century. 
During the 1870s and 1880s, the U.S. economy rose at the fastest rate in its history, with real wages, wealth, GDP, and capital formation all increasing rapidly.   
It's also important to note what came next. Public demands for reform, tightening of regulations and labor unrest through the country.  We as a nation shouldn't be asked to forfeit a century of progress just in order to make the rich become even richer. 

One authoritative source notes that when it comes to workers and working conditions, China, with its lack of labor regulations, should never be a model for labor in America.
Workers’ resistance to poor working conditions and management practices is increasingly well documented in China. Examples include the 2010 strike at the Honda car factory in Guangzhou (C. Chan and Hui, 2012 and 2014), and the April 2014 wildcat strikes in the leading sports footwear producer Yue Yuen – another Taiwanese-owned firm and the major first-tier supplier to Nike and Adidas – on the firm’s failure to make social insurance and pension payments as stipulated under national law.
Are we expected to give up all progress in the name of being competitive? It makes no sense for American industry to try to match the lowest standard found in the rest of the world.

To cut wages to a competitive level with those nations would require that everybody- except the 1%- take a cut in wages too. The standard of living for the whole nation would have to take a cut simply because there would be less money in the economy. That's just common sense. 

Trump might think the spending of the 1% can support the entire economy, but no sane person would believe this.