“…no business which depends for existence on paying less than living wages
to its workers has any right to continue in this country.”
1938 Fair Labor Standards Act – minimum wage: 25 cents
The whole subject of minimum wage laws and their effects on local and regional economies is a contentious one. We’re at an important juncture in the debate now because a number of municipalities have recently passed ordinances to raise minimum wages. So we have some natural experiments we can watch over the next few years. While we’re waiting for those efforts to play out, though, we can turn to a large number of highly respected studies of the matter to see whether raising a minimum wage is, as its critics claim, a “job killer.”
The Center on Wisconsin Strategy (COWS) comprehensive study, Raising the Minimum Wage to $10.10 per hour in Wisconsin, found that
increasing the minimum wage does not “kill jobs.” 600 economists, including seven Nobel prize winners and eight past presidents of the American Economic Association, have called for an increase in the minimum wage. Their letter sums up the case on jobs: ‘In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market.’
This chart illustrates the disconnect between productivity and wages, and what wages would be had they kept pace with productivity.Read more
Although Wisconsin's unemployment rate has fallen (to 6.5%), part of the decline seems to be the result of a shrinking labor pool. And the number of new unemployment claims, as reported by the US Department of Labor for the week of December 7, 2013, was the highest in the nation!
The Cap Times reported an official explanation: "Officials with the state Department of Workforce Development explain that Wisconsin historically sees a seasonal increase in unemployment claims around Thanksgiving -- in part because of deer hunting...." But of course other states also have deer hunting seasons, rendering the "explanation" curious at best. Perhaps even downright ridiculous.
But the increase in new unemployment claims was not the only unhappy outcome of Governor Walker's policies. His decision to refuse to expand Medicaid under the terms of the Affordable Care Act is going to cost Wisconsin taxpayers a bundle. The Milwaukee Journal Sentinel finds that Iowa's path is quite similar in many ways to the path Wisconsin is taking, except that Iowa's strategy is going to cost its citizens "a fraction" of what Wisconsin's strategy will be costing us.
Here are the key paragraphs in the Journal Sentinel story:
The broad structure of Iowa's plan — such as relying more on private health plans and less on the traditional Medicaid program — is similar to the approach developed by Walker and approved by the Legislature to increase the number of people with health insurance.
But in Iowa, the federal government is paying the full cost for the first three years of expanding its Medicaid program to cover all adults. The federal share will eventually decline to 90% of the cost.
In contrast, Wisconsin is paying 40%, and the federal government paying the other 60%.
The difference could work out to several hundred million dollars in additional spending for Wisconsin taxpayers over the next decade.
Starting with the similarities in their histories, Lawrence Jacobs, professor of political science at the Humphrey School of Public Affairs at the University of Minnesota, writing in the New York Times, analyzes two extremes and demonstrates how the Progressives in Minnesota have brought growth and security while Wisconsin's Republican majority has failed to make any improvements in the business climate and job growth.
The piece points out that these neighboring states both elected new governors in 2010 and also gave each governor's party a strong majority in his respective legislature. Since then their economic fates have diverged. Minnesota pursued a range of progressive policies, including a highly progressive tax increase to fund essential services and infrastructure, while Wisconsin followed the hard-right playbook by cutting taxes for the wealthiest and for businesses.
As professor Jacobs writes, the election of these opposing governors and legislators "began a natural experiment that compares the agendas of modern progressivism and the new right." Here's the gist of his analysis:
Which side of the experiment — the new right or modern progressivism — has been most effective in increasing jobs and improving business opportunities, not to mention living conditions?
Obviously, firm answers will require more time and more data, but the first round of evidence gives the edge to Minnesota’s model of increased services, higher costs (mostly for the affluent) and reduced payments to entrenched interests like the insurers who cover the Medicaid population.
Three years into Mr. Walker’s term, Wisconsin lags behind Minnesota in job creation and economic growth. As a candidate, Mr. Walker promised to produce 250,000 private-sector jobs in his first term, but a year before the next election that number is less than 90,000.
As it happens, this tale is repeated with another set of comparisons: between California and Wisconsin. And the results are similar. Professor Chinn, Professor of Public Affairs and Economics at the University of Wisconsin, Madison, posted a piece on the Econbrowser blog in September in which he "compared economic outcomes in two states that implemented contrasting fiscal policies: California, which surged ahead while raising taxes and cutting spending, and Wisconsin, which lagged far behind as it slashed spending on education, and cut taxes. Latest estimates of current economic activity, and forecasted economic activity six months out, indicate continued lagging performance for Wisconsin."
No matter how you slice it, progressive economic policies promote growth; regressive ones don't.
From the United States Census Bureau comes sobering news: median household income has continued to decline during the first three years of the Walker administration.
Historical Real Median Household Income for Wisconsin
By contrast, the comparable data for Minnesota looks like this:
Historical Real Median Household Income for Minnesota
Real median household income in constant dollars in Minnesosta in 2012, while still lower than the median income before the Great Recession, has now surpassed median household income in 2010. In Wisconsin, median household income in 2012 is still lower than it was in 2010. The same story can be found in Iowa. And in many other states around the country.
- Focus Wisconsin’s economic development strategy on growing family-supporting jobs.
- Bring leaders of business, education, labor, and government together to develop a bold, integrated strategy to increase personal income
- Foster private sector/government teamwork based on their respective strengths.
- Ensure that all business sectors pay their fair share toward shared services and facilities.
Wisconsin has a proud history of prosperity through hard work and innovation. Wisconsinites are ready and willing to learn skills and put them to work. Our state also has a tradition of leadership in manufacturing, food production, and innovation in turning the results of medical, biological, and environmental research into valuable products. As our economy shifts from resource extraction and heavy industry to a high-tech future, Wisconsin can again take the lead in building an economy that benefits all workers and their families.
We can restore Wisconsin to economic strength with policies that reward innovation and “in-sourcing.” Family farms, small businesses, tourism, Great Lakes-centered enterprises, and UW-system patents generate prosperity that stays in Wisconsin. We need to stop rewarding out-sourcing, foreign developers grabbing our farmlands, and the legalized blackmail that happens when a company demands tax incentives and still moves jobs out of state or overseas. Wisconsin can use innovative development ideas, such as industry clusters, to build on our unique strengths. (Read more on the importance of economic clusters.)
Economic development policy should first of all be smart and informed. We need to employ scarce dollars based on data and measurements that track results. Our state economic development office should focus on targeted efforts that will have the greatest impact on job growth. We need to learn from what other states have done to grow personal income. Many have worked as strong partners with business and schools at all levels to improve per capita income. In today’s competitive world it is naïve and shortsighted to advocate that government get out of the way of business. To grow per capita income will take teamwork and planning. Without a thoughtful plan, there is little reason to expect better outcomes.
Source: Center on Wisconsin Strategy, June 27, 2011
Source: Wisconsin Budget Project, July 3, 2013
The income of the richest Wisconsinites is going up, while that of the poorest is going down, but Walker’s tax cuts disproportionately benefit those making between $215,000 and 315,000.
A fair tax policy means everyone pays a fair share. Currently, most of the largest companies in Wisconsin pay no state income tax even when they are making record profits. And the situation will worsen in a few years. Under Walker administration tax policies, manufacturers will pay no state income tax even though the need for state funding to ensure a skilled workforce will continue and may even need to grow. This shifts the costs of education, public services and infrastructure to wage earners, small business owners, homeowners, and family farmers. Companies use our highways, ports, and rail lines and they benefit from our schools and universities. They need to help pay for them. Fair taxation will strengthen Wisconsin by encouraging investment in local communities and putting more money back into the pockets of those who live and spend here. <link to Wisconsin Budget Project white paper> Simply collecting taxes owed could boost our economy by an estimated $100 million. <link to IWF study, Investing in Revenue>
Rather than redefining “small business,” allowing foreign developers to buy up huge tracts of farmland, deregulating mining, and handing state funds to poorly managed start-up ventures, it’s time for policies that are good for Wisconsinites. Letting multinational corporations set our public policy weakens our economy when companies move profits offshore and dodge paying their fair share of public costs. Small businesses and start-ups are the biggest source of new jobs, but current economic policies have stranded Wisconsin near the bottom in entrepreneurial activity. The Wisconsin Economic Development Commission has failed to generate any jobs. Its current policy does not require startups receiving state aid to create any jobs or to account for the state funds they receive (Scott Bauer, Bloomberg Businessweek News, May 1, 2013). By restoring well-monitored start-up funding for promising new businesses, farmland protection, wetlands protection, and a strong system of public schools and colleges, we can rebuild a sustainable economy that respects our way of life, from camping “Up North” to family businesses in the city and countryside.
Money intended for schools, universities, aide to families, and the state’s rainy day fund must go for those purposes, not for unneeded highway projects and other campaign donor paybacks. Borrowing money for highway projects on an adjustable-rate loan leads to economic uncertainty for Wisconsin, just as the adjustable-rate mortgages led some homebuyers to financial collapse. Substituting one kind of debt for another is not a real solution to long-term economic stability. It will lead to the sort of “structural deficit” that the current administration pledged to fix.
We can do better! A mix of Wisconsin’s traditional economic strengths--manufacturing, dairy farming and other food production, and small business—and innovations in biotech, freshwater industries, and sustainable energy development is the key to rebuilding a strong economy. Fairer tax rates, more diligent tax collection, and strict accountability for tax-funded programs can ensure that these moneys are used as the voters intended: to restore Wisconsin’s excellence in public education, outdoor spaces, and prosperity for working families.
See Grassroots North Shore articles on this topic.
- A big issue for the economy and for people seeking work in Milwaukee is the disconnect between where job seekers live and where the jobs are located. According to a recent article in the Journal Sentinel, "A new study by the ever-busy Public Policy Forum finds the Milwaukee metropolitan area is badly disconnected, with no way for many workers to get to jobs in outlying counties. The study 'confirms the long-held notion that public transportation services are limited or non-existent in many suburban job centers” in the four-county metro area....'" [Journal Sentinel Online, December 19, 2013]
- In the latest report on new unemployment claims from the US Department of Labor for the week of December 7,2013, Wisconsin had highest number of new claims of all 50 states. In other words, Wisconsin's job losses for the week were the highest in the nation: "The largest increases in initial claims for the week ending November 30 were in Wisconsin (+4,420), Ohio (+2,597), Kentucky (+1,538), Massachusetts (+1,129), and New Jersey (+1,124), while the largest decreases were in California (-19,920), Texas (-7,284), Florida (-5,400), Pennsylvania (-5,145), and Nevada (-3,295)." [Department of Labor, December 12, 2013]
- According to a recent article by Linda Richter (“Wisconsin Lags Nation in Job Growth”), Wisconsin ranked 34th out of 50 states in private-sector job creation over the last 12 month reporting period. Citing data recently released by the U.S. Bureau of Labor Statistics,) she notes that not only did Wisconsin grow these jobs at a slower rate than most other states, but Wisconsin was out-performed by our close neighbors, Michigan, Minnesota, Indiana and Iowa. Read the full article at: http://www.newberlinnow.com/blogs/communityblogs/225673671.html [New Berlin NOW, September 28, 2013]
- In the latest data on job growth from March 2012 to March 2013, Wisconsin ranks 34th. [Journal Sentinel Online, September 26, 2013]
- Professor Chinn compares the economic performance and prospects of Wisconsin and California:
In a previous post, I compared economic outcomes in two states that implemented contrasting fiscal policies: California, which surged ahead while raising taxes and cutting spending, and Wisconsin, which lagged far behind as it slashed spending on education, and cut taxes. Latest estimates of current economic activity, and forecasted economic activity six months out, indicate continued lagging performance for Wisconsin. [Econbrowser, September 6, 2013]
- The "rising tide" of the recovery since the 2008 financial crisis, it appears, has left a lot of boats stranded, according to an analysis in the New York Times. [New York Times, September 10, 2013]
- See an earlier account from Professor Chinn on the economic forecast for Wisconsin, from Governor Walker's administration. [Econbrowser, July 19, 2013]