Links have a new look! Starting this week, we will be posting our links as separate posts in order to keep each one digestibly short and a bit less eclectic (this makes it easier to have focused discussions in the comments too).
Ten ideas to save the economy. Robert Reich, UC Berkeley professor and former Secretary of Labor under Bill Clinton, is halfway through releasing a web-series called ‘Ten Ideas to Save the Economy‘. The proposals focus on the U.S., but arguably apply to Canada as well. Five posts in, they are:
(1) Raise the minimum wage (to 15$/hr). Reich argues that increasing the minimum wage would pay for itself economically by bolstering consumer demand (via poverty reduction), expanding the workforce (because working would become an economically viable option for more people), and reducing the burden of poverty on food stamps, welfare, Medicaid and housing assistance. This last point is an important one. If full-time workers are not paid enough to live on, their dependence on the safety-net becomes an effective subsidy to their employer – a form of corporate welfare.
(2) Make work family friendly. Reich proposes mandating equal pay (among men and women) for equal work, mandating predictable hours for employees so they can effectively plan their childcare needs, providing universal childcare (pre-school and after school), and mandating employer-provided paid medical and parental leaves.
(3) Expand social security. Reich suggests significantly increasing Social Security benefits (which help seniors and the disabled, among others), and paying for it by removing the cap on wages subject to the Social Security payroll tax (currently all wages over $118,500/year are exempt).
(4) Bust up Wall Street. Reich suggests reinstating the Glass-Steagall Act that separates investment and commercial banking, putting a small tax on every financial transaction (to prevent speculative high-frequency trading), and busting up the big banks (“Any bank that’s too big to fail is too big, period.”).
(5) Reinvent education. Reich suggests making tuition free at public universities, providing skilled trades education options for senior high school students, paying teachers better (in order to attract the top talent), and reducing standardized testing (and related ‘teaching to the test’). The unifying rationale of these proposals is that broad access to high quality education is key to both maintaining productivity growth (through human capital) and achieving equality of opportunity.
Beyond the fact that these are all good ideas, I like Reich’s series because it encourages big-picture outside-the-box thinking about our economic problems, and it explicitly considers how to pay for new programs (rather than the sort of hand-waving that tends to translate to large public deficits in practice). The same could be said of the proposals for guaranteeing minimum income and housing, discussed last week. I hope these conversations continue.
Two headlines this week point to green shifts from big oil:
Suncor Energy CEO calls for a carbon tax. In a keynote speech at an event sponsored by Canada’s Ecofiscal Commission (a non-government research and advocacy group, led by leading academics and former politicians), Suncor Energy (one of Alberta’s largest oil companies) CEO Steve Williams said that he supported a carbon tax (in particular, one that targeted consumption in addition to production, like the one in B.C.). This means that the Harper government’s non-policy on climate change – seemingly motivated by concern for the oil and gas industry – has few remaining allies.
Saudi Arabia plans to be powered entirely by renewable energy, prince suggests. This might be hot air, as The Guardian noted when they broke this story, but it nonetheless adds to the evidence that even the big players in oil and gas see the clean energy shift coming and recognize the importance of getting out ahead.
The Tête-à-Tête 
The ideas from Reich are interesting, but I have to say I disagree with his approach in several (as well as his overall economic philosophy, which pretty much toes the party line of Elizabeth Warren and the associated bloc within the democrats).
1. Minimum wage: Here I am more or less in agreement with Reich. However, I would throw in the concept of a guaranteed minimum income together with discussions on minimum wage. Mark Cuban has a very interesting take on minimum wage (and family leave policies) http://www.cnn.com/2014/07/30/opinion/cupp-mark-cuban-surprising-mind/, suggesting it be raised everywhere except manufacturing, since service sector jobs don’t disappear if wages go up, but manufacturers have to compete with those overseas. Along this line of thinking, it follows that we need to have some kind of effective corporate welfare if we want manufacturing jobs that could be outsourced to stay. I’d prefer a guaranteed minimum income to the current patchwork.
2. Family policies: Here I agree with Reich on the spirit, but disagree sharply on the approach. I think family support is an area where the government and not individual companies should take the lead, because they have the best size to manage the risk. I’d like to see a mandated parental leave for one or both parents of at least 1 year, with pay from the government (like in Canada). Mandated predictable hours is also something that does not make a lot of sense across the board in our global economy. For example, any employee of an international business who has to co-ordinate with employees of branches in different time zones may not be able to do so between 9am and 5pm (9pm-5am in China). I think flexibility on both ends (i.e. work is flexible for family, just as family has become flexible for work) makes a lot more sense and is actually what is being done by many of the most sought-after employers now (e.g. Google, Apple). Finally, the idea of equal pay for equal work legislation is to me purely political and not likely to have any meaningful consequence on the economy. It is the equivalent to when governments set meaningless emissions targets to try to pacify eco-conscious voters. Such a law on its own would not do anything to improve family leave and childcare policies or influence the way men and women choose careers, the largest contributors to the overall gender pay gap (income inequality in general is a third significant contributor, since the extremes on both ends tend to be occupied by men). They would only allow for litigation in cases where discrimination can be proven (torts that are already allowed under existing discrimination laws).
3, 4, and 5 I more or less agree with. What do you think?
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I agree with the idea of thinking about guaranteed minimum income in place of raising the minimum wage, but I’d rather see the minimum wage raised everywhere than exempt some sectors more affected by the global race to the bottom. Wages in China and Mexico are lower than 7.50 an hour as well as 15 an hour, so I think at some point we just need to accept the fact that companies willing to leave for cheaper labor will leave, and try to come up with policies to deal with the potential fallout in a minimally distortionary fashion (like guaranteed minimum income). As for family policies, I agree that the government should be paying for the leave (or at least a significant fraction of it) because it’s true that a right to family leave is a public good, not a direct service to the company (most countries do do it this way, as you’ve noted). I agree with you on flexibility, but also note that flexibility is not at odds with predictability so it’s a false choice. In fact, flexibility generates the kind of predictability Reich talks about. I agree that the pay equity issue is more complicated than a quick fix, but I am not yet convinced legislating equal pay would do more harm than good. Also, Reich is not a follower of Warren; he is just as much of a leader of this thought school as she is. The intellectual guru of this thought school is probably Joe Stiglitz, Nobel laureate and 4th most cited economist alive. (Interestingly, I discovered last night that Stiglitz shares Warren’s concerns about the TPP).
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I agree that equal pay for equal work legislation does no harm (just like meaningless emissions targets), but instead that it does absolutely nothing at all. I’m all for passing the legislation to give a moral victory to certain feminist groups (like meaningless targets give certain environmental groups moral victories). I just question this bill’s presence on a list of ideas to ‘save the economy’ when it does nothing. That is why I say it is political more than anything.
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If your contention is that equal pay for equal work legislation is probably not the difference between ‘saving’ the economy and watching it perish, I’m with you. If your position is that apparent pay inequities between men and women are a lot more complicated than people overtly (or even sub-consciously) discriminating against women, again I’m with you. But I don’t agree that legislating equal pay would accomplish nothing. In negotiating professions, for example, legislating equal pay will probably encourage employers to low-ball women (and maybe also men) less. I think this would be a good thing. It’s true that broad information sharing about salaries might empower people (including women, but also men) to negotiate better, but I also doubt this would offset the differences in negotiating styles among men and women, even at its extreme (i.e. if everyone’s salary was public). Given that we agree that legislating equal pay will likely do little to no unintended harm, and it might fix some inequities, I think it’s not a bad idea (even if it only has a marginal benefit).
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Adding to the evidence that parental leave should be subsidized primarily by the government instead of employers, this just came out in the NYT: http://www.nytimes.com/2015/05/26/upshot/when-family-friendly-policies-backfire.html
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What I don’t understand about proposed Equal Pay legislation in the US is what remedy would it allow that isn’t already covered by existing anti-discrimination legislation (e.g. Equal Pay Act of 1963, Civil Rights Act, including its Title VII and Title IX, etc.). Sex discrimination in pay is already a valid tort. What is fundamentally ‘new’ about the proposed legislation that justifies its place in ‘Ten ideas to save the economy’? Is it requirements to publish more information as you suggest (why not call it the “Transparency in Compensation Act”?)? If it is simply providing incentive for employers to not low-ball their (female) employees for risk of getting sued, they already face this risk. I am all for equal opportunity (as I am for clean energy), but if we are honest with ourselves, the comparisons between Equal Pay legislation and emissions targets are uncanny: morale-boosting, but substantially utterly inconsequential.
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Under the existing law (Civil Rights Act): “employers may not pay unequal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment.” …now if only we enacted a new law stating that men and women must be paid the same for the same work, our economy would be saved!
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