[PEN-L:1678] Re: Minimum wages in real terms

[dhenwood@xxxxxxxxx (Doug Henwood)]

At 1:42 PM 12/2/95, Paul Zarembka wrote:

>Doug,
>
>I'm sorry but you are still misreading me.  I added a P.S. which implied
>"OK, if the minimum wage is increased to $10, let the average wage
>increase to $20 if need be". BOTH increases would take us back to 1950 or
>maybe only 1973 in terms of the labor time returned to workers from their
>work hours.  THIS IS NOT RADICAL!  (altho I don't mind being radical).
>IT ONLY TAKES US BACK TO AN EARLIER DATE of U.S. capitalism!  If it worked
>then for U.S. capitalism, why not now?

Because that was then and this is now. That period was an aberration in the
history of the world, a Golden Age of sorts; a period of regulated (i.e.
partly stifled) competition, weak foreign economies; a military spending
boom; U.S. imperial dominance; low female labor force participation; etc.

People who cite Europe as an example ignore the attack on social democracy
and welfare capitalism across Western Europe. They too are tending in a
more American direction, though of course they still have a long way to go.


Here are some numbers to show just how impossible this is. The
employment/pop ratio was 56% in 1950; it's 7% now; 12.8 million more people
are working now than there would be at 1950 EPR rates. And let's figure the
earnings numbers. Let's assume workers are what the BLS calls
nonsupervisory workers. BLS shows nonsup's only for private sector workers
- 79.6 million out of the 97.4 million private secdtor total or 81.7% (in
August 1995). They made an average of $11.47 an hour that week, and worked
an average of 34.7 hours. Multiply all numbers together and you get an
average of $31,015 a year in annual direct pay per worker, and $2,469
billion for a year. We don't know the sup/nonsup breakdown for government,
nor do we know pay, but let's assume they're the same as the private
sector. Total worker income was $2,794 billion. That's the amount we're
planning to double. Doubling it would raise workers' pay from 39.3% of GDP
to

Where would it come from? Capital income, of course. Personal income from K
in 199Q3 (interest, dividends, rent) was $980.4 billion. (It's hard to
allocate self-employment income, but it's only 7% of TPI, so it's safe to
ignore it for this sort of work.) Profits were $581 billion. Some share of
managerial salaries represent returns to capital - let's assume that
they're the amount by which total labor income (wage and salary plus
fringes) less worker income exceeds the BLS share of supervisors paid at
the average workers' rate. If supervisors were paid like workers, they'd
have earned $663 billion, not $1,421 billion, so the return to capital
classified as salary works out to about $758 billion. The capital portion
of personal income, then, was about $980 plus $758, or $1,739 billion.

This estimate is confirmed by another method, the Census Bureau's income
distribution figures. The top quintile had 48.6% of income in 1993, or 28.6
points more than their share would warrant. (Talk about Lake Wobegone; in
America, almost 80% of the population has below-average incomes. Well,
means that is.) That 28.6% times personal income represents an excess of
$1,737 billion.

Adding in profits would bring total K income to $2,319 billion. To double
worker pay, then, would require seizing every penny of capital income, and
then some.


Doug

--

Doug Henwood
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