Wednesday, March 22, 2017

Yes to raising the minimum wage

Chiefly, the Baltimore minimum wage bill is about aspiration. It establishes a higher bar and it expresses that Baltimore City isn't in a race to the bottom. The full implementation of the $15 rate in 2022 is a long way out and for small businesses even longer. Wages have been rising already, there is inflation and all kinds of things we don't know will happen in the next five years. For the next two years the bill won't make any difference, because it is completely aligned with the State bill.
Fight for 15 demonstration at Baltimore City Hall
[..]nearly 80 years later, economists still aren’t sure how a higher minimum wage actually affects companies and their customers.(LA Times Jan. 2017)
How can Baltimore dare to establish itself  on par with DC, San Francisco or Seattle? The audacity! Well, that is precisely the point.: To have the audacity of pronouncing a new paradigm. That is precisely what this city needs. It is well known in education that low expectations lead to low outcomes. Baltimore has suffered for too long from an inferiority complex and has too long compared itself only with low achievers. Mayor Pugh is someone with only accepts high personal expectations. She should not act any different when it comes to the city to which she is now married, according to her own words.

Of course, the matter is not entirely psychological, it has real economic implications and those are often in dispute with opposite arguments made on both sides, each underpinned with case studies. A popular argument (made also by BDC) is that 60% of Baltimore's workforce comes from outside the City and that higher wages for all employees here will increase the competition for positions and squeeze city residents out while  the additional money will be spent outside the City.

Given the confusion on the facts, it helps to take a longer view. Anybody who will look at the history of the labor movement can see that progress was always made by taking a risk. Whether new wage rates, safety rules, work-hour regulations or benefits, progress began by a few taking action and winning a battle without looking around whether everybody else was doing it, too. And each time the employer side saw the sky falling with the exact same arguments that are made now. (We have to close, to leave, let go of staff etc.). And always they have been wrong. Without the risk takers who dared to jump to the front of the line we would still have the terrible working conditions of the 19th century. Whoever doesn't believe that strengthening labor has good outcomes for the entire economy should look at the companies or countries that have the highest labor costs, best benefits and treat their workers with the most respect. They will find that precisely those companies and countries are the most profitable, have the highest productivity and are most competitive in spite of the higher labor cost. The saying that the employees are the most precious asset a company has was never any more true than today. One doesn't have to be an economist to see that to have success the human asset needs to be cultivated and not squeezed to extremes. If too many workers don't enough money to sustain themselves and their family, an economy can't be thriving.
a truth long recognized by economists: working longer hours doesn't necessarily result in increased productivity. Mexico—the least productive of the 38 countries listed in 2015 data from the Organization for Economic Cooperation and Development (OECD)—has the world's longest average work week at 41.2 hours (including full-time and part-time workers). At the other end of the spectrum, Luxembourg, the most productive country, has an average workweek of just 29 hours.
The United States ranks fifth, according to the OECD, contributing $68.30 to the country's GDP per hour worked, countering claims that Americans are the most productive workers in the world. America put in more hours—33.6 per week on average—than all four of the European countries with higher productivity rankings.(TIME Magazine Jan 4, 2017)
Council Pres Jack Young supports Mary Pat Clarke's bill (BBJ)
 It is one of the failings of the US economy that it, on average, does not respect its workforce sufficiently. Paid sick leave, decent vacations, workforce training and participation in a company's decision-making are standard practice in many industrialized countries around the world with workers being well organized in unions.
a large and growing body of research on positive organizational psychology demonstrates that not only is a cut-throat environment harmful to productivity over time, but that a positive environment will lead to dramatic benefits for employers, employees, and the bottom line.(Harvard Business Review, Dec 2015)
During the last recession when many US companies simply fired their excess staff, many European companies organized shorter work hours for everybody to spread the reduced work on more shoulders. When demand increased, they didn't need to re-hire and re-train and could work instead with a loyal work force.
29 states and Washington, DC have set minimum wages above the federal minimum of $7.25 an hour. As of July 1, 2016, the highest is Washington, DC, at $11.50 an hour, followed by California and Massachusetts at $10 an hour.(minimum-wage.procon)
True, systemic progress can't be made on the city level alone. On the other hand, with states and nations increasingly mired in inaction and incompetent wrangling, cities have to be the beacons of light, whether it is climate change, transportation, education or workers' rights. To be a beacon cannot end with a higher wage rate. It requires also lifting as many people as possible from the entry level with a minimum wage to better jobs through better training and better education. It requires urban policies that emphasize job creation, production through support for existing businesses and attraction of future industries. Baltimore has promising pilots in all of these areas.

Mayor Pugh should not veto the $15 hr minimum wage bill. With the bill the City Council adopted the sky won't be falling and there won't be a mass exodus of employers. Instead the bill will signal that Baltimore has, indeed, aspirations and that this is a city which cares about its people. Much is expected of Mayor Pugh, she can't blink now, but must stand by her own standard of raising the bar and expecting more.

Klaus Philipsen, FAIA

The Atlantic's CityLab published an article about Baltimore's wage law today shortly after this article appeared.

Study of Baltimore's 2015 Minimum Wage Bill
Studies look at what happened when cities raised minimum wage. Seattle Times March 2014