On April 4, 2017, David Siders writes in The Sacramento Bee:
Gov. Jerry Brown, casting a living wage as a moral imperative while questioning its economic rationale, signed legislation Monday raising California’s mandatory minimum to $15 an hour by 2022, acting within hours of a similar bill signing in New York.
The bill’s enactment comes one week after Brown, Democratic lawmakers and labor leaders announced an agreement on the wage increase, averting a brawl on the November ballot.
In adopting the measure, California joined New York as the first states in the nation to enact a plan to raise their statewide minimums to $15. New York Gov. Andrew Cuomo signed his state’s legislation and was cheered by labor unions at a rally moments before Brown spoke in California.
Brown, a fiscal moderate, had previously expressed reservations about a wage increase. But amid growing concern about income inequality in California and the national thrust of the labor-backed “Fight for 15” campaign, his hand was forced. Public opinion polls showed strong support for increasing the state’s mandatory minimum beyond its current $10.
The compromise Brown offered lawmakers – then celebrated with a bill-signing in Los Angeles – includes a provision allowing the governor to postpone a wage increase in the event of an economic downturn. It replaces a ballot measure that, if passed, would have raised the minimum wage to $15 by 2021, a year faster.
Brown, traveling to the state’s largest media market to sign the landmark bill, remained hesitant about the economic effect of raising the minimum wage, saying, “Economically, minimum wages may not make sense.”
But he said work is “not just an economic equation,” calling labor “part of living in a moral community.”
“Morally and socially and politically, they (minimum wages) make every sense because it binds the community together and makes sure that parents can take care of their kids in a much more satisfactory way,” Brown said.
The wage measures in California and New York reverberated nationally. Democratic presidential candidate Hillary Clinton appeared with Cuomo at a rally in his state, while her rival Bernie Sanders, said in a prepared statement that he was “proud that today two of our largest states will be increasing the minimum wage to a living wage of $15 an hour.”
The California legislation will raise the statewide minimum to $10.50 on Jan. 1 for businesses with 26 or more workers, the first of several incremental increases to $15, with future raises tied to inflation. Smaller businesses will have an additional year to phase in each increase.
The law follows measures in Los Angeles and San Francisco, among other cities, to gradually raise their own minimum wages to $15. It is expected to affect millions of low-wage workers and businesses that employ them, especially in the state’s agriculture, restaurant and retail industries. Some 6 million Californians currently earn the minimum wage.
By 2022, a full-time minimum-wage worker would see annual earnings increase to $30,000 from $20,000 today.
Senate President Pro Tem Kevin de León cast the legislation Monday as a recognition of “the contributions of hard-working men and women” throughout the state.
“No one who works full time should live in poverty,” he said.
In a concession to the state’s influential labor unions, the bill will also provide in-home health aides three annual sick days.
The Democratic-controlled Legislature passed the measure quickly last week, and on partisan lines. While labor unions and their Democratic allies celebrated the bill’s passage, no Republican supported it in either house.
Republicans and business groups said rising wages will force employers to increase prices or to cut costs by laying off workers or reducing their hours.
Research on the economic effect of a minimum wage increase is mixed, with findings ranging from little or no impact on employment rates, on one hand, to rising unemployment, on the other.
The measure will not come without a cost. According to the state Department of Finance, a $15 minimum would cost California about $4 billion a year.
Using common sense, if raising the minimum wage will not kill jobs then why not raise the minimum wage to $25.00 or $50.00 or $100.00 per hour? Of course there are consequences that either are reflected in job elimination or increased prices. Virtually never are the OWNERS of corporations willing reduce profits. If wage levels were not a factor there would be no reason for ANY company to exit production in the United States and move production to foreign lands with significantly less labor costs. Also, there is the impact on pricing levels, as any increases in the cost of production or service always results in pricing increases.
If this were not the case, then no companies would be compelled to seek other more cost-efficient means of production or to move production to foreign countries whose workers are paid far less than Americans. Increasingly, companies are seeking more efficient and less long term costs that non-human technology can deliver to reduce their operating costs, provide higher build quality, automate service, and maximize profits for their OWNERS. As is virtually always the case, the OWNERS of companies do not want to reduce profits.
What the proponents of raising the minimum wage fundamentally are addressing is that low-paid American workers need to earn more income.
We need to begin focusing on the means for people to earn more income, not dependent on earnings from jobs, which are being destroyed with tectonic shifts in the technologies of production. We need to implement financial mechanisms to finance future economic growth and simultaneously create new capital asset owners. This can be accomplished with monetary reform and using insured, interest-free capital credit (without the requirement of past savings), repayable out of the future earnings in the investments in our economy’s growth.
But how, you ask, can such an OWNERSHIP CREATION solution be implemented?
We can and should do more to create universal capital ownership not only for workers of corporations but ALL citizens. What I believe is crucial to solving economic inequality and building a future economy that can support general affluence for EVERY citizen is to address concentrated capital ownership, the fundamental cause of economic inequality. The obvious solution is to de-concentrate capital ownership by ensuring that all future wealth-creating, income-producing capital asset formation will be financed using insured, interest-free capital credit, repayable out of the future earnings of the investments, creating ownership participation by EVERY child, woman, man. This should be about investment in real productive capital growth, not speculation as with the stock exchanges. But the problem is, whether with his call for tax credits and health savings accounts, that the vast majority of Americans have no savings, or at best extremely limited savings, insufficient to be meaningful as increasingly Americans are living week to week, month to month, and deeply in consumer debt. So there is no feasible way that past savings can continue to be a requirement for investment if we are to simultaneously create new capital owners with the productive growth of the economy. The current economic investment system is structured based on the requirement of past savings used directly or as security for capital credit loans. But past savings are not necessary as viable capital formation projects pay for themselves. This is the logic of corporate finance.
Capital acquisition takes place on the logic of self-financing and asset-backed credit for productive uses. People invest in capital ownership on the basis that the investment will pay for itself. The basis for the commitment of loan guarantees is the fact that nobody who knows what he or she is doing buys a physical capital asset or an interest in one unless he or she is first assured, on the basis of the best advice one can get, that the asset in operation will pay for itself within a reasonable period of time––5 to 7 or, in a worst case scenario, 10 years (given the current depressive state of the economy). And after it pays for itself within a reasonable capital cost recovery period, it is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.
Still, there is at least a theoretical chance, and sometimes a very real chance, that the investment might not pay for itself, or it might not pay for itself in the projected time period. So, there is a business risk. This can be solved using private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). On a larger scale, the path to solve the security issue, that is, the risk can be absorbed by capital credit insurance or commercial risk insurance. Thus, in order to achieve national economic democracy, we need a way to handle risk management in finance by broadly insuring the risks. Such capital credit insurance would substitute for the security demanded by lenders to cover the risk of non-payment, thus enabling the poor and others with no or few assets (the 99 percenters) to overcome the collateralization barrier that excludes the non-halves from access to productive capital.
One feasible way is to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency of with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today––management and banks––that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.
The Federal Reserve Board is already empowered under Section 13 of the Federal Reserve Act to reform monetary policy to discourage non-productive uses of credit, to encourage accelerated rates of private sector growth, and to promote widespread individual access to productive credit as a fundamental right of citizenship. The Federal Reserve Board needs to re-activate its discount mechanism to encourage private sector growth linked to expanded capital ownership opportunities for all Americans.
Until we address concentrated capital ownership and implement solutions to simultaneously broaden capital ownership by creating new capital owners with the growth of the productive economy, money power will reside in the hands of politicians and bankers, not in the hands of the citizens. That is why to reform the system leaders and advocates for economic justice must focus on money, how it should be created and measured, how it should be controlled and why a more realistic and just money system is the key to universal and equal citizen access to future ownership opportunities as a fundamental human right. Then prosperity and economic democracy can serve as the basis for effective and non-corruptible political democracy, an ecologically sustainable environment, and global peace through justice.