A few weeks back, when Walmart announced plans to raise its starting pay to $9 per hour, I wrote a column saying this was just the beginning of what would be a growing movement around raising wages in America. Today marks a new high point in this struggle, with tens of thousands of workers set to join walkouts and protests in dozens of cities including New York, Chicago, LA, Oakland, Raleigh, Atlanta, Tampa and Boston, as part of the “Fight for $15” movement to raise the federal minimum wage.
This is big shakes in a country where people don’t take to the streets easily, even when they are toiling full-time for pay so low it forces them to take government subsidies to make ends meet, as is the case with many of the employees from fast food retail outlets like McDonalds and Walmart, as well as the home care aids, child caregivers, launderers, car washers and others who’ll be joining the protests.
It’s always been amazing to me that in a country where 42% of the population makes roughly $15 per hour, that more people weren’t already holding bullhorns, and I don’t mean just low-income workers. There’s something fundamentally off about the fact that corporate profits are at record highs in large part because labor’s share is so low, yet when low-income workers have to then apply for federal benefits, the true cost of those profits gets pushed back not to companies, but onto taxpayers, at a time when state debt levels are at record highs. Talk about an imbalanced economic model.
A higher federal minimum wage is inevitable, given that numerous states have already raised theirs and most economists and even many Right Wing politicos are increasingly in agreement that potential job destruction from a moderate increase in minimum wages is negligible. (See a good New York Times summary of that here.) Indeed, the pressure is now on presidential hopeful Hillary Clinton to come out in favor of a higher wage, given her pronouncement that she wants to be a “champion” for the average Joe.
But how will all this influence the inequality debate that will be front and center in the 2016 elections? And what will any of it really do for overall economic growth?
As much as wage hikes are needed to help people avoid working in poverty, the truth is that they won’t do much to move the needle on inequality, since most of the wealth divide has happened at the top end of the labor spectrum. There’s been a $9 trillion increase in household stock market wealth since 2008, most of which has accrued to the top quarter or so of the population that owns the majority of stocks. C-suite America in particular has benefitted, since executives take home the majority of their pay in stock (and thus have reason to do whatever it takes to manipulate stock price.)
Higher federal minimum wages are a good start, but it’s only one piece of the inequality puzzle. Boosting wages in a bigger way will also requiring changing the corporate model to reflect the fact that companies don’t exist only to enrich shareholders, but also workers and society at large, which is the way capitalism works in many other countries. German style worker councils would help balance things, as would a sliding capital gains tax for long versus short-term stock holdings, limits on corporate share buybacks and fiscal stimulus that boosted demand, and hopefully, wages. (For a fascinating back and forth on that topic between Larry Summers and Ben Bernanke, see Brookings’ website.)
Politicians are going to have to grapple with this in the election cycle, because as the latest round of wage protests makes clear, the issue isn’t going away anytime soon.
The April date has been "T-day" for 60 years
Founding Father Benjamin Franklin famously said that the only things certain in this world were death and taxes, but he wasn’t necessarily talking about federal income taxes. The U.S. didn’t institute such a tax until the time of the Civil War, as a temporary measure. The Sixteenth Amendment, ratified in 1913, made it possible for the federal government to tax individuals directly.
But the story of tax day doesn’t end there. In 1954, Congress passed nearly 1,000 pages of revision to the Internal Revenue Code. Though TIME noted back then that the bill didn’t really change the overall structure of the tax code, and that many taxpayers wouldn’t be included in the categories of Americans who would see a decrease in their tax bill due to the change, it did mean one big difference that every single taxpayer would feel: “T-day” would be moved to April 15:
The lawmakers rewrote and in some places tightened many provisions concerning gifts, trusts, partnerships and reorganized or liquidated corporations. They plugged a clutch of minor loopholes that some taxpayers had found profitable. They switched income-tax day from March 15 to April 15, thus giving the taxpayer an extra month to recover from Christmas expenses and sparing him the yearly ordeal of hearing and reading clichés about the ides of March.
But when 1955’s tax day rolled around, it became clear that — even if the extra month did help Americans’ wallets — the new date didn’t mean an end to tired date-based jokes. The Ides of March were no longer financially deadly but April, TIME noted with no hint of irony, is the cruelest month.
Read the full 1954 story, here in the TIME Vault: The New Tax Law
By almost a full percentage point
India’s economic growth may surpass China’s much sooner than initially expected, with the International Monetary Fund (IMF) forecasting earlier this week that Delhi will take the lead in 2015.
The IMF’s World Economic Outlook, released Tuesday, indicates that India’s growth rate will rise to 7.5% this year, while China’s is expected to drop to 6.8% from 7.4% last year.
India’s growth will “benefit from recent policy reforms” under new Prime Minister Narendra Modi, the report says, with the resulting rise in investment and reduction in oil prices. “Lower oil prices will raise real disposable incomes, particularly among poorer households, and help drive down inflation,” it predicts.
The IMF forecast was substantiated by a Monday report from research firm Capital Economics, which said consumer price inflation dropped unexpectedly in March and raised the possibility of a third unscheduled cut in interest rates this year.
With the World Bank also predicting that India’s growth rate will hit 8% by 2017, it looks like the upward economic trajectory anticipated by many when Modi came to power could have begun.
The massive TPP trade deal could help boost the global economy and President Obama's legacy—if Congress lets it happen
In the next few days, the Senate will begin debate on one of the most important questions it will answer this decade—whether to grant the President “trade promotion authority” (TPA), also known as “fast track.” This move would give President Obama and his successors the authority to place trade agreements before Congress for a simple up-or-down vote, denying lawmakers the chance to filibuster or add amendments to the deal which change its rules.
Those in favor say that Presidents can’t negotiate growth-boosting trade deals without fast track authority, because other governments won’t make concessions if they know that Congress can later rewrite parts of the agreement. Those who oppose TPA say the devil remains in the details—small changes within a massive trade deal can have huge impacts on individual business sectors, and on the winners and losers in any agreement. They say trade deals are too important for the lives and livelihoods of ordinary Americans to leave their elected representatives with no say in their content.
That debate is now coming to a head because negotiations among a dozen Pacific Rim nations over the Trans-Pacific Partnership (TPP)—an enormous multilateral trade deal involving a dozen Pacific rim countries—are entering the final stages. The talks now include the United States, Japan, Canada, Mexico, Chile, Peru, Australia, New Zealand, Vietnam, Singapore, Malaysia and Brunei. This group represents 40 percent of world trade and 40 percent of global GDP. Without TPA, there will be no TPP, say trade advocates, which would cost America significantly. Too bad, counter trade opponents. If Americans can’t influence the deal’s content through their representatives, America is better off without it.
What’s at stake? TPP proponents say the deal would generate hundreds of billions of dollars of economic gains over the next decade by reducing tariff and non-tariff barriers across the 12 countries it covers. It would enhance security relations among member states, boost labor and economic standards and set rules for global commerce on free-market terms. For some countries, TPP would give their economies a significant boost. Projected GDP growth in Japan and Singapore for 2025 would be nearly a full 2 percent higher with the deal than without. Malaysia’s GDP might be higher by more than 5 percent. The difference for Vietnam might be more than 10 percent.
For the U.S., the political and security impact of the TPP is more important than the economic effects. In 2025, US GDP will be $77 billion higher with TPP than without it—just 0.3 percent. But the White House says it will boost exports by 4.39 percent over 2025 baseline forecasts. If true, that matters, because exports create the kinds of middle class jobs that boost longer-term growth and reduce income inequality. TPP would also give the U.S. a firmer commercial foothold in the world’s most economically dynamic region. And it would do so while growing the economies of U.S. partners and allies, which are anxious to avoid overdependence on fast-expanding China. That’s good for US security interests and makes TPP a central element of the Obama Administration’s long-promised pivot to Asia.
This is a big moment for those who believe in the power of trade to boost economic trajectories. In 2012, China surpassed the United States to become the world’s no. 1 trading nation in total trading volume. Today, there are 124 countries that trade more with protectionist China than with free trade America. That’s why the Trans-Pacific Partnership—whether he can pass it or not—will be a crucial part of Barack Obama’s legacy.
It seems like everyone is concerned about economic inequality these days. A Gallup poll in January showed that more than two-thirds of Americans are dissatisfied with the way income and wealth are distributed, and politicians from both parties are talking about the problems facing the middle class.
But the problem may be even worse than Americans think.
A new report by the Federal Reserve Bank of St. Louis — hardly a liberal bastion — found that economic inequality is actually much worse if you take into account the demographics of the middle class.
Under the traditional economic model, which ranks all American families by their incomes and then analyzes those in the middle, the median income of the middle class increased only slightly, by between 2% and 8%, between 1989 and 2013.
But if you use a different economic model that takes into account demographic and sociological attributes, such as age, educational attainment, race or ethnicity, the median income of the middle class has actually decreased by 16% during that same time period, according to the report, which was released Tuesday.
Senior economic adviser William Emmons and policy analyst Bryan Noeth argue that the method economists typically use to measure the financial health of the middle class fails to reflect important shifts in the population, like whether a middle class family qualifies as middle class in terms of income but not in accumulated wealth, or whether a family is counted among the middle class one year, but not the next.
Instead, they suggest using a method that tracks the group more holistically, by defining a middle class family as one “headed by someone who is at least 40 years old, who is white or Asian with exactly a high school diploma, or by someone who is black or Hispanic with a two- or four-year college degree.”
“In effect, the bar has been rising to remain near the middle of the income and wealth distributions,” Emmons and Noeth write. “The growing importance of college degrees and other advantages more commonly enjoyed by white and Asian families are contributing to significant downward pressure on the relative standing of less-educated and historically disadvantaged minority families.”
This is a humbling, often intense, meditation on the fragility of social cohesion
When the European sovereign debt crisis hit in 2008, media commentary often focused on the fate of the so-called “PIIGS“. Namely, Portugal, Italy, Ireland, Greece and Spain. These were the countries saddled with the largest debt and slowest economic growth, and were the ones — excepting Spain and Italy — that received multi-billion dollar bailouts from the E.U. and International Monetary Fund. These emergency plans, it was said, would keep their economies afloat, but came with a caveat: governments would have to massively reduce spending in an effort to rein in their out-of-control finances.
The move was deeply unpopular. In Greece, austerity measures became associated with public sector layoffs, welfare cuts and later, to the rise of far right and far left political parties. In Ireland, large scale emigration and a collapsed property market dominated the national conversation, while Portugal dealt with mass youth unemployment.
Today, things have changed — at least for some. On paper, Lisbon and Dublin seem to be recovering, with their gradually rising credit ratings. But the situation in Athens often looks like it’s getting worse. Today, it is estimated that close to one million Greeks do not have access to healthcare — which has been linked to a rise in HIV infection, infant mortality and suicide rates — while 40 percent of Greek children live below the poverty line.
It is this Greece that photographer Angelos Tzortzinis set out to capture. Over the course of six years, he has documented the effects of austerity measures in his native country, one he says he no longer recognizes.
The images that have emerged are as powerful as they are shocking. The photographer shows us everything from charged Golden Dawn rallies to women working as prostitutes, and from immigrants seeking shelter to drug addicts in their bedrooms. This is a humbling, often intense, meditation on the fragility of apparent social cohesion and on the very real impact that political and economic policies can have on everyday life.
Angelos Tzortzinis is a photographer based in Athens
Richard Conway is a contributor for TIME LightBox
Chesapeake & Ohio Railroad reported customers lacked the courage to kick the habit
The idea of putting an end to tipping has been gaining some traction the United States recently, with some restaurants deciding to ban the practice and restaurant experts also speaking up, especially as momentum builds for increasing the minimum that tipped servers would take home. But this isn’t the first time a business has tried to make that change.
For example, in the late 1940s, the Chesapeake & Ohio Railroad declared that tipping in its dining cars was “unworthy of American labor” and “an imposition on the customer.” But the change didn’t stick. In 1950, the company went back to the old way. It turned out that not tipping was just too darn awkward.
Here what happened, as TIME explained back then:
Waiters, though they got a raise, had proved incapable of purging their features of all hope. And most customers had been plain miserable —uncomfortable if they slipped a clandestine coin under a saucer, more uncomfortable if they didn’t. Said the C. & O. sternly: “Too many persons lack the courage to participate in an experiment that breaks with custom.”
Read more about the minimum-wage debate, here in TIME: The Real Meaning of $9 an Hour
How peddlers can help us understand franchise owners’ struggle with the city
Starting Wednesday, many of Seattle’s workers will enjoy a higher minimum wage – but some businesses have tried (unsuccessfully, thus far) to keep their employees out of that group. Claiming that Seattle’s wage law unfairly defines franchise owners as large employers, a lawsuit – led by the International Franchise Association (IFA) and franchisees from the hospitality, healthcare and marketing sectors – sought to stop, or at least slow, the change.
The plaintiffs’ objection: by being defined as large employers, franchises will be required to raise employees’ wages more quickly than if they had been categorized as small businesses. The latter designation, they say, is more appropriate, given the scant numbers employed by most individual franchises, as opposed to the far larger numbers employed by their parent corporations. Though a district judge ruled against the plaintiffs in March, the IFA has vowed to continue its fight.
A number of media outlets were quick to tar this lawsuit as mere money-grubbing by ‘Big Fast Food.’ And so it might be. The IFA, for instance, has been accused of defending franchisors’ interests at the expense of its franchisee members.
An unlikely comparison from American history, however, suggests a more sympathetic reading of the franchisees’ predicament – if not their representatives’ recent lawsuit. The subject of this comparison? Nineteenth-century America’s army of traveling peddlers: men (and occasionally women) who sat at the vanguard of America’s consumer-goods revolution. One part entrepreneur, one part working-poor, peddlers mediated between urban merchants and rural consumers at a time when the former were typically too risk averse to develop their own marketing and sales operations.
Comparing franchise owners and peddlers may, at first, seem an unlikely analogy (journalist Timothy Noah, writing for Pacific Standard, has suggested sharecroppers as a closer equivalent). But, on closer inspection, the two turn out to have much in common.
First, both groups mainly exist to insulate higher-ups from risk. For example, should an individual franchise location fail, corporate HQ may lose its cut of the franchise’s revenues, but it doesn’t have to answer for the cost of the franchise itself. That’s on the owner and her creditors. The same was true for peddlers, who paid for their wares before they left for the countryside. If demand proved weak, it was the peddlers’ problem, not their suppliers’.
Second, both franchise owners and peddlers were often lured into their trades with outsized promises of wealth. Franchising corporations – in fast food and beyond – are notoriously cagey about the profits franchisees can expect to reap. While sales literature is quick to publicize million-dollar revenues, it’s far more circumspect about owners’ average income. The statistics suggest why. Even at top-grossing franchises, many owners default on their loans. And even those who stay afloat take home an average income of only $50,000. This, of course, is nothing to sneeze at – especially in comparison with fast-food workers’ salaries. But it hardly puts owners in the top 1% of wealth holders.
Peddlers’ prospects were equally disappointing. While a handful went on to commercial fortunes, the majority languished just beyond the grasp of poverty. A rain-soaked and wind-beaten existence, peddling was a young man’s game – far richer in reputation than in reality. Many entered the profession in search of a promised career as a merchant, but instead found sore backs and tired limbs.
Third and finally, franchise owners and peddlers have served as lightning rods for economic anxieties not of their own making. Consider how the Seattle franchise owners’ suit has been seen as a machination by McDonald’s corporate HQ. Never mind that franchise owners typically have minimal control over wage levels, let alone marketing strategy or product design. This still hasn’t spared them from blame for the sins of their bosses.
Peddlers faced similar problems. Though merely pawns in the larger economic transformation sweeping nineteenth-century America, peddlers were often blamed for its most disruptive effects. Stuck with a broken clock or a wooden nutmeg (carved knock-offs that peddlers were reputed to sell in place of the genuine article), poor consumers were quick to vilify salesmen rather than their unscrupulous suppliers. As such, peddlers earned a reputation as tricksters and cheats, while the suppliers responsible for these frauds continued to masquerade in the garb of respectability.
In 1837, for instance, Ohio peddler John Bartholomew wrote to tell his supplier that the clocks he had received contained “very rusty” wires and parts “Swelled So that they will no [sic] run until I whittle & Smooth the wheels.” And yet, it was peddlers themselves who were cursed, in the words of one customer, as “dam profiteers” and even threatened with violence (the same irate customer pronounced that peddlers, according to New England peddler James Guild, “ought to have a good whipping by every one that sees you”).
This is not to suggest that peddlers were the worst victims in these transactions. That distinction goes to hardscrabble farmers who sold their tiny surplus for a few small luxuries – only to discover these products were not what they seemed. So, too, in Seattle’s minimum wage fight, franchisees face brighter prospects than uninsured fry cooks who daily risk third-degree oil burns for less than a living wage.
But that doesn’t mean that franchise owners’ claims warrant no consideration. By being included under the Seattle labor law’s definition of a large employer, franchisees are on the hook for an $11 minimum wage starting April 1, as opposed to the $10 they would owe if counted as small businesses. This may not sound like much of a difference, but for franchises with 20 half-time workers, it means around $20,000 in increased annual labor costs. That’s hardly a deal-breaker for a major corporation or even for the handful of owners with dozens of locations in their portfolio – but it’s a serious pinch for small franchisees averaging $50,000 in take-home income and more than a half-million dollars in debt.
A real solution to America’s wage problem therefore needs to take account of franchisees’ grievances. Just as consumers’ complaints against peddlers were inseparable from peddlers’ exploitation by their suppliers, justice for franchise staff demands justice for franchise owners. This, of course, is no easy task – but should minimum wage increases proceed without reference to franchisees’ concerns, they’ll merely succeed in gutting the middle, rather than redressing America’s larger edifice of inequality.
Sean Trainor is a Ph.D. Candidate in History & Women’s Studies at Penn State University. He blogs at seantrainor.org.
President Obama was self-assured during a quick sales pitch to foreign business leaders Monday, saying he was confident that he could work with Congress to iron out trade deals and a budget plan.
“The things that help businesses grow are not partisan,” Obama said in his remarks.
Still, he and a key Cabinet member warned Republicans against blocking the reauthorization of the Export-Import Bank, which helps foreign companies that need credit buy U.S. goods.
Obama faces partisan difficulties on both sides as he pushes ahead with the business-friendly agenda. A conservative group backed by the Koch Brothers launched a new effort Monday to block the Ex-Im Bank, arguing that it represents “cronyism and corporate welfare.”
The administration is also going head-to-head with members of the Democratic Party and typical supporters like labor unions as it irons out the plan that would free up trade between the U.S. and about a dozen countries in the Asia-Pacific region and Latin America.
Some of the most outspoken critics are Democratic Rep. Rosa DeLauro and AFL-CIO President Richard Trumka, who oppose the administration’s goal of moving the trade legislation through Congress quickly because they worry it will threaten jobs and standards on food and product safety.
In an interview ahead of the President’s speech, Commerce Secretary Penny Pritzker said it would be “terrible” if the Ex-Im Bank were to expire and argued the Trans-Pacific Partnership deal is critical to the U.S. remaining competitive with Asia’s growing middle class.
“Today there are 550 million people in the middle class in Asia,” she said. “That number will be 2.7 billion in 15 years. The ability for our companies to be able to sell into the fastest-growing middle class market in the world is really critical.”
Vinai Thummalapally, the executive director of SelectUSA, told reporters that foreign investors are generally confident that the debate over the Ex-Im bank will die down eventually.
“In spite of the debate, it rarely comes up there’s this confidence that things will settle down, based on things that happened in the past.” for the most part, he added, “they’re amused, they shake their heads.”