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Hullabaloo


Wednesday, May 18, 2016

 

And then there are parasites

by Tom Sullivan


Image via DakkaDakka.

Moses: A city is built of brick, Pharoah. The strong make many, the starving make few. The dead make none.
Venture capitalist Nick Hanauer offers up a prescription for boosting the nation's economy in the American Prospect that you would be wise to read. Hanauer focuses on the low-wage "parasite economy" characterized by firms that derive "record profits on the backs of cheap labor" and from taxpayer subsidies that support their employees. Not so the real economy:
The real economy pays the wages that drive consumer demand, while the parasite economy erodes it. The real economy generates about $5 trillion a year in local, state, and federal tax revenue, while the parasite economy is subsidized by taxes. The real economy provides our children the education and opportunity necessary to grow into the next generation of innovators, entrepreneurs, and civic leaders, while the parasite economy traps them in a cycle of intergenerational poverty.
"The parasite economy is simply bad for business," Hanauer writes:
As an entrepreneur and investor, I have founded or financed 35 companies across a wide range of industries: manufacturing, retailing, software, e-commerce, robotics, health care, financial services, and banking. I know a thing or two about sales and customers. And I have never been in a business that considered minimum-wage workers earning $10,000 to $20,000 per year as our target customer. Except for pawnshops or payday lenders, a typical business’s core customers very likely earn more than minimum wage. It is demand from middle-income workers that supports the small local businesses that create 64 percent of new private-sector jobs and 49 percent of all jobs in America. So a fair question to ask is: If no business wants customers who make $7.25 an hour, why in the world would we tolerate—or even worse, subsidize—businesses that pay their workers so little?
Besides low-wage service-sector jobs, American manufacturing has taken a hit:
According to a new study from the UC Berkeley Labor Center, the families of one in three manufacturing production workers now rely on public assistance at a cost of $10.2 billion a year to state and federal taxpayers. Blue-collar manufacturing workers didn’t earn solid middle-class incomes because they were better trained, better educated, or more productive than their service-sector counterparts, or because their employers were larger or more profitable than the giant service companies of today. Manufacturing workers earned middle-class wages because they were unionized, and as their bargaining power declined, so did their incomes.
This is avoidable, Hanauer believes, if collective action forces a raise in the federal minimum wage to $15 per hour. Better for workers and it prevents the parasite economy from leeching off the real one. And doomsayers be damned:
For every Walmart, there’s a Costco. For every McDonald’s, there’s an In-N-Out Burger. For every single mom waiting tables at the local diner for $2.13 an hour, there’s a healthier, wealthier counterpart earning $13 an hour or more (soon to be $15!) in Seattle or San Francisco or in the thousands of real-economy businesses nationwide where management understands that the “minimum wage” is meant to be a minimum, not a maximum.
Hanauer asks, "Why in the world would you pay your workers enough to clothe, house, and feed themselves, a growing number of my fellow CEOs apparently figure, when taxpayers are willing to do it for you?" For the same reason they move jobs offshore and work so hard, as Donald Trump admits, "to pay as little tax as possible" in support of this country. Because, why should the rich pay to educate other people's children when other countrys' taxpayers will do it for them?

Even McDonalds is slowly figuring out that paying workers higher wages and providing benefits is better for its bottom line. It's working for Washington state.

(h/t SR)