The Wages of Progressive Elitist Political Sins in California

Progressive elitist political sins have very real consequences.  It is often said that California leads the nation in trends such as progressive elitism.  It is certainly the intent of many of the major Internet media companies based in California, such as Google and Facebook, to lead America into a socialist future.  The California Budget and Policy Center has compiled the data on low wage, mid wage, and high wage workers in California for the last 40 years.  The eye-opening inflation-adjusted, real wages are plotted below:

Apparently, progressive elitist policies only work for elitists and only hurt those the elitists claim they are trying to help.  Over 40 years, low wage workers in California were mostly worse off than they were in 1979 and only the recent expansion of the economy has managed to bring them to a very slight improvement over 1979 of 4%.  Mid wage earners have been very nearly flat in earnings per hour over this entire 40 year period.  The upper 10% of wage earners have done comparatively OK under California progressivism with a 43% real increase, though even this is only a 1.075% increase per year.

In comparison, the national real median personal income is:

Nationwide, real median personal income went up by 39% from 1979 to 2016 and it went up further in 2017.  This median national real income is not on a per hour basis, as is the data above on California workers.  However, in 1980 the average worker worked 38.1 hours a week and now the average worker works 34.4 hours/week, so one could multiply the gains in the national median income by about 1.1 for a comparison with the CA data above, though I am not doing that in the subsequent numbers I discuss.  If the national median personal income data excluded the population of California, whose population is about 12% that of the entire U.S., the increase would have been greater.  In fact, with some simple algebra one calculates that the median non-California worker's real income increased by about 44%, which means that outside of California, median income workers did as well as the top 10% of California workers did over the 40 years since 1979.  And that despite the fact that real incomes in many other states have also been held hostage to the sins of progressive elitist politics.

The wages of California progressive political sins are even worse than is suggested by this data.  The inflation adjustment on California worker wages is a national inflation rate, not a California cost of living adjustment.  California progressive politics has caused housing costs to soar.  Their regulatory state has caused costs on many businesses to soar as well and these costs have to be passed on to the people living in California.  State taxes are high.  The cost of living in California is about 13.4% above the national average, or about 15.2% above the national cost of living excluding California.

The California practice of suppressing individual rights has bad consequences for more than one's economic well-being, but the economics of it are bad enough.  Once again, I will remind my readers that economic growth rates are like interest rates, as they go up they have a most remarkable compounding effect on the size of the economy.  A rapidly growing economy makes a very much bigger pie to benefit everyone over a 40 year period, which is the time that most Americans have to look forward to before they die.  Many of us have even longer time-horizons for our concerns, since we have children and grandchildren we love and want to see flourish in freedom, prosperity, and security.

My youngest granddaughter just celebrated her first birthday.  If the national economy grows at a rate of 3% a year for the next 90 years, it will be 14.3 times as big as it is today.  Such growth rates are very achievable, if our governments do not excessively interfere with the private sector.  A 2% growth rate for 90 years yields an economy only 5.9 times its present size.  I expect the 14.3 times larger economy will have much more to offer my granddaughter as her life comes to a close than will an economy 5.9 times larger.  It might even offer her many more years of enjoyable life.  Of course, a real Progressive Elitist government outcome could be a negative growth rate or a 1% growth rate, where the latter economy in 90 years would be only 2.4 times the size of the present economy.

Minnesota is Misrepresenting the Effects of Higher Taxes and Minimum Wages

It is being claimed that higher taxes on high income persons and increases in the minimum wage are the key to jobs creation and a fast-growing economy.  The example of Minnesota since Democrat Gov. Dayton took over is being used to "prove" this.

Gov. Dayton certainly benefited relative to Gov. Pawlenty in that he became Gov. in the year that the recovery from the Great Recession began, however meekly. He did not create the 172,000 jobs either. But let us note that 172,000 jobs in two years is just barely a match for an anemic population growth.

The article notes that the Minnesota median income advantage relative to the national average actually fell by $2,000 from 2012-2013 to now. It was not noted that the cost of living in Minnesota relative to the national average is going up as well. The combination of a rising cost of living and a falling median income, both relative to the nation, is not good.

While the minimum wage is to go up to $9.50/hr. for large employers by 2018, it will go up to only $7.75/hr. for small employers who employ most people. There are special provisions for a 90-day training period for workers under 20 years old and for all workers under 18 with a minimum wage of $6.50/hr. There are many states with no such provisions.

Furthermore, the private sector job growth in Minnesota from Q1 of 2013 to Q1 of 2014 showed Minnesota to be dead last in the Midwest in private sector job creation. Its 0.8% increase in private sector jobs was behind the next worst state in the Midwest, Illinois at 1.2%.

Gov. Dayton is probably not claiming that he caused a relative decrease in the median income with an increase in the relative cost of living.  And now that businesses have had time to react to his higher taxes and mandated higher wage costs, he is surely not claiming credit for Minnesota being dead last in private sector jobs creation in the Midwest.

Further Comments on the Dismal September Jobs Report

Here are some further comments on the September jobs report we should all be aware of:

• The increased employment of Americans only affected white Americans.  The employment rates for blacks, Hispanics, and teenagers were unchanged at their much higher rates.
• The long-term unemployed number changed little.  40.1% of the unemployed have been unemployed for more than 27 weeks.
• The number of people employed part-time for economic reasons increased by 600,000, which is equal to most of the 775,000 new jobs that were supposed to have been created in September according to the household survey!
• The establishment survey total non-farm payroll employment was up by only 114,000 in September, which is way below the anemic 2012 average of 146,000 per month and still more below the pitiful average per month in 2011 of 153,000.  It is important to note that 114,000 establishment jobs is far, far less than the household survey number of 775,000.
• Employment rose in health care, transportation, and warehousing.  The increase in transportation and warehousing at this time of year may be in anticipation of Christmas.
• Manufacturing employment dropped by 16,000 jobs.

There was a 206,000 person increase in the working age population available for work in September according to the household survey.  If the same fraction of these people were to become employed as were in January 2000, when jobs were plentiful, then 133,426 of them would have needed jobs in September.  Even to hold the sorry ground now in which a smaller fraction of the population is employed, 121,128 would have needed jobs.  Established non-farm businesses only provided 114,000 jobs, so this population growth was not even accommodated.

On the other hand, the household survey data says many more new jobs were created, so most of those additional jobs are self-employed or in the farm sector.  We also know most of those jobs are part-time jobs due to that 600,000 increase in part-time jobs.  My expectation is that many of these jobs are due to people who have been long out of work setting up their own business at home.  We know this to have been the case for a very large fraction of the new jobs created since the depths of the recession.  Desperate families may also have wives who are raising children setting up more businesses to earn a few dollars to pay for the rising cost of living and to supplement the falling incomes of husbands.  We know that women have been setting up their own small businesses in record numbers.

Median household income adjusted for the official, understated cost-of-living was down to $50,054 in 2011, or 8% less than in 2007.  Properly adjusted, household incomes were even more degraded.  This should drive people into the part-time workforce who would not normally be there.  So, while capitalized start-up businesses have been way down, home businesses with no real capital have been growing in numbers.  Unfortunately, most of them generate considerably less income than would a job at an established business.

It has been pointed out that in years past, employment of 18 to 25 year olds has fallen drastically in September as students returned to college and gave up their summer jobs.  Not this September.  Also not last September.  I suspect two things are going on here.  One is that these last two summers, many fewer students were able to find jobs in the summer, so the student drop in employment in September was much less due to them returning to college.  The other effect is that with college expenses having increased much more than family incomes have for many years and the actual loss of real family incomes over the last few years, many more students may have very part-time work-aid assignments at their colleges as part of their student-aid package.  In the past, the BLS was inclined to ignore these very part-time college jobs and not count these students as employed while in college.  What if they are now very assiduously counting these work aid students as part-time employed in the household survey?  This would account for the strange increase in employment of 18 - 25 year olds these last two Septembers and for the huge increase in part-time jobs precisely in the month of September.  [Update on morning of 10 October 2012.]

We are also hearing more and more reports that many businesses such as restaurants and other service businesses are more and more reluctant to hire full-time employees with the onset of the ObamaUncaringTax program, sympathetically called ObamaCare.  There is already a switch to hiring part-time workers.  Restaurants are adopting the policy of mostly hiring people for 28 hours a week.  An employer needs to hire about 43% more people at 28 hours a week compared to at 40 hours a week.  That is good for a major surge in hiring which Obama is happy to claim is all his doing.  In a way it is, since he gave us ObamaUncaringTax.  Of course that program will ultimately also cost Americans not just full-time jobs, but it will also decrease the total number of hours for which people are hired across the nation.

Overall economic activity will slow as a result of ObamaUncaringTax.  In addition to discouraging the optimal use of employees, it will also be adding to the corporation tax and making us still less competitive with the corporations of other countries.  It adds to our medical care and insurance costs, redirecting the additional money we are forced to spend on overburdened doctors and hospitals from other parts of the economy.  There was already going to be considerable redirection of money into the medical sector due to the aging of the Baby Boomers.  That was already going to cause many problems in our society, including people losing jobs in other industries as a result.

Now Obama and the Democrats have decided to make that problem and the wrenching effects much worse by adding many more medical service demands from younger, more healthy Americans.  After all, if you have to pay for a government approved plan with a low deduction and with many services most Americans have not previously thought were worth paying for, you are going to use more medical services.  Doctor visits for reasons of low importance will go way up.  Pity the frazzled doctors, except those with enough intelligence to refuse to take time for such patients.  In practice, that will mean that more doctors will be refusing to take Medicaid patients and those on ObamaCare insurance that pays them less than the free market would under their still more over-worked conditions.