tv Politics Public Policy Today CSPAN April 10, 2015 5:00pm-7:01pm EDT
it says iran would be committed to have no reprocessing. okay this is first you have iranian good will, as long as you do not have reprocessing you cannot make nuclear weapon from heavy water facilities. israelis, they have reprocessing. would the u.s. and the world powers be ready to regional iez the measures agreed with iran for all regional countries nobody would have enrichment above 5%? as long as there is no enrichment above 5% there would be never nuclear bomb from enrichment facility. if there is no reprocessing, it is impossible to have nuclear bomb from heavy water facilities. it can have major positive
impact if israelis also would be ready to follow the same nuclear policy iran has followed for 40 50 years. and if the other regional countries would be ready to accept such measures iran has accepted far beyond mpt. >> -- do you have any comments on that? >> i don't think israel will ever give up its nuclear weapons or agree to restrictions. and i think i would expect them to continue to oppose this deal no matter what. and to lobby for actions against iran. that is -- because of the nature
of the two governments. john was talking about how in the past israel viewed iran as a -- you know, as a partner in a sense. because both of them had concerns about the arab world and american relations with the arab world. but i can't see that entering into their minds any time in the near midterm. and in fact their concern about iran is so great that they are, you know, in the sense reversing that trend and trying to forge relations with states that also view iran as threat. it is a very tactile effort on their part. it is only because they both have a concern about iran. when netanyahu was in front of the congress a month or so ago and warned that iran is a
country that commits aggression against the arab world i think that he -- i don't think that is his primary concern. >> just very briefly i think i would say there was just simply a consensus in the international community that the way israel was formed how small it is the fact that its neighbors were rejected it immediately, there's been a consensus to sort of allow it to have this deterrent. so i think continuing to raise the fact that they are not in the npt and all this stuff, it's maybe intellectually splice but probably -- price but -- intellectually precise but
probably not going to go very far. >> they don't start the day by saying [ bleep ]. doet america. maybe -- death to america. maybe changing that could help go a long way. also personalities define relationships and right now we have very strong personalities involved in the israeli/iranian "dialogue" if we want to call it that. it's more like two monologues that never meet. also there are other issues involved here. and let me get it straight. i'm not saying i'm against the deal. i'm not saying i'm for it. i'm saying get better specificity and make it a real deal, not this thing floating in the air. i am not for war if iran. i've been through war games looking at cost of that war and it is astonishing what could happen. it would make iraq look like a picnic. iran is a bigger country. bigger military.
more organized. hierarchical. a long culture. and as soon as the boots hit the ground, welcome to hell. for all sides involved. we don't need that. what we need is some kind of a diplomatic academiceconomic, informational other change to bring this about. and my sense is this two and a half page document is not it because we have other issues to deal with. what's happening in bahrain, what's happening east in saudi arabia. what's happening in the lebanon, in iraq, in yemen. this is not part of the deal. ballistic missiles are not part of the deal. this is a very narrow document. this solves a very narrow question. and again i am for improving relations but it has to be done in the right way. excuse me.
>> i just urge you to read dr. anthony's latest piece on what -- why are we talking about iran, why is -- what are the reasons basically behind this push towards iran, iran iran. so i usually you to read his hort on that. -- report on that. >> there is a fundamental question with regard to actually getting a copy of the deal. somebody asked where can we get a copy of the framework between u.s. and iran? >> on the white house website. >> on the website? >> yeah. >> -- published it and mideast policy council has it on the website. >> and you can also find the iranian interpretations and the french interpretations which are somewhat different than the white house interpretation.
which is mart of thepart of the problem here changing the way it is interpreted. it is far from gown and far from clear. maybe it was important to make it unclear to see what happens. >> do we have idea on who the leads are on returning back to the discussion? secretary of energy? secretary kerry going to be reengaged? technical sides on the iranian side? what level will they be. >> if they haven't started this yet, the clock is ticking. july 1st is not so far away. you know, that is almost midterm time for a college. and this is trying to deal with all this complicated issue. probably there are a bunch of the sherpas out there on all sides doing heavy lifting. and once they get to a point where the sherpas do the heavy lifting then the big players go on cnn and fox tv and iranian tv and they then start to say well we made the deal.
the real work happens at a different level. >> --. i don't know if the build in the post but in the daily star he basically summed it up as if i may basically the deal -- framework or the deal slightly over 5,000 centrifuges for the next 10 years that iran would maintain would be allowed to work only. enrichment for 15 years will be banned at the facility. that iran can enrich some uranium and not tons which is a heavy water reactor -- no i'm sorry. that is iraq heavy water reactor. at tons for 6.37% purity and
that is capped for 15 years. the ir-2 centrifuges the newer version would be removed. and the iraq heavy water reactor would be reconfigured to prevent the production of the bomb fuel basically plutonium. the iaea inspections would last for 25 years of all facilities, all mines all imports that have do with all of this. the iaea will have full access to everything. and in return iran will get the gradual removal of sanctions as soon as iaea provides verification. so whenever they do, that then the sanctions will begin to be lifted. >> to put this in perspective, this is the white house document explaining the deal. this is it. >> next question. with the gcc countries so close to iran and the nuclear sites
even if iran's intent is to build nuclear for energy what language should be insisted upon in the final agreement to safeguard and avoid nuclear accidents like fukishima? >> this is an issue of real concern. in terms of one of the sites on the one nearest to the gulf and the other gulf countries. because of the sanctions, because of the non existent relations between teheran and washington diplomatly lyly lyically and formally, there could be such an accident. iran has had a history of earthquakes. so has turkey. they are part of a different
teutonic plate than those of arabia. so there is legitimate fear of what if there is an earthquake in that region. they fear is that there would be spillage and leakage and that this would be contaminating. and it would pose an immediate direct threat to the water desalination plants in kuwait and bahrain qatar and elsewhere. and ships may refuse to come into the gulf until this is dealt with and cleaned up. that is more than a nightmare. and that has catastrophic implications. the russians who were involved in building that reactor, and
they are also the so-called inspectors of it until now. but this is like put fox in the coop with the chickens. there needs to be a more technologically professional efficient and renowned inspector of that particular facility. because it is the one that could be catastrophic were there to be any accident there. like a chernobyl. and the kuwaitties the ones most concerned and involved in this. and the chernobyl disaster, some 200,000 people had to be relocated. and that was costly. and the united nations asked for a number of donor countries to subsidize and finance it. and kuwait was the leading one. so kuwait's been involved in this kind of an issue longer
than any of the other gcc co-countries on the accident side which relates directly to inspection and relates directly to one particular nuclear facility the one that is closest to the gulf and that could affect them all. >> that is the bushir reactor. >> yes. >> first of all they are under full control of the iaea on the safety issues. it is hundred percent from the day one has been under iaea full supervision for the safety issues. and the iaea has fully confirmed all safety measures and mechanisms already is there. second, joint plan of action also -- i mean on the framework they agreed, they have also
agreed the world powers to have more cooperation with iran on the safety issues. third, fukishima was in japan. japan never lowered its nuclear activities after fukishima. they continued the same nuclear activities. chernobyl was in russia. russia increased its nuclear activities after chernobyl. emirates is going to have four nuclear nuclear power plants. arabia is going to have power plants. turkey is going to have power plants therefore we don't need to create more artificial fears about the iranian nuclear program. >> the japanese shut down all of the nuclear power plants. i was there two weeks ago. and they are spending billions
of dollars to set up safety devices in the event of another earthquake or tsunami. the japanese have been through a very difficult energy time since they had to shut down 30% of their electricity, which is what they have done. and there is a huge debate in japan right now about whether to turn these back on again. the farther away from tokyo you are the more likely one of those plants is going to be started back up again. it is a very emotional issue. and this fukishima wasn't just the earthquake. it is a water flow problem. and when i think water in the mideast, i wonder what some people are thinking. the jordanensians are bringing a the site in the desert using a the water treatment plant as a source to treat it. i wouldn't live beside that. if the water treatment plant goes down the water flow goes
down and it overheats and you have a fukishima in northeast jordan near the iraq border. the mideast is water short. if you are going to be putting a plant on the ocean, that makes sense. if you put it in the desert that makes no sense. if you put it on a fault like where bushir is, it's on several. it makes no sense. near the ocean maybe you keep the cooling going. but at the same time it will shout down automatically if there is an earthquake. nuclear facilities are very complicated beasts and they need a lot of water and a lot of water flow. and people are just not think thinking this through. >> anybody else want to comment on? question for ken. please compare and contrast libya sanctions removal versus iranian sanctions removal and when will iran be removed from the terrorism list? >> quite the question.
i know c-span is here so i want to just say hi mom. [ laughter ] the iran's removal from the u.s. of list of the terrorism state sponsors. there are some young people in the audience so maybe by the time they are my age our our age that could happen. iran is not anywhere close to being removed from the terrorism list. there is no consideration in the u.s. government for removing iran from that list. i would just be categorical on that question. the other -- what was the rest of the question i'm sorry? >> oh let's see. >> libya. comparing libya? >> yeah. >> well, you know, we conceivably could have two similar situations. i mean libya gave up its nuclear program and actually gave --
dismantled the whole thing. so obviously there was not the same level of debate over lifting some of the sanctions on libya because they had been so, you know basically dismantled the entire program. iran is not doing that. obviously this deal leaves them with a substantial infrastructure. and we've, you know, had more than an hour of discussion of the continuing concerns. so, you know obviously it is not quite as easy. but, you know, again, just looking at authorities though. the president does have, you know, quite a bit of authority in terms of suspending sanctions. but if you are talking about lifting sanctions outright where congressional action is needed, then of course it becomes much more involved. and most of the main sanctions that would be relieved under this deal are enforced by congressly-passed statute.
and therefore congress to lift the sanctions outright would have to pass new lemgs togislation to do that? >> a follow-up question if i could for you. to the banking system and u.s. payment system. >> anything involving the u.s. is not really part of the sanctions relief. it is -- iran would be able to access again the european the asian financial system and the secondary sanctions on those banks that are doing business with iranian banks, they would not be penalized by doing business with the u.s. financial system. but direct iran-u.s. financial
transactions would still -- that is not contemplated as part of the relief package. >> thank you. question for ambassador mousavian. he would recommend joining the -- if the nuclear deal is successful. what would the implications of this be and how would iran and the sco partners benefit? >> iran is already participating on all shanghai's high level meetings. and if iran is member there would create more opportunities for asean cooperation between iran and china. iran central asia. iran cal kusis and iran and
india. this would have more impact on iran economic cooperation with asia. >> as a general for the panel -- we've got about 16 minutes to go. it is a broad one. it is what will the u.s. congress do? which is just sort of going to be filling a lot of air in terms of time but if anybody would like to comment o that. over the next three months. >> hi mom. >> c-span's here. >> well the u.s. congress will do what u.s. congress will do. and that is debate this issue and take partisan viewpoints and try to work this through and whatever manner they will. there is an election year coming up. there is always an election year coming up. and it is going to be hardball. and that is pretty much the way it is going to work out.
and the house and the senate are now run by the republicans. which for those you who don't know they run who gets invited to the committees and actually run the questions in the committee assignments. so things are going to be a little bit different. it is going to be a very very rough road. >> i agree with him. but to my understand ging is not only because of the next u.s. election and the mystic rivalries between democrats and republicans. it has a lot to do with the influence of the netanyahu, apec and more a big, big misunderstanding, i believe, not only in the u.s. congress between a lot of u.s. politicians. you hear from many u.s. congressmen that we should keep
the sanctions, pressure iran. iran only came to nuclear negotiation deal or framework because of sanctions pressures. still they keep the same narrative. in all debates you read the same narrative. but very simple fact before sanctions iran had a few hundred centrifuges. after sanctions iran increased to 22,000 centrifuges. before sanctions iran was enriching below 5%. after sanctions, iran increased to 20%. before sanctions, iran had just a few hundred kilogram of stockpile. after sanction, 10,000 kilogram. before sanctions iran was working with one generation of centrifuges. now eight generation of centrifuges. this was really the impact of
sanctions. as president obama said suddenly the p5 plus 1 opened their eyes and recognize that iran has just three months to breakout. the only thing really made the deal or framework possible was, first, the u.s. agreed to iran to have enrichment for its domestic practical needs. that is why iran accepted to every transparency measures. and iran was ready to give everyone confidence building measure that iran was never divert the program. because practically they had the same red line. and obama said our red line is nuclear bomb. this narrative still has not been corrected in the u.s.
congress. there is a big misunderstanding. and they are repeating the same mistakes. today more concerns are about issues beyond nuclear. you hear you heard our panelists, they discussed about other threats. hezbollah, influence of so on and so and so. the reason the hawks in washington are pushing the administration to continue coercion strategy is to contain iranian influence and power. this is the reality. but as long as they really do not recognize the fact. what is the fact? i believe for 35 years the u.s., europe, the world powers they did everything they could on coercion strategies against
iran. our unilateral sanction, multilateral sanctions, u.n. sanctions. a war against iran. a million iranians either killed or injured. even using chemical weapons. material was provided by the u.s., europe and arab allies. all supported the use of the weapons of mass destruction against iranians. 100,000 were killed or injure. no other country in last 35 years has been under so much of pressure and sanction orchestrated by the u.s. however, after 35 years everybody today is crying and complaining, why iran so stable? why iran so powerful? why iran has to influence? iran is everywhere from beirut to baghdad to yemen. iran is everywhere.
this is a evidence and fact that 35 years of sanctions and pressures and the most powerful coercion policies against iran not only has failed but has strengthened iran' stability and power in the region. and look at the u.s. allies in the region. where is mubarak? they got all weapon, all money, all supports. and you can see the collapse of u.s. allies in the region and the others you cannot say. but at one understand they are very --. and one would say look if you are right, then if we leave the sanctions iran will be more aggressive. here is another misperception, misunderstanding about iranian culture between our regional arab allies and even the west and even in washington. i have been 30 years within the iranian administration. i'm iranian and there is a
culture. they need to understand iranian culture. more pressure more sanctions would make iran more aggressive. there are as long as the congress follows the coercion strategy, iran like last 35 years would be more aggressive. and you would cry more. you would be feared more about the role of iran. if there is more opening to iran more cooperation,0ms$ iranians would make a deal like you on all other disputed issues like the flexibilities they did on the nuclear. therefore as long as this narrative continues in u.s. congress, i am optimistic even about the future of iran u.s. relations. i'm pessimistic sorry. >> one country we haven't
mentioned here is china. and they are very much involved in the situation. including developing two of the largest oil fields in iran. under sanctions i don't think the issue is an application of too tough sanctions. it is an issue of not applying the ones we already have in certain circumstances. the chinese export 60% of iran's oil exports. they built systems and roads. they are very much involved. is russians are very much involved. that's another country we have mentioned once or twice in here. t it is not just the u.s. and we have lost leverage. some seem to think that we can do something and the world jumps. this is a different world. china is a powerful country. russia is not as powerful. its economy is degraded and its leader -- that is something else. but the chinese are a powerful country that wants more influence in the mideast and they are moving into the every
single country. it is one of the few countries that helped saudi arabia and iran at the same time. informsed ed invested in both at the same time. they support the palestinians and the israels at the same time. they are playing a the double game and playing it brilliantly. and our leverage in the region is not what it was, even five years ago. so to think that we can say sanction and close the door and everyone jumps, that is not the way it is anymore. this is a different region. as the the different iran. it is a different xhchina. china when this whole thing started was a pour country back in 1979. china was a poor country. had no real clout in the region. and it didn't start importing oil until 1983. this is a totally different world. we have to get up to speed on this one. >> yeah but back to the congress issue. the unfortunate fact is, i
believe, that the only hope that might come from anything related to congress is that the white house would have some sort of ability to break the veto proof kind of thing. unfortunately situation is such that congressmen are not necessarily listening to reason argument. >> the ami come from a slightly different perspective but i end up with the same point. and that is the pressure of lobby groups. neo conservatives and those who are interested in advancing the
israeli narrative or israeli objectives or israeli interest. and iran has become quite convenient as a distraction from israel's actions. israel's policies. israel's positions. israel's fait accompli. and it will continue to serve this tactile role to deflect tension away from the eastern mediterranean, specifically israel and its building of settlements. by focusing on iran as the whipping boy, the bad boy the scapegoat, the fear monger in there. and this is because it has been a successful tactic. by israel and its friends. in 1982, the u.s. was on a role
in iran having camp david under its belt and got the israelis to withdraw from the sana. and the next items on the agenda were to be jerusalem in the west bank in gaza. and the israeli pushback was over our dead body sies this will not be your agenda. and we thought that this was hubris run amok. but it wasn't sat in on meetings in january of '82 where state department briefing said that between april 15th and june 15th israel will invade lebanon. we said why would they do that because there's a cease fire already been seven months negotiated with the plo. and intelligence by then it will be lebanon's.
why will they do that? and the answer was because they want to change the agenda completely. and indeed they did by invading lebanon. and they remained there directly or indirectly for the next 19 years. during this time with the attention deflected the settlements doubled quadrupled, quintupled and those settlements all remain. so this is quite tempting. even with the united states invasion of iraq in 2003. in the period since then israel has built the so called separation barrier. the security wall. and this is cut into what was to be the territory for interdependent state of palestine. 22% remaining. so territorial expansion has occurred in the shadow of deflecting american attention.
we have done nothing to prevent those events that i just described. that is, put a just enduring comprehensive piece even further from the reach of those who've tried in the last year with secretary of state kerry. before him mitchell, before him colin powell. before them tony senny,ette. we've been ineffectual. so i share the pessimism of the ambassador. but i arrive at it differently. iran will continue to be an object of scorn and isolation if people in congress and those who lobby them are successful. >> thank you. i think we've got probably less than 3 or 4 minutes left. so what i would like to do is one final question and pose to the panel.
we can just go right down the row and see what we have to say about it. >> what would be the regional implications and repercussions for a failure to arrive an acceptable march 30 deadline? what is the next step? if there is no agreement on the technical details in the -- over the next 90 days. >> probably a delay. i don't think it is going to be a reachable goal. it is going to be an extremely complicated situation. and to just give up and throw your hands up on july 1? that would probably bring a great deal of political resentment and anger within iran. within the iranian leadership. and the implications of that
could be significant for whatever is happening between the united states and iran on other issues. if it breaks down entirely then we're back to step one. and to get these folks back into the table, even if it is that wonderful 10 star hotel in lo zahn, it is going to be very difficult. the proxies for iran and others may also react if a kinetic way if this happens making life far more complicated in the region. the game has started and i don't mean a fun game. i mean a complicated and dangerous game. and it may not be a retrievable one if this thing breaks down. but the agreement, if there is to be an agreement has to be a proper one. and very long-lasting. and has to be a step to going to deal with the other issues that are involved with this.
otherwise we'll have an agreement on something narrow. and nothing else. >> i agree with paul about that maybe the resort would be to postpone the negotiations or the technical details. but at the same time if we resort to -- if we postpone those, then we -- then it is likely that elements within the iranian regime will try to stir things up regionally so it can have a little more of a bargaining chip in those extended negotiations. >> i think given the reaction in iran to the tentative deal, i think it is going to be extremely difficult for iran not to go forward and have the final deal. i think the repercussions in
iran would be tremendous if there were a collapse at the end of this. i think president rohani. i think you would see a major upheaval if this doesn't go to completion at this point. >> i agree the technical details are so difficult that i would fully expect when june 30th comes, some announcement about extending the talks and continuing. and i think that would suit a number of the gulf arab states. because they would like to see a tighter agreement negotiated. and they don't want sanctions lifted yet. until the agreement is better.
and because they have recently i think realized that they need to lead in dealing with geopolitical threats rather than wait for the united states to lead them. and -- but not only that. but they are also seeing that the united states is responding to their lead. and the united states is gradually getting more involved helping in yemen helping more in syria than before. so i think it would suit a number of those states for the negotiations to continue until a better deal is agreed upon. >> i believe already the negotiations have reached to no return point. and they have already decided to strike the deal and they would
reach. the u.s. also cannot leave the negotiation table. the world powers they cannot leave the negotiation table because of two reason. one -- three reasons. one, from the beginning they agreed criteria would be npt. they have signed. there is nothing left or disputed within npt. already everything within npt is agreed. even in details. second, iran is the only country with measures on verification, no breakout, non diversion, far accepting far far beyond npt. and third is the realities in the region. this really dictates to them to finish the job by july 1st. if it fails, i believe neither
we would have upheaval in iran or washington. neither would we have regime change in teheran or in washington. iranians would be able to continue other decades like they have been able to resist and stay stable power for the last three, four decades. but the implication, even if we do not agree with the world powers, why iran and the regional powers like saudi arabia turkey egypt they cannot sit together and to agree on the same measures within npt and beyond np trkst for nuclear weapon free zone in the region, why? this is already achievement for the regional countries regional powers to sit together to agree for a regional mechanism.
i think iran, saudi arabia, turkey, egypt iraq really they are the main powers. and finally, regardless of the nuclear issue, the problems in the region definitely is far far far beyond iranian nuclear issue. and as long as we don't have regional cooperation between regional powers, iran, saudi arabia, gcc teamworkurkey, egypt, you are not going to get to anywhere. even if the deal is done on the nuclear. >> it's 12:00. it is time to move on. close the proceedings here. i on behalf of the national council and u.s.-arab relations i wanted to thank our distinguished panelists for coming today to share their insights knowledge, wisdom and projections for the future. let's hope the next three months are eventful.
and as closing, i wanted to just point out that president's legacy is on the line on this. so it is serious discussion and debate that we'll be probably moving forward in the next three or four months. he says if we can take the nuclear issue off the table and bring regional stability to the mideast, these are noble objectives which i think in the days ahead will as a result of our insights here give us better understanding whether or not these are actually achievable ends and normal goals that can be pursued with success. thank you again for coming. you have been a great audience and wonderful questions. [ applause ]
>> the petersen institute recently held a wages and work in the u.s. they talk about the economic impact of the raising wages. voluntary increases versus federal mandates and collective bargaining. >> good morning everyone. and welcome back to the peterson institute for international economics. i've adam posen, president of the peterson institute. and it is a great pleasure today that we are looking at something a little below the surface, but of profound importance. which is, how and why wages get set where they do for low wage workers in the u.s. and
globally. leading into our panel thanks to a series of major grants the peterson institute has been working on inequality and inclusive capitalism for a while. we did not get there first and most with the inequality best seller. but we have been doing substantial work around the issues particularly of comparative labor market and comparative financing across countries and how this affects outcomes for actual people. our basic premise which i hope today and all our guest speakers i know will reflect, is that when you start talking about inequality or exclusion, the tendency is to be like farmers talking about the weather. you sort of say it is bad and then just accept that that's the way it is. or you rale against the weather
and go off on to crazy fixes. what we are -- our commitment in our project and i believe of everyone here today is to say okay, we may not be able to effect the weather but we can differentially come up with roofs, appropriate drainage gutter cleaning and maybe even proper redistribution of water rights? if we're really going to push it. so it is in that spirit we've seized upon this issue of wage increases. obviously there is a macroeconomic background. this gives me a chance to plug that tomorrow we'll be having our semi annual global economic prospects here in this room, at noon under the leadership of the david stockton. talking about u.s. economy. nick talking about the china. and jacob kirkegaard on europe. so there is this macro background that as the u.s.
economy improves we expect wages the pick up. but there is something more at work here. there is something more at work in terms of some of the actions taken by american companies. we are going to be featuring later today the ceo of aetna, who took a real initiative in this position. but also fundamentally that the labor share in this economy is close to an all-time low from the post war period. and that is a number that generally never used to fluctuate much over the business cycle and has been sustained over a lower share of national income for many years now. and the question is does it have to be that way? when does it make sense for companies to change that? and that is what we're going to address today. we are very fortunate to be releasing a set of short papers in our new briefing series. which we put together, meant to
be very topical and pointed. and two of the contributing authors will be speaking today. my colleague justin wolfers is a speak first, the senior fell leow and he is also a rock star on twitter. a columnist with "the new york times." he runs a ridiculous number of marathons and someone who has importantly forced us to up our game here on micro and labor issues which was why we brought him over and we are delighted to have him with us. speaking second will be the aforementioned justin who has been associated with the initute since 2002. we are immensely proud of jacob who has grown up into being a
double threat. the leading american commentator and forecaster of the political economy of europe. for today, in this is exemplified not just by his work in our new briefing on wages, but his recent working paper. someone who sees the connections and comparisons across labor markets around the world. it is great to have him contribute to that discussion. i'm also grateful that because of the importance of this discussion and our friendship with various actors in the public debate, we have two other speakers. damon silvers, director of policy and special counsel for the afl-cio. we think of him as mr. substance for the afl. that was not meant as a swipe. that is a positive thing for damon. he has done incredible number of
things. he is assistant security general pro bono for the state of new york. he is a member of the fcc. the public company accounting advisory group. he was deputy chair of congressional oversight panel for tarp. covers a whole range of economic regulatory and financial issues from a very strong public service perspective. previously, from 2006 to two dozen eight, was chair of the advisory committee of the auditing profession. we are putting him back into more labor camp today but i'm sure he can handle that. finally, michael strain who was named deputy director for economic policy studies at the american enterprise institute. to give him the similar thing, he is the economist who most of us would read most at aei. michael is well known for taking iconoclastic views motivated by
principles. he manages to get himself into the press quite a bit nonetheless. he is a contributor for "the washington post." he has done extensive research with the labor dynamics institute, the u.s. census bureau, the new york census research center and will give us additional perspective on today's issues. thank you for joining us. of a like to first call up -- i would like to first call up justin. wolfers. >> my task here is simple. want to make a case that there is a legitimate business case to be made for employers to pay higher wages than they currently do. that case is strong at the lower end of the labor market. i want to be clear that what i want to talk about his
microeconomics. this is not, it was widely attribute it to henry ford when he painted his workers -- paid his workers $5 a day so they can all buy ford cars. it seems like an inefficient way to generate demand for ford cars. so it's not the keynesian argument and it was not the argument for henry ford. it is the claim when you treat your workers well, they will work harder, longer and stay with you and potentially cost savings. there is real profit opportunities for doing this. the ford plant at the time employed 14,000 men on the line making cars that in order to keep them on the line, they had to higher 52,000 people every year. you can see how turnover costs can undermine a business's efficiency. paying a little more, staying on the line more attractive might yield more benefits.
the argument is then you pay a little more, you get a little better. this is by no means a new argument. we refer to it under efficiency wage theory. it was first surfaced in marshall. later on, some of the most important champions were janet yellen and her husband,. the arguments go like this -- because we are economists, we think of things in terms of incentives. if we are paying you better than your current job, you valley of your current job or and then you want to make sure you minimize the possibility that you lose that job. by that logic, you work harder. that is the mean-spirited version of the claim that what you want to do was pay your
workers more. the empirical research has been quite useful but it has come up with different margins than what we write down in our models. one of the obvious things, if you pay a little more, you are likely to get higher-quality workers come to your firm. if you think at what is happening in the present moment with mcdonald's and walmart, also suggesting there willing to pay higher wages. i think that is an advantage. there are a bunch of lowe's coworkers that would rather earn $10 an hour than eight dollars an hour. my guess is that many of those workers are going to aetna rather than competitors. there is a strong argument when it comes to firms in customer service. customer service means knowing about an identifying with what it is your customers want. if you are more or less paying your workers part of a completely separate society where they cannot afford to be a part of or engage in the same activities as your customers,
they may not understand it. is to take a firm like aetna, it is moving towards having folks on the phone dealing with customers' inquiries. if you want some of the deal with that, it makes sense to have some of the that knows what health insurance is. who understands the difficulties of dealing with bureaucracies over this and be a part of what it is the customers are calling it is the customers are calling about. otherwise, you get a real sense of being in a different language and we have had those experiences before with the other person on the line has no idea what we're talking about and that is because they don't. they are not living the same life that you and i may be. the dimension which i think resonates most clearly with our economic models which are about preventing shirking, higher wages have fewer disciplinary problems.
that is obvious. why is it we behave ourselves? for some of us it is innate professionalism and for others it is we value our job. we value our job more the better we are treated. it shows that absenteeism is lower in workplaces with higher pay. a lot of the studies focuses on two margins -- absenteeism and turnover. the reason isn't these are the most interesting far reaching margins but they are the easiest to me sure. it turns out that turnover is the most studied margin. there are a large number of studies showing the higher the wages within a workplace, the better the work, the more likely they are to stay. job tenure tends to be greaterer. learning on the job and skills tend to develop better as well. so that's the stuff i think economists have done a good job
at measuring. there is a whole other realm of stuff that matters that we can't measure as well. usually when we write down the models it's important to pay workers well so they are thinking about how they are doing relative to outside options. sometimes it's important to treat people fairly. a sense of being treated fairly which isn't necessarily a cold, calculating ratio of an existing wage to an outside offer. it's a general sense of how you feel treated could matter. if you look at -- there is no shortage of firms that have dysfunction that will cultures of conflict between workers and management labor and capital. a lot of that comes back to a sense of not being treated fairly which has something to do with how workers are treated. there is a sense when workers are treated well and paid fatherly, management gains a sense of legitimacy in the eyes of workers.
think about different firms you have been in. if i want to go to the statione are ry closet i feel treated fairly. if i go up there if i wanted to i could take out 200 pads of lined paper. my 5-year-old might like that. but i don't do it because this is an institution i regard as having a great deal of legitimacy. if i was seen walking out the front door with paperer now, one of my colleagues who believes the institution has a great deal of oh legitimacy may talk to adam. what you get is when it is perceived to have legit that si work ohhers monitor themselves and each other. you can compare it to any number of low wage work places you may have gone to visit where you have to go up to someone behind the counterer anddemand three pads
of paper and they ask you who to charge it to. you have to put in extra monitoring and supervision. you have to do it because the institution isn't seen as legitimate, so i feel comfortable stealing, slacking on the jo. my fellow workers don't have a shared interest in the greater goals. this legitimacy thing matters. one of the things you see is when you look across companies the higher the wages, the higher the supervisors involved. hiring extra people to monitor which isn't productive is expensive. buying the sense of legitimacy is something important you can buy with higher wages. the origin ohhal forms of efficiency wage thee erie started by talking about health and the developing world. we would be talking about villages where people don't eat enough to be at the full level of productivity.
it's hard to headache the case in the u.s. we should raise wages so people can get enough calories to get through the day. our bigger problem in the u.s. is we have too many calories. but there are still important versions in which health actually really does matter. and lower wages can be an impairment. one of the avenues of research is in psychology. thinking about psychological burdens and how people deal with them. one of the things we are learning is in a book called "scarcity." being poor is stressful. and stress puts a greater cognitive load on you. the greaterer cognitive load as you go to work the less room you have to headache good decision this is the work place. one of oh my favorite expeerpts is simple. they go to a local shopping center, take a bunch of people and say -- they do a little
test. most people do well on the test. one way to make people do badly is before you administer the test say i want you to think about your car just broke down and you have $1500 worth of repairs to headache tomake to the car. when you ask poor people to think about mythical repair s to a mythical car in a shopping center they do worse on the test. when you do it with rich people they're like that's fine. they get on with their lives. the way to think about this is the test here is a stand-in for your performance on the job. the greater cognitive load of poverty may lead people to make bad decisions on the job. you can see this is a rich vein of research here for psychologists. it's harder for economists to get at this. the idea that there are workers who make bad decisions and we can list some of them. we see people who can't afford to smoke smoking. they spend all day trying to
keep their -- together -- that's an australia yap technical term. at the end of the day they don't have self-control are left. much the same way they make a mistake picking up smoke s they likely make mistakes with decisions on the line as well. the fist claim i want to make is there are strong reasons to believe paying low wage workers well pay be profitable for companies. the literature gives us a flavor of whaet's like. that's not an argument that goes everywhere for every firm. the more it involves -- the greater the turnover costs are, the more attractive the argument will be. the more possibility there is for conflict between workers and management. the more important supervision isment thor more important dealing with customers and customer service is. the more compelling the argument will be. the second claim i want to make is the argument that we should pay workers better, which at
first coming from an economist sounds bizarre and like spg from outside the tribe and sounds incredibly radical is the least radical claim you could make. if you look at most firms out there, most firms pay workers more than they have to. very few people this the u.s. labor force are paid according to the -- are on the federal minimum wage. this idea, the insight to pay people better and hope for more is one every hger out there already understands. the third question that i want to raise is this all relative? maybe some of this is about if you can get your firm, pay your workers more what matters is paying your workers more relative to other workers. this might work for one firm but not the whale economy. in the job we refer this might work in partial but not general equilibrium are. it depends, it's not entirely
obvious. in technical models we can write down what a worker cares about is the wage this in the job relative to their outside option. in reality what a lot of us care about is being treated well and fairly. maybe it's not just about relativity. the second observation is the outside option for many workers is not would i be better off at walmart or kmart but working at walmart or being unemployed. the relativity is between work and not work. if that's the case it's no longer a case that et's relative. the other point to make is that many of the pathways we can think about and not actually about relativities. i want to think about things like legitimacy or the psychological evidence on cognitive load and the load of being poor. being poor is actually not a purely relative thing. struggling to make ends meet i
think, probably does under mine the productivity of oh workers. if you read ethnographies of the american poor, they are absolutely full of examples of someone who had a good job the car broke down and they had no way of getting to work. that led testimony tohem to be fired and yields worse for the next job are they apply for. there are real issues of can i get reliable transport to work? can i i get reliable --
if the off set is about one for one, either will be roughly profitable. it becomes a question for a ceo, which of the two choices do i want to make? obviously you might think one has more positive implications than the other. it's difficult. to know exactly what the off set isment ef i have spent a lot of time reading just about every case study we are aware of of firms who decided to take the high road are and see what sort of pay off they get and firms that decided to take the low road. it turns out we are really good at quantifying small things and bad at quantify inging big things. we can usually measure the turnover consequences of higher wages but legitimacy and
fairness and the broaderer productivity pay offs are incredibly badly measured. we think they are there. we don't know whether they yield a 50% return to the employer, 100% or 200%. the thing i'm struck by when i talk to the h are r executives making decisions is they are fogged in by uncertainty as much as we are. there i may be an instinct to think to keep wages as low as possible. there is a real possibility worth exploring what higher wages look like and what sorts of pay-offs one could get. there is no example in the literature. if i could ask a ceo to do it their workers would hate me. i would love to see a ceo take half the plants give higher wages to half and honor tor both groups to know whether this is a good or a bad situation. the truth is no ceo has run the
experiment. any ce o choosing either the high or low road is doing so through a fog of uncertainty. i think there is a reason to believe there is good reason for firms to be p experimenting more. it's just a different management practice practice, one that potentially has a big pay off. let me stop there. [ applause ] >> thank you very much. it's a great pleasure to talk about these issues today. it's obviously also always great to follow jus tip. i figured i should perhaps try to say a little bit about the macro economic setting that the micro economic dynamics that justin talked about operates in. then a little bit about the broader political situation where i would argue there is also some issues. i think first from a research
perspective this is a nice subject to work on right now. we are in the analytical gray area between anecdotes and a clear trend when we look at what's going on with self-initiated corporate initiatives in the united states. you can either become a dominant national trend or fizzle away. it's fair to say that when we think about it here at the peterson institute we would like it to spread as wildfire. i think also we should recognize this would not be entirely straightforward for some corporates as it is for others. there are objective analytics for each firm. we try to do it to dig into which type of firms made this type of nesh tif whether it's hemoglobiner wages or some of the other initiatives we have seen recently from microsoft and others compelling their
contractors to pay sick leave and other things. whether or not they would be more appropriate for some firms some sectors and for others. this is obviously important when you think about what is the true extent that these types of oh initiatives can reach with respect to the share of the total u.s. labor force and others. but i think it is fair to say that in my opinion at least there is basically two -- there is a broader set of macro economic issues and broader sense of political issues in which these trends are being played out right now. on the macro economic front, i think it is fair to say that the microeconomic logic that justin just laid out is probably more effective when you are in a labor market like we have in the united states that is
objectively tightening. there may be quite likely more of a first mover advantage for individual firms in this situation than in a period where there is an abundance of unemployed workers. it may even be that if we are in a situation as we find ourselves in in the united states today where perhaps the real hurdle is luring people from the ranks of the outside the labor force back into the labor force, irrespective of their -- irrespective of their skill level, it is actually perhaps an even better point in time to raise wages because i think there is quite a lot of analytical results will show one of the things that really -- or perhaps the most important thing that lures people back into the labor force is actually higher wages.
there is also perhaps a situation from the corporate side that the -- i think it is fair to say that the marginal benefit for corporations for doing all the other things with their cash on hand is perhaps declining at the moment. we know for a fact that there has been low levels of investment, broadly speaking from corporations. there is perhaps we are at a level where the stock market is such that mergers and acquisitions are no longer as attractive as they were. and therefore the lack of alternative and perhaps even the low interest rate environment that does, that basically now in a country where there is a little institutional pressure for higher wages, corporations simply find their -- find a situation where because of the declining returns of the other
avenues of deploying their capital, it actually makes sense right now to pay their workers more. and that, of course, is a fairly -- not very benign interpretation of the situation. but i think perhaps also there is a broader political setting in which the recent trend is occurring. and i think if we think about it, if we look at most of the polling, it is clear that income inequality and poverty issues have become an increasing concern to the public in the united states. and i think it is also fair to say that right at this moment there is little legislative likelihood of things improving, at least at the national level, but i think ironically it is also very important to recognize and justin mentioned it, this to me, and we're talking about this
event last week, that actually this is an area in which there has been a lot of executive branch action taken. quite in the same trend as what many corporations is doing because if you think about what barack obama, the ceo mentioned last year in his state of the union speech, it was that he mandated through executive order that the contractors of the federal government pay $10.10 an hour. and in that sense, one could even make the argument that the subsequent corporate action was actually mimicked on some of the corporate action that the ceo, barack obama, took earlier. and we have subsequently seen this year in which the call was for the workers or for federal contractors to pay sick leave, well that was subsequently picked up by microsoft. but basically i would argue that we are in a situation that because of the lack of likely legislative action by congress on this issue, and the rising level of public anxiety of this issue, there really is an opportunity for a -- a
corporation to get a significant pr benefit from doing this. basically appearing to have a -- become a responsible stake holder at this very point in time. and i would also perhaps go further and say that it is kind of a little bit like the previous model for effective corporate behavior that we have seen and we're talking about sweatshop labor in the third world and the likes. this is -- the dynamics is different, but certainly very american and private sector led initiative to drive this, yet the interesting thing here, of course, is that it is not, in fact, labor standards in the third world that are being addressed, but it is actually perceived deficiency in the labor standards and wage levels
of workers -- of some workers in the united states which, of course, means that when you then look at the u.s. labor legislation code and you see, well, the united states is quite unique among the osce countries and having no legislative parental leave on the books, it obviously as was highlighted in the last state of the union doesn't have mandated sick leave either. and then you think about, well, where is the next step of this type of pressures going to be found? well, i would say that these are probably the -- the next steps for which these types of corporate actions will be taken. and as i said, it basically means that we are in my opinion in a very fortuitous macro economic and broadly political situation right now. so i think what we're seeing is from that perspective certainly
very welcome and it has an opportunity to actually be taken quite a lot further into other initiatives and other areas of labor standards, not just wages. i think i'll stop there. thank you. [ applause ] >> well, thank you very much. this is a wonderful conference. thank you, adam, for including the loyal opposition. it is a pleasure to be here. the discussion today is about voluntary wage increases for lower wage workers. i will take voluntary to mean nonlegislated, that affirm is responding to market pressures rather than to legislations or
executive decrees. and i will discuss voluntary wage increases as they relate to federal minimum wage legislation and to the living wage movement. so a little different spin than we have heard. but, first, let me say that i welcome voluntary wage increases for lower wage workers. i welcome a situation where firms are responding to market pressures. and are raising the wages of low wage workers. i think in this discussion it can get technical, but i think sometimes people sound like they're defending low wages and that's not -- that's not something that we should be defending. we should be defending appropriate wages. this signals very good news for the macro economy, signals good news for the labor market. it would add evidence in support of the hypothesis the labor market is tightening, something we should all want and very importantly it is very good for low wage workers themselves who should be our primary concern.
many of them have trouble making ends meet, justin did a great job talking about issues of cognitive load and the stress that having financial problems can lead to a person that helps make them -- that pushes them in the direction in some cases of being a bad worker, but it also pushes them in other directions that are bad as well and their personal lives, so we should be happy when some of those pressures are alleviated. these workers are playing by the rules. they have jobs. they're working hard. they're getting a pay increase is a fantastic development for them. we should be happy about it. so i will now turn to the main focus of the remarks, which is voluntary wage increases in the context of public policy. and i'll just make three points. the first is that -- according to press reports, average wages, even after the voluntary wage increases, average wages among firms in industries that disproportionately employ low
wage workers will still be lower than the desired federal minimum wage of the president and congressional democrats. this is a little hazy because not all the data is out there, but my understanding is the firms in these industries that announced voluntary increases so far will be u.n. der $10.10. mcdonald's, for example, promises to pay $10 an hour for some other firms which is less than the $10.10 an hour that many on left desire. my understanding is this is true for walmart, may not be true for some firms with a broader distribution of wages within their firm, but it is true and
jacob makes the correct point that industries matter and it is true -- or seems to be true at this point in firms who are in industries that are thought of as disproportionately paying low wages and hiring low wage workers. it is far short of the living wage movement case's. so this system, $10.10 is likely too high for a federal minimum wage. those few firms who are publicly announcing pay increases are still below what the president and congressional liberals would require the minimum to be for all firms. and so we need to keep that in mind when trying to map discussion of these voluntary pay increases into our discussion about national public policy. and, again, this says to me the $15 per hour with some municipalities are moving toward and the living wage movement wants is way too high. the second point that i would make is that these voluntary increases do not justify raising the federal minimum wage.
it is an empirical fact that wages are mysterious, justin did a fantastic job of walking through the microeconomics of why wage increases make sense and in many cases and in how -- in many cases those empirical realities are either not the main focus of economic theory or are missing entirely. it is also a fact that standard techniques can explain only a fraction of the variation in wages. but to me, those facts suggest that we proceed with caution about policies that may result in significant employment losses among lesser skilled and vulnerable americans. to listen to many on the left, you would think what i just said is a fringe view, but in fact i don't think it is. the nonpartisan congressional budget office, the referee for so many of our public policy debates recently reported that
raising the federal minimum wage to $10.10 per hour could result in hundreds of thousands fewer low wage jobs. the cbo also reported that a $10.10 per hour federal minimum would result in $31 billion of increased earnings for low wage workers. this sounds good. but if you dig a little deeper, the cbo found that only 19%, less than 4 out of every $5, of that $31 billion, would accrue to families below the poverty line. one-third of the $31 billion would accrue to families earning more than three times the poverty line. so the minimum wage is a very inefficient tool to help low income families, families below the poverty line. it may result in significant employment losses among the very population minimum wage advocates are trying to help. so we should celebrate that some firms are raising wages, the increases are in the best interests of the firms, and in the best interests of the economy at large. and they clearly help the workers. but we should recognize that mandatory increases are very different than voluntary increases. and mandatory increases very
likely could carry unintended consequences. my third point is that despite that gloom and doom i just delivered, we shouldn't do nothing. i think that there is an appropriate public policy response at the federal level to the situation that low wage workers find themselves in, and that is to increase the earned income tax credit. the eitc is a earnings subsidy f you work and your household earns below a certain amount, they write you a check. it is efficient. it is targeted with households with low income, rather than workers with low wages. those are very, very different populations. as is suggested by the cbo's distributional analysis, which households would get how much of that $31 billion increase in earnings. previous eitc expansions pulled
significant numbers of jobless americans into the workforce and the eitc lifts millions of people, including millions of children, out of poverty. so to take a step back, we should have as a goal that no one who works full time and heads a household lives in poverty. that is a social goal. and consequently that goal should be met with social resources. proponents of involuntary legislative minimum wages implicitly argue that the burden of meeting that goal should be placed on the shoulders of the businesses who employ low wage workers and on the customers of those businesses who will see higher prices. the eitc is better than this. it marshals resources from all of society to help meet that social goal. instead of a few businesses, the eict supports work, encourages earned success and fights poverty using resources from mcdonald's and walmart and target, sure, but also from well to do economists, from wall street financiers, from corporate ceos and hedge fund managers. all of society should be employed to achieve that noble social goal, the eitc is designed to make that happen, it
is a superior tool to the federal minimum wage. and i will leave it at that. [ applause ] >> well, good morning. let me begin by saying that i'm going to shock you and say that i can agree with all of the people who have come before me that raising low wage workers' pay is a good idea. and i find myself a little surprised to be amidst such a robust and passionate consensus. this is, i think, the first time
in which i've been at the peterson institute for a moment at which everyone including my friends from the american enterprise institute all embraced the afl-cio's current strategic campaign which is called raising wages. and i welcome all of you to it. now, i think there is a set of things that have to be said about this, though, to make sense of some of the back and forth around the areas where maybe there wasn't so much consensus. the first is is that we really misconceive what is going on in america's labor market and america's broader economy. we talk about the issue we're dealing with today as an issue of poverty. there is no question it is an issue of poverty and just to be clear about this, because i suspect none of us in this room, very few of us in this room work for an hourly wage that we are talking about a current minimum wage that full time is roughly $14,500 a year depending on how long you get paid, and that -- how long you work and that a $10 an hour minimum wage is $20,000 a year. before you get too outraged at the possibility that somebody might be paid that much money that doesn't deserve it, spend a moment thinking about how your life would work if that is what you were paid. so poverty is important here. what i'm describing is wage
levels in which people live in poverty. whether they live in poverty according to the -- according to the indexes we keep officially is not really the issue. at any of these wage levels, people who depend on them experience a life of poverty. but the reason why it is not the issue is because those dynamics and those wage levels, that level of the minimum wage, large firms of the kind that we have been discussing here, paying those wage levels, are an embedded part of a larger problem which is wage stagnation across the entire labor market, up to roughly the 90th percentile over the period of decades. in that environment, our economy has all sorts of problems. the -- what was referred to in adam posen's introduction to the papers this morning, the fordist fantasy. it is a fantasy when you look at it from the perspective of very
low wage workers whose incomes are so low, even when you talk about millions of people, and the kinds of wage increases we're discussing today don't have a macro economic effect, but long-term wage stagnation across the -- across what amounts to the entire labor market does. and so when we talk about policy solutions, we have to ask ourselves what is the impact on this larger problem? and in addition to asking the question that i think michael put in front of us, what is the most effective way to increase the incomes of the poor. now, here are a couple of basic observations that i will make and then i assume we'll have a group discussion. the first is, the -- the
question of what are minimum wage should be is obviously embedded in the question of the pay increases that have been made and i love the term, voluntary wage increases. or self-acuated wage increases. i will speak to that in a moment. but talk about the minimum wage for a moment. the minimum wage today is roughly 35% of the average hourly wage. at its peak in the late 1960s, it was 53%. if the -- one major problem that is associated with arguments
about the impact of raising the minimum wage on low wage employment is the issue of wage compression. it is what drives the numbers -- the numbers that michael was talking about. whether or not you agree with those numbers and i would suggest that as michael hinted, the bulk of labor market academia is a little more optimistic about raising the minimum wage than cbo is, but the point is it is all driven by compression. and compression is about wage stagnation across -- across the labor market. so that if we're trying to think seriously about how to raise the wages of the poor, we ought to think seriously about how to reverse the shift from what returns on wages to -- from returns on capital to returns on wages that are outlined in the papers you have, more broadly. but if we wanted to return -- if we wanted to return to historical levels of the minimum wage, just looking at -- at the effects of inflation, we would be talking about a minimum wage at around $11 an hour, today, not years from now, but today. the second question, the second point i'll make is this issue of voluntary wage increases. walmart, which is the first firm to have initiated to have announced wage increases for its employees, that got a lot of
attention, walmart is the country's largest private sector employer. walmart has been -- walmart's employees have been engaged in a multiyear effort to get walmart to raise their wages. they have gone on strike. they have picketed walmart. they have engaged in all the things that historically are associated with collective bargaining. but they have done so without an exclusive bargaining relationship with the company. mcdonald's workers, the latest announcement, has done the same thing as have the employees of many other fast food companies. april 15th is the day on which a -- workers of a wide range of employers including particularly mcdonald's intend to go through another round of strikes and protests demanding as michael alluded to $15 an hour in a union. again, they're engaging in collective bargaining, but they're not doing it within the
national labor relations board structures. although in both cases, walmart workers and mcdonald's workers have been pursuing their legal remedies at the national labor relations board particularly when those firms have illegally retaliated against them for exercising their right to collective action by firing them. both of these companies are enmeshed in heavy duty social conflict. what they are doing is -- they're engaging this collective bargaining too. and they're making offers to their employees. the clear subtext of the offers is please be quiet and go away. on april 15th, we'll see what mcdonald's workers think of that offer. fascinating thing about it, which relates to justin's question about shouldn't we be able to run an experiment, is that mcdonald's offered to raise its wages by a dollar an hour
from $7.25, the lowest, up to $8.25. mcdonald's offer has been made only to the 90,000 mcdonald's employees who work directly for mcdonald's corporate. meaning mcdonald's itself owns a bunch of mcdonald's restaurants but it's a small portion of the mcdonald's in the country. most are owned through the franchise system and they have not been guaranteed the wage increase. i suspect we'll see a little bit of that experiment in the weeks to come, at least in mcdonald's. the main thing to understand here is that what is going on at mcdonald's and as at walmart and the other fast food companies is collective bargaining, in the street, meaning instead of sitting down at a table and negotiating, people are yelling at each other through megaphones. workers and the employer uses all the apparatus that are available to a large well
resourced corporation to make its offers. now, if we think that that is a better way to raise wages, and it seems as though there is some consensus in this room that it is, that that is a better way to raise wages than the minimum wage, we ought to first ask -- i think there is not disagreement in this room, maybe there is, michael will have to explain later, i think there is not disagreement in this room we ought to have the minimum wage, and if we ought to have a minimum wage, the question of where it should be set would seem to be higher than where it is now, which is that -- which is at a historic low in relationship to the rest of the labor market. there is a good argument that a minimum wage is not good enough as a way of dealing with the problem of wage stagnation across the labor market, including at -- in relatively low wage work like fast food and walmart where there are powerful arguments if you look at the firms that they ought to be paid
well above the minimum wage. they are not a pretzel stand. but question is how. and if you believe that what is going on right now in the streets, so to speak, collective bargaining by walmart and mcdonald's workers with walmart and mcdonald's management, if you think that's the right way to do it you ought to ask yourself how do you sustain that and broaden it? because the reality is that -- there is no secret about this, the reality is is that those workers are being supported by other workers who are enmeshed -- part of the old collective barring ing system through exclusive representation through paying union dues and the like. and if you want to have -- if you want to have a labor market in which there is, in fact, a robust system of collective bargaining and all issues do not become essentially issues of
public policy, so there is some room for customization and firms, then you have to actually have one. and something we don't talk about very much here, but which ought to be said, is that wage stagnation in the united states is directly correlated with the dismantling of the collective bargaining estimate, particularly in the private sector in a way that is not true in other countries. i would suggest two things. one is to the extent we all agree that wages -- that it is good for low wage workers to enjoy wage increases, and i suspect we all agree that it is good for workers as a whole to enjoy wage increases commensurate with their growing productivity, then the question is not should we have a minimum wage, but where should it be and i'm afraid there is no way to get around it, it needs to be higher than where it is now for it to do its job, a. and, b, we need to think carefully about how in today's economy and today's labor market, today's globalized world, how do we ensure -- how do we ensure that the
interaction that is going on between walmart's workers and mcdonald's workers and management which is leading to their wages being increased after years of stagnation and the fact that walmart really falling compensation, if we think that interaction is a good thing, how do we ensure the workers who engage in it are not doing so at the risk of their jobs, which is the reality of what is going on now, and it is why the national labor relations board brought charges against walmart for firing workers engaging in this process we all like so much. we ought to ask ourselves how do we ensure that process is rootenized in a world of network firms and franchises and precarious work? because really if that's what we say we want, that's what we need to do. thank you. [ applause ] >> could i ask our four panelists to come up? i'm going to make a couple of
remarks to try to pull this together just for those of you tuning in on webcast or on c-span and coming in later, just a reminder that all of today's remarks and the luncheon speech by mark bertellini will be available on the website, transcripts will go up shortly afterwards, and our briefing and various other supplementary materials will be available on the same web page. before i let my happy warriors go at it, let me just make a couple of points. the first is factual on this word voluntary. i normally don't want to get into facts with damon, because he usually gets them right. but in this one, aetna raised wages a month before -- more than a month before walmart and did so with no strike threat. and, again, they were not the only ones, but they were the big
ones starting it this year which is why we bothered to have bartellini come. more importantly, i think i asked all our panelists and outside guests to talk about how this relates to minimum wage. i think it was right to go there. i want to stress what we're talking about in terms of the so-called voluntary low wage sector or voluntary wages for the low wage sector. a large share of people at the minimum wage are people who are young or part time or who have low attachment to work. there are reasons, and i personally am in favor of wage hike there are reasons you may want to do that. i think it is reasonable to think about the millions of people who are one stage up, the classic working class, who are in jobs that maybe are slightly less precarious, we hope, and have the potential to be long-term if not permanent jobs and who are full time workers and who are often heads of household. and the issue is whether or not
there is an economic case to be made as well as a business case as well as a pr case, we're here for the economic case that companies should be investing more in that set of workers. so instead of the golden saks and citigroup investing huge amounts of money, whether it makes sense for private sector to invest in the people at the low skilled end of the distribution. and as i think jacob and justin put implicitly and documented in pretty good detail by our briefings that are out today, this is not a huge share of the workforce, but it is a larger share than the minimum wage workforce and it is not something that every company will do. go back to mcdonald's. we can be upset with a mcdonald's or any other fast food joint because they run on a
very low wage model. and we can ask ourselves whether, you know, that's a sustainable model, whether we want to legislate about that. but the issue is there is a broad rage of companies in this country who input isn't so in low wage labor. and that's what we have tried to identify not specific companies, but sectors, types of firms, where it could be broadly sensible to invest in that because it is not like you're an individual cleaning service or mcdonald's franchise where you move your labor input, away from your profit margin. that's part of the question we have to think about is how realistic is that and we would argue that it is realistic for a large part of companies.
the second point i want to make before turning to our panel is just bringing us back to the international context, which jacob did in part and he has a great essay in our new briefing. it is very important to put the kinds of things that michael cited from the cbo in context. when we talk about the cbo saying there would be x hundred thousand jobs lost. three cautions. first, that's not dynamic scoring. you know, we talk a lot about dynamic scoring on the fiscal side. that's also a straight partial equilibrium result, i know michael knows this. i want to be clear for the audience. it is about what is the immediate impact, not about if there are the kinds of productivity effects that justin was talking about and that plays out in the economy and you reallocate workers, potentially that's not what we're talking about. the second point is, couple hundred thousand people, a lot
of human beings, we should care about that. but the u.s. workforce is 150 plus million human beings and we churn 5 million jobs a month. so when we're talking about an effect that is something below 1 million, whether you're talking about that as the effect of a trade deal or talking about that as the effect of a wage increase, human beings are never rounding, but from a policy point of view, getting caught up in something that is tenths of a percent in total employment is not necessarily the way you want to evaluate a policy like raising the minimum wage. i know michael wasn't saying that, but i have to give context there. the final point in terms of the internationalization, which jacob doesn't have a chance to say, is that we know cross sectionally, cross country, and damon sort of touched on this, he emphasized the collective bargaining, we'll emphasize the outcomes, that there are a vast majority, not just of european countries, including justin's native australia, including some of the asian and richer latin american countries, where the wage gap is much smaller. and they managed to export and they managed to have relatively high labor force participation. jacob has done good work on the fact that labor force participation has gone up in
western europe. even in countries where wages were not horribly compressed including germany. it is not this iron law that if you pay more, you see -- doesn't mean it always pays. but it might. so with that in mind, or more importantly what our panelists had in mind, let me open up to the floor for questions or comments. jessica has a mike up front. please, these two people, first nancy and then to this gentleman. please identify yourself, please. if you make a political statement, pretend it is a question. i'm sorry. >> nancy with the ilo. i want to thank the peterson institute for organizing this briefing and this meeting and for looking at these issues. one of the issues i was hoping to hear from the panelists, maybe a little more, and i missed the very beginning, but
when michael was talking about public policy effects, let me just say, of course, i think eitc is one of the best programs going, but i was hoping that some of the analysis from the economists would look at the remarkable amount of taxpayer subsidy that goes in effect to companies that have low wage workers because of the public services that those low wage workers have to access to live. and i saw just one study about workers in ohio, and it was tens of thousands of workers who were relying on public welfare systems because as full time low wage workers, so imagine how that effect spreads in the united states. i wonder if anyone could speak to that. it is an important public policy issue.
>> anyone on the panel care to speak? >> i can take a quick stab at that. that's basically a political question. and i say it in the sense that it really depends what your baseline is. so you can say, all these guys at walmart, who work at walmart, are on food stamps, if they weren't on food stamps -- if they weren't being paid a low wage, they wouldn't be on food stamps. so we're subsidizing walmart. and walmart's response will to be they weren't working at walmart on a low wage, they wouldn't be working at all. the food stamp subsidy would be bigger so walmart is helping. so it is a question of what the right baseline here is. and, of course, this is just a question i think very much more of political framing than anything else. i think there is an important public policy issue here. the way i describe it is if you believe there are two profitable wage policies, the high road and low road, we as a democratic population might think we prefer firms to take the high road.
we generally -- when firms are doing bad things, polluting the river and the like, the are doing bad things polluting the river and the like the economist's answer is you tax people doing bad things and you get them to do good things. so if you really think there are two profitable alternatives for businesses and the businesses taking the low road are making us worse off there's a strong argument we should either tax those guys for making bad choices or subsidize the other guys for making good choices. >> i think -- there have been a lot of studies of what those costs look like. and the singular fact that walmart, which is at various times the company with the largest capitalization or one of the largest capitalizations on our securities markets is also the company that employs the
most people on medicaid. that sort of thing has been looked at a lot. i think justin's answer really draws out something very important to understand though, about this. it's that if you postulate a country -- a political economy a country in which the choices are unemployment or low-wage work for billionaires subsidized by the public then you make -- then you end up making very bad choices no matter what you do. and let me spell out what i mean. in the economy that we have actually built, the walton family -- i've run these numbers in this way. but the walton family, the six of them, and the koch brothers some other very wealthy people involved in our politics, have a
net worth collectively of $230 billion. that is equal to the net worth of 44% of our population. the subsidies you're talking about have produced that outcome. they're not the only thing that produced it but they have fed that outcome. now, if you want, you can hypothesize that somehow the politics that those numbers drive are going to produce the kinds of results, right? that justin hopes for. which is that we will tax low road employers to make up the difference. that would be a response. history and comparative political economy suggests that if you want a different response the people who work for these companies have to have some voice in our political economy. that's the proposition to which the i.l.o. is dedicated to. we are beginning to see right now, in fact, we're having this
meeting because -- and i mean no on the to the folks at aetna who i recognize are in a different place, different situation but we are having this discussion because low-wage workers in the fast food sector and walmart have braved being fired in order to try to raise the wages of themselves and their co-workers. that's the only way you get out of the trap that justin's analysis hypothesizes. and i think you have to ask a question about public policy measures, be they the minimum wage, the eitc the labor unemployment laws. you have to ask the question are they promoting a high-wage society or a low-wage society? we don't seem to like a low-wage society, but we've consciously built one and we need to make different choice if we want a different one. >> michael did you want to come in? >> yeah. i'll be very brief. i agree with justin that it's a political question. and i think we have to think about it from the broad 30,000-foot level of society and
we have to recognize that different agents in society have different responsibilities. so imagine you have workers firms, and a government. it is in some sense, damon is arguing that we've built this low-wage system but if you're talking about fast food industries, fast food restaurants and low-wage workers, it is simply unrealistic to expect that a firm that is ostensibly trying to maximize profits although perhaps imperfectly will take someone who can bring in $5 or $7 an hour in revenue and pay them two to three times that amount of money. then we'll be lose be five or ten dollars an hour on every hour that person is working and that is just unrealistic to expect a firm to do in a market economy. so then the question becomes who is responsible for making sure that the employees of these organizations have adequate food, adequate shelter adequate health care, and who can meet a baseline level of material standing especially given we
live in a society where we have a lot of billionaires as damon pointed out. and to me that answer is government through all of society. i don't want those workers to be poor, and i don't want those workers to not have enough food and i don't want those workers to have to deal with the cognitive low that justin described. but i want more than mcdonald's and more than walmart to be responsible for making sure that those outcomes happen. i want the koch brothers to be responsible. i want the walton family to be responsible. i want me to be responsible. even though i don't employ any low-wage workers. so the way to do that is to tax people who have a lot of money and to redistribute it to people who are working hard and playing by the rules but who aren't earning what we deem socially as an adequate standard of living. so you seem to want walmart and mcdonald's to bear the entire brunt of that. and that's implicit in the argument that somehow the government is subsidizing walmart and mcdonald's. and i just fundamentally disagree with that framing. >> jacob.
>> very quickly, it if you take the big one which i would argue is the health care issue right? the fact the united states is virtually unique in essence unique among the industrialized world in having this direct employment link typically to health care i mean, the -- if you take other countries where you have essentially a single payer public funded system you could then say well, on the one hand that implies that the subsidy provided by the public sector to the entire corporate world is 100% because no firm needs to take any direct costs for health care. it's just basically taken care of if you like. but of course -- and from the corporate perspective that is i would argue any corporate executive i have spoken to would be a much -- maybe not people that provide this kind of service. but from -- if you're a foreign
direct investor or something like that, would you rather invest in a country where you have to deal with this issue or it's just basically taken care of by the government? i would certainly argue that it is the latter. and therefore i think in an international context at least i think it is probably the wrong framing of this as viewing it as a public subsidy to the corporate sector. rather i think you should take both a normtive position and say look, this is actually one of the social goals that society wants to promote. which is true in pretty much all other industrialized economies. but you should also take an efficiency perspective. it is hard to argue there are efficiency gains to be had in having the broad health care system the united states has when you compare the cost of it with other industrialized countries. >> justin. >> so all of my questions with michael strain and the rest of his cabal of long-haired liberals end with him suggesting
that we should always only take action through the state and absolve anyone of individual responsibility. the alternative is of course to recognize the possibility that sometimes it's just the right thing to do and corporate social responsibility is more than just a buzzword but something we should take seriously and that then suggests that we should think a little bit more about a little bit more than just a marginal product of the worker at mcdonald's relative to their wage and ask a little bit more sometimes. and i think one of the tools i wish damon and his colleagues would use more you that think's been lost would be the shame constraint. we have low-wage workers in precarious work working for billionaires. but billionaires who take their helicopter straight from manhattan to the hamptons and as a result never touch anyone along the way. there was a time when we thought, when we asked a little bit more of chief executive officers and firms. and that shame constraint's no longer there. and i think that's a large part of what we're seeing driving the income distribution now.
and i think the shame constraint to the extent to which we can bring it back is actually a way to push ceos to take the high road. damon's usually thinking about how to force them to do it but sometimes we can entice them to do it instead. >> i'm not sure the afl wants to suggest they've been lackadaisical on the shame front. and i was going to say, i'm feeling kind of like i've been shirking. >> i'm also not sure if wolfers should be talking about hair length. >> let me pick up on something justin said. i know the gentleman here's waiting and a gentleman at the back, but this is a very important discussion. let me pick up on something justin said and take it in a slightly different direction. there's the issue of do we do things just through the state or not. and there is a very coherent political economy moral argument of the sort that michael's making. i think, though, i want to make a practical argument which i think will be echoed to some degree by mark later.
for many people in capitalist societies work is an important part of their life. and how you're treated at work and in your workday is an important part of your life. and i don't think any of us are going to deny this. so the idea we target things, be it the eitc and minimum wage, both of which i'm happy to support. let me be clear. but those are about achieving post-work income outcomes. and they're about making sure that there is a floor both of which are virtuous. but there's something to be said for making in-work outcomes better for the vast majority of people. and that that's a distink part of life and a goal worth pursuing and that may not be legislatable. there may be collective business action inspired by the peterson institute for international economics and the example of aetna or perhaps pressured through changes in the world. but