tv Inside Story Al Jazeera December 3, 2013 5:00pm-5:31pm EST
you. >> this is al jazeera america live from new york, new york. i'm tony harris with a look at today's top stories. detroit has become the largest u.s. city to ever enter bankcy. the city's $18 billion debt could include cutting pensions. results of drug and alcohol tests on the train operator of the train that went offel rails came in negative.
>> an american contractor has been held in a cuban prison for four years. he was setting up internet on the island and the government felt it was to undermine the government. 85-year-old merrill newman has been detained in north korea since october. those are your headlines stori stories. >> what difference will two or three additional dollars per hour make in the life of low-wage americans and their times and the economy as a whole? the debate surrounding raising the minimum wage is the inside story.
>> hello, i'm ray suarez. the wheels of the american economy turned with the labor of low wage workers across this country. the dishwashers, retail sales people and healthcare providers who toil at the federal minimum wage haven't seen a pay raise in four years and efforts in congress to find one have stagnated. cities, states, and counties are taking it on themselves to bring their workers to income levels closer to the fiscal realities of these tough times. and it's no easy task. as much debate surrounds the effectiveness of image wage hikes and who really benefits. do these wage controls cost jobs? we'll discuss the issue on this addition of "inside story."
but first this background. >> they deserve to live a good life in one of the richest cities in the world. >> reporter: close to 100 people rallied outside washington, d.c. city council chamber as council members inside voted to raise the city's minimum wage to $11.50 an hour. >> congress' failure to act, and congress' failure to take care of those left behind not just from the recession, but as the people who make the most have done better and better, we've become a city of haves and have nots, and a country of haves and have nots. step up and make sure that people have a living wage. >> reporter: with little hope congress will raise the minimum wage twage. in september california governor jerry brown approved a gradual rise in the state's minimum wage to $10 by 2016. last month the town of seatac in
washington state raised to raise the local minimum wage to $15 an hour. the highest in the country. >> people finally will make ends meet without having to work two or three jobs with decent pay and decent benefits. this is great for the workers and the community here. >> reporter: in d.c. city council every member greed the old minimum of $8.25 an hour was too low. the question was how high to go? to $10 or $11.50? for minimum wage worker means weaning her family off food stamps. >> i did apply for public assistance for my son and i to get food stamps because that have issue, because he's still using formula. price wise things have just shot up. gas up.
house something up in this area. but our wages aren't up. >> reporter: every morning 29-year-old yiya wakes up at 6:00 a.m. to get her son ready for the day before she goes to work. she is a food service work in a federal building in washington, d.c. >> we work down in the basement, around in the back to prepare everything for the restaurant to open which is totally different from the shiny wow piece of the government that they're seeing. that's how we feel. we're at the bottom. we're at the apartment where the don't see us. >> reporter: they live at niya's parent's house with her four brothers and sisters. >> to be on a more even playing field helps everyone. helps everyone to buy more, helps the economy. >> reporter: the d.c. chamber of commerce is against raising the
minimum wage. >> for every percent of raising the minimum wage lowers employment that percentage. for a business person it's a big deal. it may mean laying off a person who can't forward to pay that. that's not what you want team te to do. >> but some small business owners welcome the change. >> there are many cities that have a much higher minimum wage than we do, and tourism has not suffered. pickerly tourists, they're not going to care if their burgers are a dollar or more. i don't think it's going to matter the huge basket 37 he has adopted d.c. as his home 47 years ago. he said the raise in the minimum wage is not only good for the
business but the community. >> a lot of people will be able to increase their price points by $0.25 to $0.50, and i think consumers will do that as well if it means people will have a living wage. >> reporter: down the road, the national battle over minimum wage has largely stalled. president obama promised to raise the minimum wage. >> no one who works full time should have to live in poverty and raise the federal minimum wage to $9 an hour. we should be able to get that done. >> reporter: congressional republicans have generally been against the move. in reaction to obama's pledge house speaker john boehner said when you raise the price of employment guess what happens, you get less of it. why would we want to make is harder for small employerers to hire people. tuesday's vote was an unanimous
13-0. as for all d.c. laws it will need to be approved by congress. if that happens, d.c.'s minimum wage will gradually become $4 more than the federal level. niya hopes that extra money in her paycheck will bring a better life to herself and her son. >> joining us now, heidi, an economist with the economic policy institute where she focuses on the low-wage labor market. and from los angeles, writer and senior fell low at the campaign for america's future, and mark wilson, he served as deputy assistant secretary for employment standards administration at the u.s. department of labor for president george w. bush. he now heads applied economic strategy. so heidi, we saw niya pots. if that d.c. minimum wage raise
was to go through. she's looking at an extra $26 per shift. where does that money come from? >> that money will come--aside from just coming from the employer? what we know is that what the evidence shows is it's not going to come from her coworkers getting laid off. the evidence--this is one of the most researched things in labor economics on what is the impact of minimum wage increases and what the weight of that evidence shows is that we're not going to see a big layoff of her coworkers. her pay is not going to be coming from coworkers who lost their jobs. one of the places that her pa additional pay is going to be coming from is that there is going to be reduced turnover that her employers will have to face. increased in minimum wage lead to reduced turnover of workers.
that saves companies. because hiring and fire something very expensive. reathey'll recoop some of that t from hiring and firing. there is likely to be some shift from corporate profits to minimum wage works when the minimum wage goes up. there is a favorite of ways that employers can recoop the costs of an increased minimum wage. but what we know is that the evidence shows it's not going to come from her colleagues being laid off. >> $130 a week. back of the envelope calculation, in the case of someone like niya potts. that can't be made up by just increases in stability of employment and people not getting--leaving and having to be retrained. >> so i am dead serious when i say this is--the effects of minimum wage increases the
employment. a part of it because the data is there. labor economists are excited because you have states raising minimum wage at different times at different levels so you can dig in and find out what the effects were. what we know the increases in the minimum wage that we have seen have not caused job loss. that's the evidence we have. so applyin applying that evideno what d.c. just did, our best guess is that her increased pay is not going to come at the expense of laid off colleagues. >> mark wilson, $8.25 to $11.50 is more than 30%. how would you answer that question? where is that money going to come from? >> as your opening clip pointed out it's not free. someone will have to pay for it. the restaurant owner in d.c. suggested it would be a $1 more increase in price for hamburgers. consumers will pay for it.
fewer hours perhaps, employers will be careful about watching employee hours. and if the business is slow they're likely to let them go an hour or two early. applesbee's announced they're going to deploy 100,000 ipads and tablets so their customers could order their food and pay their bills. why are they doing that? they probably won't need as main waiters and waitresses in the future. it's not that people will be laid off. i agree with heidi in that point but there will likely be fewer job opportunities in the future. we're pumping our own gas. when i started as a minimum wageworker in 1970s i was pumping gas, and most people now a days pump their own. that's another example of job opportunities lost when minimum wage rises.
>> job opportunities or jobs that were going the way of the gas pumpers. >> both. applesbee's is a good example of an employer using technology to increase productivity. weither workers are working harder for the same output or fewer amount of hours are being worked for the same amount of output. >> richard, could you make a case that people paying a quarter or a buck extra because it helps the niya potts of the world? >> is absolutely does. i think one of the things that the records show and the studies show is that increased minimum wage, in particularly at times like this when there has been so much wage stagnation, and so much pent up demand will lead to increased consumer confidence, increased consumer spending and
that in turn translates to additional jobs as more successful economy for everyone. by the way, we can look back in history and see in 1968, for example, the minimum wage in real dollar terms or in fixed dollars terms would be $9.44 now. and the unemployment is less than half of what it is today. the notion that minimum wage destroys jobs is disproved. and when you think about it, the common sense that says people at the lower end of the income spectrum are going to spend the money that they make, that will create jobs and will be good for everyone. >> low wage workers as customers. that's where i want to come back. we'll take a short break with our guests and we'll be back. this is inside story.
and mark, former deputy assistance sector employment standards at the u.s. department of labor in the bush administration. mark, is there a balance to be struck here? are there jobs that are, well, vulnerable in this economy any way? perhaps helping 90% of low-wage workers while disadvantaging some works out in the macro-economy even while it's hurting in the near term some of those very low-wage workers we're trying to help. >> yes, there will be workers that will be helped by the increase in minimum wage, that is a certainty. they'll spend almost likely all of the money they get in that wage increase. how difficult it is to ascertain whether the macro-economy will be helped substantially or not because there will be so many things swirling around. potentially increasing interest rates. things that may happen. tax increases, spending increases at the federal level.
so many possibility it is difficult to disentangle-- >> is it really had a hard if millions of people have more money to spend we don't know what the effect will be? >> sure' we're talking about 300 million people and 15 million would be independentinbenefitingfrom the. so in the context it will b be a small number. >> we are it will be a shot in the arm to the macro-economy, but it won't be huge. it would shift $35 billion to minimum wage workers. so the economy is 15 trillion-dollar. so it will generate jobs when those people will spend that money. but it's not a jobs program. it's a wage program.
that increase, that economic activity, those people will spend that money. it will increase the amount for foods and services. who produces the goods and services? more workers, more workers will bwillneed to be hired. >> and richard, help me out here. will you be less reluctant to add another worker or two on a shift if your marginal costs per hour have gone up 10% to 25%? >> well, you have to put that question in context. first of all most of our low wage jobs are in the retail and service industries. a study was done on impact of raging minimum wage to $12.25. in the real retail industry that would amount to 1 hers of annual sales. 6% of payroll. so we're not talking about a dramatic shift, number one. number two, would you hire them?
i think the answer is if you want to stay in business and want to stay competitive, yes, you will. no question about it. we're looking at--the reason why i mentioned the job creation aspect of this earlier not to suggest that it was a transformative jobs program but to merely point out that the net effect would be positive. identifiy says 75,000. i've seen 100,000. it's relatively small but the net effect would be positive, not negative. you would be lifting three-quarters of a million people off the assistance roles for government assistance. you'll be providing all sorts of additional services to these people and you would be doing what is fair and just. i think that's what we need to concentrate on here. >> earlier in the program mark referred to the minimum wage as a blunt instrument. there are places in los angeles, where i'm sitting in washington, d.c. that persistent
demand is high enough that you won't see any difference in the clientele or bills in the restaurant. but go a couple of miles away where demand might be slack more, episodic, and suddenly jobs may be in trouble the way they weren't, or pushed to the margins to match their hourly productivity with their wage so much closely, and less of a clearcut slam dunk for an interand worker, no? >> no, you have to look first of all again who these minimum wage workers are. 66%, two-thirds of low wage workers work for companies with 100 employees orego or more. we're not talking about mom and pop operations by and large in those kinds of neighborhood. we're talking about the taco bells, mcdonald's, walmart with 1.4 million employees. we're talking about companies that can make that calculation and make that adjustment. many of whom have seen record
profits even since 2008, and they're in an excellent position to make these adjustments. there would be very little kind of a problem that you describe, and the advantage, the economic benefits of that are likely to accrue most to the kinds of neighborhoods you just described. >> more with our guests in a moment. stay with us. you're watching "inside story" "
companies we've seen that many of their intake procedures involve advising their own workers on how to take advantage of federal and state benefits for low-wage people. as a taxpayer and a customer, am i better off paying my tax money to give those people benefits like snap, or am i better off paying a little extra so they're not poor any more. >> you're probably better off paying a little extra so they're not poor any more. if you look at the dead weight loss as economists look at it with the transfer of your money through the federal government and then back through the social service programs that a lot of minimum wage workers are available for, there is loss added to that through the transaction. you're probably better off paying a little bit more. but again that's the cost. the minimum wage, increase in minimum wage is a political argument. it's never been an economic argument. people should be aware that
there is a cost associated with it and if people are willing to pay that cost as people in seatac were willing and you'll see an increase. >> seatac was an unusual market because all of the employees involved in that minimum wage increase work at an airport. it's not like i'll go buy my lunch somewhere else, you're stuck there. but will we have better laboratories to sob the effect of the better minimum wage. >> meaning? >> if we'll see the effect the raise in minimum wage will have and gauge it soon? >> yes, we look at it in terms of the aftermath. what is happening to employment, hours, price increases.
when these cities, states, counties and the federal government, when they make thee moves people are looking to see what the affect affects are. that's the thing to fall back on. we have so much information on what the affects have been. been. i don't have any reason to believe that the effects that that we're seeing now will be anti-different. it has increased wages but not job loss. >> let's talk about those workers who make more than minimum wage. so much of this focuses on people at the very minimum. if you're already making $10 an hour. if they raise it to $10, are you going in to the boss to ask for a raise so that you're no longer a minimum wage worker? is there going to be a bump up for people who are close to the minimum wage? >> well, common sense would say that there would be because at
that point you've got a worker with some seniority making an entry level wage. while that may not change overnight presumably the worker who has six months or a year on the job who is making $10 or $9.50 will be expected and will be expecting to make more than that. so yes, there is absolutely, and i think heidi can confirm this but the studies are pretty clear there is a benefit not only for workers at or below the minimum wage but those near and above it as well. i think you start to see a lot of households benefiting from that in addition to those directly effected by the minimum wage. >> potentially larger still. do we know how much? >> 10 to 15%, some estimates as much as 20% above the minimum wage. somewhere between $10 and $12 an
hour employers will adjust the wages for folks, boost those wages to maintain the wage structures. if you index the minimum wage for inflation you're likely to get a price increase followed by a wage increase followed by a price increase followed by a wage increase. that's a vicious cycle. >> the program may be over but the conversation continues. we want to hear what you think about the issues on this or any day's show. you can log in to our facebook page. send us your thoughts on twitter. our handle is @aj inside story am or reach me directly @ray suarez news. in washington, i'm ray suarez.