South By North Strategies, Ltd.

Fixing the Minimum Wage

In a new briefing paper, economist Heidi Shierholz of the Economic Policy Institute summarizes the existing research about the federal minimum wage and calls for setting the wage equal to half of the previous year’s average wage of production and nonsupervisory workers.

Shierholz argues that such a step would restore the value of the minimum wage, prevent the value of the wage from eroding over time, ensure that workers benefit from productivity gains, offset various types of wage and income inequality, and bring the United States in line with practices in other advanced economies. Additionally, shows Shierholz, this practice would be consistent with those used in other social insurance programs like Social Security, Workers’ Compensation, and Unemployment Insurance and would produce more benefits than costs.

Specifically, the briefing paper calls for the following:

The FLSA should be amended so that on April 1, 2012, the minimum wage is set at 50% of the previous year’s average wage of production and nonsupervisory workers. This formula would likely result in a minimum wage of around $9.80 in 2012 (or around $9.00 in 2009 dollars).
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On each April 1 thereafter, the minimum wage should be adjusted by the percent change in the average wage during the preceding year, in other words, indexed to the average wage.
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Making the policy change effective in 2012 allows for intermediate steps to increase the wage in 2010 and 2011 as a phase-in period. These near-term wage increases will provide crucial economic stimulus at a time when the economy will likely be in the middle of a rocky recovery.

Around the Dial – Dec. 22

Economic policy reports, blog postings, and media stories of interest:

• The Financial Times documents the US’ lower-than-expected growth rate.
• The Washington Post reports on the health of state unemployment funds.
• The New York Times compares countries based on “the misery index.”
• Paul Krugman asks if the legislative process is broken.
• CEPR estimates potential revenues from financial transaction taxes.

NC’S Metro Economies

The newest version of the Brookings Institution’s Metro Monitor suggests that a fragile economic recovery is underway in most the nation’s 100 largest metro areas.

The Metro Monitor tracks three of North Carolina’s metro areas: Charlotte; Greensboro-High Point; and Raleigh-Cary. By most measures, the economy of the Raleigh-Cary has outperformed those in Charlotte and Greensboro. Since early 2008, Raleigh’s gross metropolitan product has declined by just 0.4 percent compared to a 7 percent decline in Charlotte and a 7.3 percent drop in Greensboro. In the same vein, the Raleigh area has recorded fewer job losses and a smaller change in its unemployment rate compared to the other two.

Click here to view detailed profiles for all 100 major metro areas.

Around the Dial – Dec. 21

Economic policy reports, blog postings, and media stories of interest:

• The Charlotte Business Journal looks at the challenges facing Bank of America.
• Politico explores the Senate’s compromise on the health reform bill.
• The New York Times documents hiring trends for temp workers.
• The Economist wonders if voter initiatives are running wild in the US.

November Producer Prices

The seasonally-adjusted prices received by producers of finished goods rose by 1.8 percent in November, according to data recently released by the U.S. Bureau of Labor Statistics. That same month, the prices received by sellers of intermediate goods rose by 1.4 percent, and the prices received by sellers of crude goods advanced by 5.7 percent.

At each stage of the production process, price increases were attributable to rises in food and energy prices, primarily energy prices. When energy and food prices are excluded, producer prices for finished goods actually rose by 0.5 percent in November. Absent energy and food costs, producer prices rose slightly for intermediate goods and fell slightly for crude ones.

Over the past year, producer prices have risen. Unadjusted prices for finished goods have grown by 2.4 percent, and producer prices for intermediate and crude goods have risen by 1.4 percent and 5.7 percent, respectively.

The new data offer two insights into the state of the American economy. First, the findings suggest that demand for good and services remains weak, though not quite as weak as in recent months.  Second, the report indicates that inflation is not currently a threat to the larger economy.