Speaking of the Farm Bill

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I mention the Farm Bill briefly in today’s article, so, I guess this is a good opportunity to bring up this NY Times Magazine article:

Compared with a bunch of carrots, a package of Twinkies, to take one iconic processed foodlike substance as an example, is a highly complicated, high-tech piece of manufacture, involving no fewer than 39 ingredients, many themselves elaborately manufactured, as well as the packaging and a hefty marketing budget. So how can the supermarket possibly sell a pair of these synthetic cream-filled pseudocakes for less than a bunch of roots?

For the answer, you need look no farther than the farm bill. This resolutely unglamorous and head-hurtingly complicated piece of legislation, which comes around roughly every five years and is about to do so again, sets the rules for the American food system — indeed, to a considerable extent, for the world’s food system.

An interesting look at the way we get our food, why we pay what we do at the checkout aisle, and why those in poverty face obesity:

For the last several decades — indeed, for about as long as the American waistline has been ballooning — U.S. agricultural policy has been designed in such a way as to promote the overproduction of these five commodities, especially corn and soy.

That’s because the current farm bill helps commodity farmers by cutting them a check based on how many bushels they can grow, rather than, say, by supporting prices and limiting production, as farm bills once did. The result? A food system awash in added sugars (derived from corn) and added fats (derived mainly from soy), as well as dirt-cheap meat and milk (derived from both).

The way low-income households deal with food scarcity is something I’ve blogged about in the past. It’s simply cheaper for low-income families to eat less nutritious foods. When you’re worried about paying the rent/mortgage, or whether you’ll be able to put gas in the car this week, or if you’ll have enough money to pay for prescriptions, making healthy choices in the supermarkets becomes a secondary concern.

It’s nice, however, to see the NY Times pick it up. If you want more information on poverty in America, I’d recommend this special report by The American Prospect. From the introduction:

In assigning and editing these articles, we were struck by a paradox. There is now growing ideological convergence on what it takes to end poverty. Liberals and conservatives agree that ending poverty is about both personal behaviors and rewards to work; about both values and economics. Ending poverty requires opportunities for wealth creation as well as income support, empowerment as well as transfer payments. It requires all children to be school-ready, which takes both stronger families and more effective public programs.

Yet mocking this hopeful consensus there is a disabling one. Too many elected officials, both liberal and conservative, believe that we know what to do, but just can’t afford it — whether because of budget deficits, or entitlement overloads, or national security demands. There is no shortage of good pilot programs, but time and again we hear that there is no money to take them to scale.

We disagree. This nation, on average, is twice as rich as in the 1960s. If America is to compete in a global economy, and honor its ideals, we can’t afford to waste a single American. There is no good excuse for failing to end poverty in our lifetime.

What inequality?

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I didn’t have a chance to mention it last week, but a new report was released showing an ever widening gap between the super, super-rich and the rest of us:

2005 shows a very large increase in income concentration: the top 1% gains 14% in real terms from 2004 while the bottom 99% gains less than 1% (when including capital gains). The [previous] record peak of 2000 is surpassed even though 2005 is less of a high capital gains, high stock option year than 2000. By 2005, it looks like top incomes are showing strongly along all components: wages, business income, dividends, and capital gains.

Did you see a 14 percent gain during 2005?

That awesome economy of ours

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Among the information contained in the latest Census report on poverty
(New Mexico is second-to-last in the nation for the percentage of people without health care!) is the news that the number of “severaly poor” Americans grew at an alarming rate between 2000 and 2005. According to McClatchy (hat tip to TAPPED):

The McClatchy analysis found that the number of severely poor Americans grew by 26 percent from 2000 to 2005. That’s 56 percent faster than the overall poverty population grew in the same period. McClatchy’s review also found statistically significant increases in the percentage of the population in severe poverty in 65 of 215 large U.S. counties, and similar increases in 28 states. The review also suggested that the rise in severely poor residents isn’t confined to large urban counties but extends to suburban and rural areas.

The plight of the severely poor is a distressing sidebar to an unusual economic expansion. Worker productivity has increased dramatically since the brief recession of 2001, but wages and job growth have lagged behind. At the same time, the share of national income going to corporate profits has dwarfed the amount going to wages and salaries. That helps explain why the median household income of working-age families, adjusted for inflation, has fallen for five straight years.

These and other factors have helped push 43 percent of the nation’s 37 million poor people into deep poverty – the highest rate since at least 1975.

I just checked, and, sure enough, Ezra has a post online about the latest news:

[W]e’re not just seeing an increase in poverty, we’re seeing an increase in severe poverty, to the highest rate since 1975. And this is all coming at the tail end of a fairly robust — at least if you believe the macroeconomic numbers — expansionary period.

Indeed, this has been the first expansion in which poverty has increased in every successive year (I haven’t seen the data for 2006 yet). That’s a fairly remarkable trend, and a real break with how our economy traditionally worked. Periods of growth used to aid every element of society, but we’ve become so unequal that even multiyear expansions will peter out before they reach the bottom segments of society. Meanwhile, the Luxembourg Income Study found that America has the highest child poverty rate of any of the 31 developed nations studied. As the wise Ms. Goodrich says, “that is one international competition the U.S. probably doesn’t want to win.” If only we weren’t so damn competitive.

Will an increased minimum wage impact business negatively?

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The short answer: probably, but not by much.

Sen. Ben Altamirano (D-Silver City) introduced a minimum wage bill again this year (the Senate approved it on Friday), so the naysayers are out in force. We’re always treated with scare stories of businesses laying off workers and other myths:

A small point of order, entry-level jobs will be the only recipients of this wage hike. That means, fewer opportunities for advancement, and as obvious of a concept as it seems, the sad reality is that another generation of New Mexicans will be forced to look for advanced jobs outside of New Mexico. New Mexico already has an abundance of entry-level jobs.

Now, before we get started with some specifics, let’s see what the Legislative Finance Council said in it’s fiscal analysis (PDF) of SB 324:

Increasing the minimum wage is not without cost to business. The estimate of those costs are controversial and often rely on anecdotes rather than statistics. However, most studies have shown relatively minor impacts to business. EPI estimates that, not surprisingly, the leisure and hospitality industry will be most impacted but the estimated impact is an increase of one percent.

For all workers, the increase is 0.2 percent as a share of sales. A report by the Employment Policies Institute, a non profit in Washington DC that receives funding from the food and restaurant industry reports that there is a negative employment impact particularly among minorities.
(emphasis mine)

So, though businesses will be impacted negatively (more on that in a bit), who will benefit? Nationally, here are the numbers:

Analysis of the 2005 Current Population Survey reveals that the workers potentially affected by a minimum wage increase are mainly adults who typically work full time and provide significant income to their families. If the federal minimum wage were increased to $7.25 per hour by 2008, 14.9 million workers would see their wages rise. The vast majority (80%) of workers affected are adults age 20 and above. Twenty-six percent of these workers are parents, and as a result over 7.3 million children of low-wage workers would see their parents’ income increase if the federal minimum wage was increased to $7.25 per hour by 2008.

Furthermore, the earnings of minimum wage workers are essential to their families’ total income. While not all minimum wage workers are poor or are the sole breadwinner for their families, it is striking how important low-wage workers’ income is to their economic well-being. On average, families with affected workers rely on those workers for over half (59%) of the families’ total earnings. Nearly half (46%) of all families with an affected worker rely solely on the earnings of those workers.

So, only 20 percent of those affected are teenagers, while minimum-wage workers account for more than half of their families’ income. Seems like a group that could use some help. But what about the claims of upward mobility, that workers will be stuck in entry-level jobs? Well, according to a labor market analysis (PDF) completed by the Center for Economic and Policy Research:

Finally, policy also plays a role. Workers who live in states that have enacted a state minimum wage higher than the federal minimum wage have a lower probability of staying in a low-wage job.

Back to the business impact — what does economist Kash Mansori deduce when he looks at the facts:

But what this data does suggest is that any effect of raising the minimum wage on employment levels is almost certainly tiny, and generally swamped by other factors in the economy that influence employment much more strongly. The burden of proof is on those who think that higher minimum wages do indeed cause employment to fall, and as hinted at by the charts and tables presented here, it’s surprisingly tough to come by such evidence.

Indeed, actual evidence that a high minimum wage impacts jobs is hard to find. It’s rather easy, however, to find data to suggest the opposite. For example, Hawaii has a high minimum wage and the lowest unemployment in the country. Florida’s wage is indexed to inflation — the Golden State is ranked No. 9 for the percentage of workers employed. Mississippi, on the other hand, has no minimum wage, and the highest unemployment.

And speaking of Florida:

Before last year’s elections, a political action committee backed by the likes of Publix Super Markets and Outback Steakhouse had some hair-raising predictions about the effect of bumping up the minimum wage.

Thousands of jobs would be lost if voters increased the state’s rock-bottom wage to $6.15 from $5.15, said one e-mail sent out by the Coalition to Save Florida Jobs.

Jobs would be outsourced overseas, the e-mail said. Even companies that paid above the minimum wage would be forced to raise pay for everyone, said retailers and restaurants that opposed the amendment.

Today, though, it’s hard to find much wreckage in the Florida retailing and restaurant industries, the two groups that bankrolled the Coalition to Save Florida Jobs.

Aside from all that, why bother raising the minimum wage? It’s an economic question, right, so why don’t we let the market figure it out? Well, the Federal Reserve is always willing to help the market out when wages become a problem:

Wages have risen so swiftly that some economists worry that they could push inflation up on their own, by forcing companies to raise prices. Last week, the Federal Reserve chairman, Ben S. Bernanke, warned that the central bank might have to raise interest rates again. “One factor that we are watching carefully is labor costs,” he said.

So, we know companies are being looked after. But, again, why raise the minimum wage? Well, perhaps we don’t want it lagging too far behind the federal poverty level:

Every day that Congress fails to enact a higher minimum wage, workers lose purchasing power. However, if the minimum wage bill currently under debate in the Senate (HR 2) were immediately passed, this gap would be significantly reduced. In 2009, this bill would raise full-time minimum wage workers above the poverty line for a family of two for the first time in over a decade. While this modest bill would still place minimum wage workers 18% below the poverty line for a family of three, it would provide much needed relief to low-wage workers and their families.

For the first time in a decade? You’ve got to be kidding me! Why is this even a debate?

Scare stories aside, we’ve seen time and time again, in states and municipalities, that an increased minimum wage helps those who need help the most, and doesn’t necessarily impact business negatively. It’s time to stop the chicken little act.