Inequality and the Pandemic, Part IV: Possibilities

by John Quiggin on October 6, 2020

Another in my series of extracts from my book-in-progress, Economic Consequences of the Pandemic. So far I’ve looked at luck the limited relationship between returns and social value and the fact that risk-taking is mostly done (involuntarily) by the poor, not the rich. Now I’m going to consider possibilities for reform

The biggest lesson of the pandemic, and indeed of the decade since the Global Financial Crisis is that (just about) anything is possible. The decades in which the ‘Washington Consensus’ held sway narrowed the range of thinkable policy options to the marginal differences between hard (think Newt Gingrich and Margaret Thatcher) and soft (Bill Clinton and Tony Blair) versions of neoliberalism.

Economic policies that had prevailed during the decades of widely shared prosperity in the decades after 1945 were simply ruled out as the kind of thing governments don’t do any more. This was particularly true in relation to income distribution.

Let’s start with the minimum wage. When the Federal minimum wage of $0.25 cents an hour was introduced in 1938, national income [more precisely, Gross Domestic Product] per person was $674 per year. Over the next thirty years, the minimum wage grew roughly in line with GDP, reaching its maximum purchasing in 1968. Since then, the minimum wage has failed to keep pace with inflation, let alone income per person, which reached $65000 in 2019. If the minimum wage had risen at the same rate, it would now be just under $25/hour. In fact, the Federal minimum wage is $7.25/hour. Many states have higher rates, but the average is still only $11/hour.

The same calculation can be done in terms of labor productivity. If the minimum wage had kept up with labor’s productivity growth since 1958, it would have reached $19.33 in 2017, https://www.businessinsider.com.au/how-much-higher-the-federal-minimum-wage-should-be-2017-12?r=US&IR=T

So far has this history receded from memory that, when Swiss voters recently decided to increase the minimum wage to $25/hour, this was treated as the kind of aberration that could only occur in Europe. Yet Switzerland has slightly higher GDP per person than the US. When the minimum wage is compared to average income per person, Switzerland’s policy is identical to that which prevailed under US Presidents from FDR to LBJ.

Minimum wages set a floor, but for most workers, what matters is the bargain they can strike with their employers. In the mid-20th century, labour’s side of this bargaining process was mostly undertaken by unions – even non-union workers benefitted from this process. Unions have vanished from most of the US private sector today, a development paralleled to a greater or lesser extent in much of the developed world.

In the neoliberal framing of the issue, the decline in unionism is the inevitable consequence of a modern flexible economy. In reality, the primary cause of declining union density is the passage of anti-union laws, beginning with the Taft-Hartley Act in 1948 (outside the US, the process began later and is less complete, but the sequence of events is generally the same). As the International Monetary Fund (long a guardian of economic orthodoxy) has observed, the weakening of unions may be responsible for as much as half the decline in the labor share of national income.

Similar points may be made about income tax rates. Work by economists such as Diamond and Saez suggests that income tax revenue would be maximized with a top marginal rate of 70 per cent. And, on almost any plausible assumptions about the relative value of additional income to the rich and the poor, the socially optimal marginal rate would be only marginally above this.

It’s true that there were plenty of loopholes (though perhaps fewer than today). Still it seems clear that a good many high income earners faced an effective marginal tax rate equal to or greater than the 70 per cent rate recommended by economists like Diamond and Saez. They may have reduced their work effort as a result, but any impact on the economy as a whole

High minimum wages, strong unions and progressive taxes worked well in the past. But in considering the possibilities for a post-pandemic world, we need not think in terms of turning back the clock, even if doing so would be an improvement on the disasters wrought by decades of neoliberalism. Rather, we can imagine new paths that combine the best of the past with innovations made possible by the advance of technology.

Some of these new possibilities, such as Universal Basic Income and guaranteed free access to college, have already been raised, notably in the context of the Democratic Party primary campaign. Others, such as the need to redress growing inequality between potentially home based information workers and in person service providers, are emerging from the pandemic. Much remains to be worked out but one thing is certain: a return to the pre-pandemic economy, neither possible nor desirable.

(links to come when I get some more time).

{ 43 comments }

1

J-D 10.06.20 at 7:47 am

They may have reduced their work effort as a result, but any impact on the economy as a whole

but without any impact?

2

Thomas Locatell 10.06.20 at 8:08 am

Reparations are in order for a whole class of workers who were knowingly sold down the river by the usual suspects. To have lived and worked through the time frame indicated by most observers of the neo-liberal takeover, the last forty years, I, for one, could use a little of that whole-making magic that is so readily available to those who scatter the crumbs.

3

John mcgowan 10.06.20 at 8:11 am

Been reading these posts with interest. Something missing at bottom of third to last paragraph.

4

Tim Worstall 10.06.20 at 9:04 am

“If the minimum wage had kept up with labor’s productivity growth since 1958, it would have reached $19.33 in 2017,”

Well, yes, that’s based upon the EPI’s calculation. Which is a direct copy of the one Krugman critiques Michael Lind for using here:

https://web.mit.edu/krugman/www/ricardo.htm

It really is a direct copy, almost as if the EPI took that warning as their design.

As to the decline in the labour share I’m dubious. Sure, it has happened. But the implication here – and often elsewhere – is that there is also an increase in the capital share in order to balance it. Clearly, for must sum to 100%.

However, a look at the UK showed the situation to be a little different:

https://uneconomical.wordpress.com/2012/09/12/uk-gdp-by-income-revisited/

Of the four components of national income the capital share seemed to be (leaving out that 1970s collapse which couldn’t be sustained, not covering depreciation as it didn’t) around the long term level. It was mixed income plus production subsidies and consumption taxes which rose. The general introduction of VAT (yes, something that didn;t happen in the US but sales taxes have risen) would have something to do with that last.

That is, the labour share has fallen even as the capital share hasn’t risen.

Dividing into the two shares, capital plus labour, is I believe done by applying fixed allocations of portions of those other two components in many places. But a change in those other two is exactly what won’t be shown by a fixed ratio of allocation to capital and labour.

5

Tm 10.06.20 at 1:52 pm

Regretfully, John, you have been misinformed about Switzerland. Switzerland does not have a federal minimum wage, indeed it was soundly rejected by Swiss voters, in line with the old “Sozialpartnerschaft” concept that expects unions and employers to collectively negotiate wages and other aspects of working conditions without much government intervention. For the same reason, Germany did not have a minimum wage until 2015. The expansion in recent years of a low wage sector with little union penetration and the possibility of companies operating in other EU countries of posting workers abroad while not observing the local wages and union contracts increased the pressure on the coalition government to put stronger regulation in place.

Back to Switzerland, the economically seemingly abnormal case of a high wage high price island in the middle of the European common market, with free movement of labor with the EU (*). To counter concerns about wage dumping, the unions proposed a federal minimum wage of 22 Francs, about 4000 Francs per month and in line with the current wage structure, e. g. most retail businesses already pay minimum wages on that order. These wages are high in international comparison (how much does Walmart pay again?), but not as high as you think, when adjusted for purchasing power (the Swiss Franc is ridiculously overvalued; interestingly, the Swiss exporting industry is very successful despite the overvalued Franc and the very high labor cost.)

The referendum was held in 2014. Only 24% of voters were in favor, which is less than the yes share in the parliamentary vote, which had been 30%. Why? I think the reasons for this failure are relevant for the “possibilities” questions raised in this post. I propose four reasons that I believe apply similarly in other affluent countries.

(1) Poor and low income people are disproportionately immigrants, so they can’t vote and citizens don’t empathize too much with their plight.
(2) The majority of middle class voters not only wouldn’t personally benefit from minimum wages at the low end, they might even reason that they personally would have to pay higher prices.
(3) Voters are conservative and cautious to support social or economic “experiments”, whether left or right wing. A minimum wage doesn’t seem such a radical idea but as explained, it is alien to the Sozialpartnerschaft tradition that seems to have worked well for decades. (**)
(4) Last not least, voters have internalized neoliberal ideology. They really do believe that too much government intervention in the economy is bad and threatens their national and personal prosperity.

We like to think that people tend to be more economically progressive than the representatives and governments they elect, beholden to lobby interests and neoliberal ideology as they are. Many of us (especially in the US) imagine that rightwing voters are “tricked” into supporting economically rightwing politicians with culture war methods, that these voters do not really support the economic policies that they vote for. Referenda in countries like Switzerland but also in US states, where voters quite often get to directly express their political preferences independent of party politics, routinely refute this wishful thinking. It surprises me how little attention there is among progressive political circles (outside of Switzerland) to the outcome of these votes.

To be sure, there are examples of referenda with progressive outcomes. In the Swiss case, when the right wing majority in parliament proposes some neoliberal policy (e.g. raising the pension age), they quite often fail at the ballot box (see point (3) above). In US states, voters approve modest minimum wage increases and have approved Medicaid expansion in several Republican states. But it rarely if ever happens that some actually economically progressive (redistributionist) policy succeeds at the ballot box against the political and economic establishment. In Switzerland, policies to limit inequality, to create a public health insurance, to raise taxes on the rich, and many more, have all been proposed by the left and failed. Progressives still need to work hard to convince voters of their economic agenda.

(*) The free movement agreement with the EU has been in place since 2002 and has been confirmed four times by Swiss voters), the last time just two weeks ago with 61% voting against terminating the agreement (which would have been the Swiss analogue to Brexit).

(**) There are mechanisms against wage dumping in place that are based on Sozialpartnerschaft and for example allow industry specific minimum wages. These mechanisms were introduced in connection with the Freedom of Movement agreement. The unions were in a very strong bargaining position and were able to win important concessions because the economic mainstream wanted the EU agreement and the hard right opposed it; the agreement would certainly have failed if the left had opposed it along with the right. The hard right opposes both Freedom of Movement and almost any kind of worker protection and economic regulation, and makes absolutely no secret of the latter.

[This is a correction of the former post – sorry]

6

KT2 10.07.20 at 4:51 am

JQ said “considering the possibilities for a post-pandemic world, we need not think in terms of turning back the clock”.

Perhaps this is like fashion – or a stopped clock? Back to 1935… long read.

“POPULAR RADICALISM IN THE 1930S: THE FORGOTTEN HISTORY OF THE WORKERS’ UNEMPLOYMENT INSURANCE BILL

By Chris Wright

“Its newfound national prominence in that year gave the movement greater momentum, and a new organization was founded to lend the bill intellectual respectability: the Inter-Professional Association for Social Insurance (IPA)**. Within a year the IPA had dozens of chapters and organizing committees around the country, as distinguished academics like Mary Van Kleeck of the Russell Sage Foundation proselytized for the bill in the press and before Congress.”

“Congress took essentially no action on the bill in 1934, so Lundeen reintroduced it in January 1935. This would become the year of the “Second New Deal,” when the Roosevelt administration turned left in response to massive discontent and disillusionment with its policies. Senator Huey Long had become a hero to millions by denouncing the wealthy and proposing his Share Our Wealth program, an implicit criticism of the New Deal’s conservatism. The “radio priest” Father Charles Coughlin had acquired heroic stature among yet more millions by constantly “talking about a living wage, about profits for the farmer, about government-protected labor unions,” as one journalist put it. “He insists that human rights be placed above property rights. He emphasizes the ‘wickedness’ of ‘private financialism and production for profit.’”

“The tens of millions of people who flocked to the banners of Huey Long and Father Coughlin—not to mention the Communist Workers’ Bill (or Lundeen Bill)—put the lie to any interpretation of the American people as being irremediably conservative/centrist or wedded to capitalism. During the Great Depression, arguably a majority wanted the U.S. to become, in effect, a radical social democracy, or a socialist democracy.

“The hearings in 1935 that were held before the Labor subcommittee on the Lundeen Bill are a remarkable historical document, “probably the most unique document ever to appear in the Congressional record,” at least according to the executive secretary of the IPA. Eighty witnesses testified: industrial workers, farmers, veterans, professional workers, African-Americans, women, the foreign-born, and youth. “Probably never in American history,” an editor of the Nation wrote, “have the underprivileged had a better opportunity to present their case before Congress.” The aggregate of the testimonies amounted to a systematic indictment of American capitalism and the New Deal, and an impassioned defense of the radical alternative under consideration.

“From the representative of the American Youth Congress, which encompassed over two million people, to the representative of the United Council of Working-Class Women, which had 10,000 members, each testimony fleshed out the eminently class-conscious point of view of the people back home who had “gather[ed] up nickels and pennies which they [could] poorly spare” in order to send someone to plead their case before Congress. At the same time, the Social Security Act—known then as the Wagner-Lewis Bill, since it hadn’t been passed yet—was criticized as a cruel sham, “a proposal to set up little privileged groups in the sea of misery who would be content to sit on their small islands and watch the others drown” (to quote a professor at Smith College). What most Americans wanted, witnesses insisted, was the more universal plan embodied in the Lundeen Bill.

“Interestingly, most congressmen on the subcommittee were sympathetic to this point of view.”…

https://www.hamptonthink.org/read/popular-radicalism-in-the-1930s-the-forgotten-history-of-the-workers-unemployment-insurance-bill

** [A different IPA in Australia now!]

7

John Quiggin 10.07.20 at 9:04 am

Thanks for a lot of useful corrections. I rushed this one out, so I’ll be sure to a bit more careful next time.

Particular thanks to TM – I couldn’t have put all this together for myself, but here it is all in one place.

8

Fergus 10.07.20 at 9:06 am

Tim Worstall @ 4 says of the minimum wage vs. productivity calculation: “It really is a direct copy, almost as if the EPI took that warning as their design.”

It isn’t:
– the main error Krugman points to is using manufacturing productivity only; the EPI figure clearly refers to total economy productivity
– the second error is that comparing productivity growth to average wage growth, rather than growth in overall compensation, is a mistake. But the EPI figure isn’t measuring growth in average wages, it’s measuring minimum wage growth. There is no ‘minimum total compensation’, so there isn’t really even an analogous error they could be making.

I suppose one might argue that if minimum wage earners have seen their other benefits grow, then the fact that their wages have lagged productivity (to the tune of missing a 167% increase) is misleading. Of course minimum wage jobs tend not to come with many benefits, so it’d be a brave argument.

9

Eszter Hargittai 10.07.20 at 1:17 pm

TM, thanks for the analysis. Can you explain this?
interestingly, the Swiss exporting industry is very successful despite the overvalued Franc and the very high labor cost

10

Tm 10.07.20 at 2:28 pm

@Eszter You mean explain why the exporting industry is so successful? Well I don’t think that’s my expertise. .. 20 years ago, the Franc cost around 60 cents EUR. After the financial crisis it jumped to 80 cents, and now it exceeds 90 cents. Similar story with the US dollar. Nevertheless, the export volume has steadily increased and substantial export surpluses have been generated year after year. It seems that they have to be really efficient to pull that off.

A different story is the crisis caused by Covid19, the outcome of which is not yet foreseeable. If you’d like more in-depth analysis, the Konjunkturforschungsstelle at ETH would be an excellent address (https://kof.ethz.ch/).

11

Tm 10.07.20 at 2:44 pm

@Eszter You mean explain why the exporting industry is so successful? Well I don’t think that’s my expertise. .. 20 years ago, the Franc cost around 60 cents EUR. After the financial crisis it jumped to 80 cents, and now it exceeds 90 cents. Similar but even more dramatic story with the US dollar. Nevertheless, the export volume has steadily increased and substantial export surpluses have been generated year after year. It seems that they have to be really efficient to pull that off.

A different story is the crisis caused by Covid19, the outcome of which is not yet foreseeable. If you’d like more in-depth analysis, the Konjunkturforschungsstelle at ETH would be an excellent address (https://kof.ethz.ch/).

12

MisterMr 10.07.20 at 3:39 pm

@Eszter Hargittai 9

I believe he means that Switzerland has a big trade surplus eve though they have very high cost of living and wages:

https://fred.stlouisfed.org/series/BPBLTD01CHA636S

https://tradingeconomics.com/switzerland/balance-of-trade

although in my opinion “overvalued currency” is just another name for “trade deficitit”, I don’t know another measure to say that a currency is overvalued or undervalued.

13

nastywoman 10.07.20 at 9:37 pm

@
”interestingly, the Swiss exporting industry is very successful despite the overvalued Franc and the very high labor cost”

interestingly, that is also the case in the case of the German exporting industry –
(”to be very successful”) – while paying workers who produce the products for such a successful Export Industry really, really well – and it always seems to be a complete mystery to any Anglo-American Exporters or Economists – who (still) might believe –
that only if workers are payed really poorly – an exporting industry can be… successful.

14

Tm 10.08.20 at 8:09 am

“I don’t know another measure to say that a currency is overvalued or undervalued.”

If just by crossing the border the purchasing power of your money doubles, I would call that currency overvalued. The Franc is overvalued because it is considered a safe haven, for whatever reasons…

15

Tm 10.08.20 at 8:45 am

KT2 can you explain the differences between the Lundeen Bill and the Social Security Act?

16

nastywoman 10.08.20 at 9:55 am

@11+12
”overvalued or undervalued”.

which could remind US all – how much Anglo-American Economists – always like to blame -(or credit) Exchange Rates for a successful – or lesser successful exporting Industry – while my favourite Swiss Watchmaker and the Swabian Uncle Kitchen Builder always say:

Whatever the exchange rate – the world wants our watches and our kitchens!
AND as long we can pay our workers the highest possible salaries the world should pay for these salaries by buying our watches and kitchens!

17

Peter T 10.08.20 at 11:12 am

Eszter Hargittai

There’s no mystery her unless you are fixated on price. There are only a handful of countries in the world that can make a decent spanner, fewer that can make decent engines, fewer still that can make decent jet engines. Industrial expertise – that combination of design, know-how, machines and market knowledge – is not easily acquired. Once you have it in some area, price is a secondary consideration.

18

Eszter Hargittai 10.08.20 at 12:25 pm

TM, I was asking about how Switzerland manages to continue to be so good with exports given the associated high costs here (I’m in CH).

Peter T, not clear why in this day and age this needs to be the case (“only a handful of countries in the world that can make a decent” x).

19

MisterMr 10.08.20 at 12:43 pm

@Tm 14

“If just by crossing the border the purchasing power of your money doubles, I would call that currency overvalued.”

I understand what you mean (I live in Italy just 30km from the border with Switzerland so I see this very clearly), however this just mean that prices in Switzerland are way higer than, for example, in Italy.
This is a common situation and in theory can be explained by a different productivity level in the tradeable sector, with non-tradeable goods increasing in price to match productivity in the tradeable sector (e.g. houses in Switzerland will be more expensive than in Italy because the Swiss have more money with which to buy them, and coffees in Switzerland will be more expensive than coffees in Italy because the bartender has to pay for his/her own house and anyway would shift to another job if this wasn’t the case, thus creating a scarcity of bartenders).
It is still difficult to explain such a big difference in the tradeable sector, though.

@nastywoman 16
This doesn’t explain why the swiss don’t buy a ton of relatively cheaper foreign stuff with their high buying power, though.

20

Gorgonzola Petrovna 10.08.20 at 1:58 pm

“not clear why in this day and age this needs to be the case”

There’s little mystery here, imo.

Mass-production of cheap junk is made profitable on account of cheap labor.

And expensive stuff that requires high precision, high quality, and/or high level of customization has a different formula. Big part of it is stable, skillful, responsible workforce.

Arguably, the later is not even the capitalist ‘mode of production’; rather it’s the precapitalist craftsmanship/artisan mode.

21

nastywoman 10.08.20 at 2:50 pm

@
”not clear why in this day and age this needs to be the case (“only a handful of countries in the world that can make a decent” x”).

You never must have eaten the ”Hausmischung” at the Fondue Beizle in St. Gallen?

22

nastywoman 10.08.20 at 3:09 pm

and sorry about the Fondue-Joke – as there finally is the question of ALL (economical) questions:
”not clear why in this day and age this needs to be the case (“only a handful of countries in the world that can make a decent” x).

BE-cause in 1999 – when the German machinemakers –
and the Swiss watchmakers –
and the French costumesmakers
and the Italian bagmakers –
thought they were ”toast” -(as there were all these other countries in the world – coming up with millions and millions of workers – who would make machines and watches and costumes and bags much, much cheaper) AND Paul Krugman wrote:
”the world has changed in a way that seems to favor flexibility over discipline. With technology and markets in flux, not everything worth doing is worth doing well.

He was ”completely” – ”totally” – mistaken – as actually:
”everything worth doing is worth doing as well as a Swiss watchmaker -(or the Fondue Beizli in St.Gallen) – does it!

23

nastywoman 10.08.20 at 3:16 pm

as actually: ”everything worth doing is worth doing as well as a Swiss watchmaker -(or the Fondue Beizli in St.Gallen) – does it!

and so – one drives 45 minutes there – and 45 minutes back BE-cause somehow ”Germans” just can’t produce a Fondue like the Fondue Beizli in St. Gallen?
It’s like Germans can’t produce SNL – even if it’s not clear why in this day and age this needs to be the case (“only a handful of countries in the world that can make a decent” x).

24

Tm 10.08.20 at 3:22 pm

Eszter: Apparently they are good at what they are doing, but I don’t know their secret. It’s not my expertise. As I said the KOF would be a good address for you.

25

nastywoman 10.08.20 at 9:26 pm

and at MisterMr.@19

”This doesn’t explain why the swiss don’t buy a ton of relatively cheaper foreign stuff with their high buying power, though”.

And I think I already have explained IT –
But if NOT:
”BE-cause the Swiss… really don’t like a ton of relatively cheaper foreign stuff”!
OR – if they like ”foreign stuff” –
They really like ”the better foreign stuff” much better – than some… some… cheap crap!

26

nastywoman 10.08.20 at 9:34 pm

AND! –
as not only the Swiss BUT millions of people all over the World like ”the better foreign stuff” much, better – than some… some… cheap crap!

The Countries – who produce ”the better stuff” – pay their workers A LOT more money for their work than the producers of cheap crap!

Capisce?!

27

nastywoman 10.08.20 at 9:55 pm

AND about –
”but I don’t know their secret”.
that’s why – when I had to write my Master Thesis about ”The Language of the Internet”
I first learned how to make some really good cheese!

28

hix 10.08.20 at 11:09 pm

Switzerland is a small country with lots of tax evasion surrounded by one of the richest broader macro regions in the world. Some headquarters of global market leaders (the tax part helps there on top of historic path dependency), some China boom in status symbols. Their sausage is not all that complicated if you just slice down into all the luck factors that cannot be reproduced. If you look at Tirol´s gdp, some nice mountains in a rich region alone would be enough to be on the richer end of things.

29

hix 10.08.20 at 11:17 pm

Tax evasion plus nothing else at all is sufficient to put a 5 million nation with a rather marginal geography like Ireland above the EU average. Exploiting third parties like that is also a good starting point for a great corporatist bargain to keep the local disadvantaged groups and lefties in general with their ethical complaints on board with the tax dodging system. Arguably, Ireland and Switzerland are both doing that kind of corporatist compromise.

30

KT2 10.09.20 at 3:04 am

Tm asked “KT2 can you explain the differences between the Lundeen Bill and the Social Security Act?”

No. But others may… the Lundeen bill “gave unchallenged priority to the ideal of guaranteeing economic security to all of the potentially dependent. It also was simple and all-embracing-but these it carried to the point of being faults rather than virtues.” ^1.

As compared to the first SSA Amendement
“Social Security Act Amendments of 1939 H.R.6635 Approved, August 10, 1939 Public Law 76-379 “Amendments of 1939: The original Act provided only retirement benefits, and only to the worker. The 1939 Amendments made a fundamental change in the Social Security program. The Amendments added two new categories of benefits: payments to the spouse and minor children of a retired worker (called dependents benefits) and survivors benefits paid to the family in the event of the premature death of the worker. The 1939 Amendments also increased benefit amounts and accelerated the start of monthly benefit payments from 1940 to 1942.” https://en.wikipedia.org/wiki/Social_Security_Act

“The Social Security Act
“The law established the Social Security program. The old-age program is funded by payroll taxes, … The Social Security Act also established
– an unemployment insurance program administered by the states and
-the Aid to Dependent Children program, which provided aid to families headed by single mothers. The law was later amended by acts such as
– the Social Security Amendments of 1965, which established two major healthcare programs:
– Medicare and 
– Medicaid.” Wikipedia 

Tm, with over 50 amendements + Medicare / Medicaid, who could explain & compare? I’m all ears. Yet it seems the ‘C’ word – communism – has struck Lundeen from history. Wikipedia doesn’t mention it.

The Social Security website Histroy section does:

^1. (much better resource – long & detailed)
“Rationality & Welfare: Public Discussion of Poverty and Social Insurance in the United States 1875-1935”

by Professor Theron Schlabach

Chapter 3: Social Workers: Professionalism, Reliefism, and Passivity

“But total economic planning was beyond the reach of mere social workers. Consequently, the militants more and more rallied around another solution, still radical and overarching in its conception, but beginning with the welfare sector rather than with the entire economy. The Workers’ Social Insurance Bill, or “Lundeen Bill” as it was dubbed after Representative Ernest Lundeen of Minnesota sponsored it in the House of Representatives in 1934, proposed simply to guarantee a weekly minimum of $10 plus $3 for each dependent to persons who were unemployed or unable to work “because of sickness, old age, maternity, industrial injury, or any other disability.” It would benefit all farmers and all workers, whether “industrial, agricultural, domestic, office, or professional.” Workers and farmers themselves would administer the measure, and could withhold benefits neither because of strike activity, nor for refusal to work at substandard wages, under unhealthful conditions, or at “an unreasonable distance from home.” The money would come entirely from the federal treasury, replenished with taxes on inheritances, gifts, and personal and corporation incomes fiver $5000 per year.38

“The Lundeen bill had one virtue that would have improved almost every other social insurance proposal advanced in the decades before 1935: it gave unchallenged priority to the ideal of guaranteeing economic security to all of the potentially dependent. It also was simple and all-embracing-but these it carried to the point of being faults rather than virtues.”…
https://www.ssa.gov/history/reports/schlabach3.html

Further research & documemts here:
Guide to NARA Collection – [National Archives & Record Administration]
https://www.ssa.gov/history/index.html

Social Security Textual Records in NARA II
Part 1: Researching Social Security 
Background to Social Security & Its Records
“INTRODUCTION

“Because they do contain a wealth of useful background information, we are reproducing large parts of both documents here in this Introduction, as well updating the material to reflect changes at SSA since 1976.”
https://www.ssa.gov/history/archives/nara/SSAbackground.htm

Serendipity… and this will be relevant soon… 
^2. 
“”The switch in time that saved nine” is the phrase, originally a quip by humorist Cal Tinney,[1] about what was perceived in 1937 as the sudden jurisprudential shift by Associate Justice Owen Roberts of the U.S. Supreme Court in the 1937 case West Coast Hotel Co. v. Parrish.[2] Conventional historical accounts portrayed the Court’s majority opinion as a strategic political move to protect the Court’s integrity and independence from President Franklin Roosevelt’s court-reform bill (also known as the “court-packing plan”), which would have expanded the size of the bench up to 15 justices. ”
https://en.wikipedia.org/wiki/The_switch_in_time_that_saved_nine

^3. ”
During the 1950s, those over 65 continued to have the highest poverty rate of any age group in the US with the largest percentage of the nation’s wealth concentrated in the hands of Americans under 35. By 2010, that figure had dramatically reversed itself with the largest percentage of wealth being in the hands of Americans 55–75 and those under 45 being among the poorest. Elder poverty, once a normal sight, had thus become rare by the 21st century.
[ 24 – Curse of the Young Old
By William Saletan
Sunday, March 19, 2006
https://www.washingtonpost.com/wp-dyn/content/article/2006/03/17/AR2006031702088.html ]”
https://en.m.wikipedia.org/wiki/Social_Security_Act

31

nastywoman 10.09.20 at 8:37 am

@28+29
Yes – ”Taxes and Banking” and how easy does that make one miss the main point?

As there is this little town in the Swiss Alps – which one upon a time importer all this cheap crap from everywhere – BUT then the townspeople thought:
”This is Insane”! –
and they realised – that this type of ”economics” completely killed their OWN economy – they went ALL IN for ”local quality” and something called ”Nachaltigkeit” -(sustainablity ) even if their OWN products were a lot more expensive – than the cheap foreign crap.

AND as the little town is the perfect example for – how the Swiss THINK – in general –
THAT’S THE POINT!

Capisce?

32

Tm 10.09.20 at 9:10 am

His: tax haven policies explain some things but not, I think, the success of the exporting industry. It’s not just that Corporate headquarters are located here. There is actual stuff being produced in this country, by workers who are paid well, and successfully sold on the world market.

nastywoman: Have you ever visited the Arkansas wine country? There is a Swiss winery there dating from 1880. The fondue they serve is the worst you’ve ever tried 😉

33

Tm 10.09.20 at 5:36 pm

Important addition re minimum wage

I now realize that John was half right when he wrote of “Swiss voters recently decided to increase the minimum wage to $25/hour”. He was referring to the voters of Geneva, who did introduce (not “increase”) a minimum wage in that amount two weeks ago. Somehow I missed this piece of good news; it is actually more remarkable than John makes it appear.

The digression on Switzerland has almost hijacked this thread, which wasn’t my intention at all. But these issues are on the agenda across the globe. Deregulation, globalization, increasing inequality and economic uncertainty everywhere evoke two distinct political responses: the Right calls for closing borders (for people, not capital!), demonizes immigrants and attacks democratic institutions with fake populism. Progressives call for economic regulation, protecting workers, and preventing tax evasion. The Right seems to have had a winning streak but it seem to be coming to an end. And Switzerland (which btw has a lot in common with the US) is a good indicator. Here, the alternative is particularly stark: the Right wants a deregulated economy and immigration restrictions, the Left supports freedom of movement and economic regulation. In 2014, the Swiss voted heavily (76%) against a minimum wage and narrowly (50.3%) against free movement. (In 2016, the British also voted narrowly against free movement.) In 2020, the Swiss reversed the 2014 vote with 61% supporting free movement, and at least one state approved a minimum wage with 58% yes.

Geneva voted in 2011 against a state minimum wage, in 2014 against a federal minimum wage, and in 2020 for a state minimum wage. The approving vote shares were 46%, 34% and 58%. Geneva, generally among the most progressive Cantons, is the fourth Canton (out of 26) to approve a minimum wage, all in the last few years and all of them non-German-speaking border states that are particularly concerned about wage dumping. A federal minimum wage may still be a decade or more away but it is almost certain that more states will follow. The tide is turning, progressive economic ideas are gaining ground after decades of neoliberalism!

34

nastywoman 10.10.20 at 6:47 am

@33
”And Switzerland is a good indicator”.

It’s ”the best” indicator – as the Swiss were about ”THE FIRST” – who understood the type of economics the Virus now forces – so ”revolutionary” onto the rest of the World.

As what did the famous American Philosopher Olivia Nuzzi write – when she wrote about the US economy:

“he mishandled the coronavirus, he’s never been popular, and he’s gonna lose badly.
…it touches every American’s life every day in multiple different ways, and he’s handled it badly and people don’t forget that.” Or, as ex–Trump adviser Sam Nunberg put it, “Everything has just completely gone to shit.”
“I think some of this is sad to watch,” Nunberg said.
It does appear at times as though self-destruction may be the point. How else could you explain the Plague Parade circling Walter Reed, in which a very sick Trump boarded a tightly sealed SUV with his Secret Service agents so he could wave at the supporters who had come to fly their flags on the street? Or the Evita-inspired return to the White House, in which a still very sick Trump ascended the staircase to the balcony, ripped off his face mask, and saluted to no one as his photographer snapped away? Or calling in to the Fox Business Channel to suggest his infection may be the fault of the Gold Star military families, since they were always asking to hug him? This is what it looks like when the president knows he’s losing, but it’s also close to what it looked like when he won — after all, he thought he was losing in 2016, too. We all did. “You’re never as smart as you look when you win, and never as dumb as you look when you lose,” according to David Axelrod. In Trump’s case, it may be more like this: What seems like genius when he manages to survive is the very madness that threatens his survival in the first place”.

What a ”BEAUTIFUL” –
(as Trump would say) ”PARABEL” – for ”the Anglo-American Economy”
EVEN IF:

“This thing could go either way. It’s tricky. They told me it’s tricky,” Trump said. “You can tell it can go either way……”

35

nastywoman 10.10.20 at 7:10 am

So in conclusion – TM @33
Let’s not call it ”neoliberalism”! – let’s call it STUPID – if economists and economies don’t understand – that the most important ”thing” –
for every economy is –
THE happy workers – who produce GREAT watches
and hand-bags
and costumes
and kitchens – AND Fondue -(unlike in the Wiederkehr Vineyard in Arkansas)
EVERYBODY in the World wants – AND – at the same time understand that a well working ”Regional – Local Sustainable Economy” – is even more important.
AND let’s NOT forget the Swiss ”Zunft System” where ”Handwerk” is still honoured in a way – the Anglo-American World had completely forgotten –
EVEN –
if everybody in my homeland is now baking bread!

36

Gorgonzola Petrovna 10.10.20 at 9:01 am

As I remember, Geneva’s had the minimum wage of about the same amount for a decade or so. Only it wasn’t government-dictated but negotiated, annually, between the unions and employers association.

Personally, I feel that this shift from corporatism to social democracy is not a positive development. But then, this is certainly for the people of the canton to judge.

37

hix 10.11.20 at 4:11 am

That was the technical use of the term corporatism Schmiters type- it is not really incompatible with social democracy per se. Rather it requires unions and social democrats to have some strength and for example in the Austrian case, the corporatist system had very strong social democrats. The traditional reasoning against corporatism has been that the interest groups tend push through compromises that harm third parties. If the third party is the population of other nations, only better.

My broader thesis could be something like this:
Corporatism was falling apart under right wing attacks pretty much everywhere and only survived in a weakened version in some small nations doing a tax evasion free riding strategy with the rest of the world. Corporatism should be helpful for example to avoid undermining the local tax base with all the tax games that are supposed to target foreigners.

38

Tm 10.11.20 at 8:00 am

Gorgo: as explained, negotiated union contracts have been the rule in Switzerland and Germany for generations. These do not set a fixed minimum wage but sectorially different wages and conditions. The preferred term for this is Sozialpartnerschaft, not corporatism.

The pressure for statutury minimum wages arose esssentially because too many employers opted out of or refuse to comply with the spirit of the Sozialpartnerschaft. Germany as mentioned introduced a federal minimum wage but as important is the fact that sectorial union contracts can be declared mandatory for all employers of a certain sector by tripartite commissions (comprising union, employer and government representatives) (for Germany see https://de.wikipedia.org/wiki/Mindestlohn#Aktuelle_gesetzliche_Mindestl%C3%B6hne_und_Lohnuntergrenzen_in_den_einzelnen_Branchen). This instrument is also available in Switzerland and is seen as essential by the unions to counter wage dumping. The unions still prefer the Sozialpartnerschaft approach but it needs some tweaking.

“this shift from corporatism to social democracy” – this is a bit weird. The German social democrats did not introduce minimum wages when they had the power to do so in the 1970s, apparently there was no pressing need. The new approach of the grand coalition in the last few years is a response to the transformations induced by neoliberalism.

39

Tm 10.11.20 at 1:19 pm

Further re Gorgo: There are different theories of corporatism. The negotiation of union contracts with employer associations, whether one wants to call that corporatism or not, certainly is not antagonistic to social democracy. To the contrary it is an integral part of European Social Democracy, as it is commonly understood. Perhaps it’s antagonistic to state socialism but that is different. Wikipedia explicitly refers to „economic tripartism involving negotiations between labour and business interest groups and the government … as neo-corporatism or social democratic corporatism“.

40

Gorgonzola Petrovna 10.12.20 at 9:04 am

“The negotiation of union contracts with employer associations, whether one wants to call that corporatism or not, certainly is not antagonistic to social democracy.”

I disagree; in my opinion, it is. Imo, social democracy (centralized ‘welfare state’) is a maneuver aimed at destroying syndicalism (if we can use this word, instead of ‘corporatism’). At destroying labor as a democratic institution.

It doesn’t happen overnight, of course, but that’s the essence: no need for collective participation, just vote once in a while – as an individual; voting is an individual action – for a nice politician (or a nice party, group of politicians) and they will take care of everything. Once labor is atomized, it’s game over.

41

Tm 10.13.20 at 6:36 am

The atomization you are describing Gorgo is a version of neoliberalism, not social democracy. It’s the attitude of the US Supreme Court saying that workers have a right to individually opt out of union representation. In such a framework, collective bargaining is inconceivable, which is the whole purpose of the exercise. That this is a social democratic idea is news not only to social democrats.

42

Gorgonzola Petrovna 10.13.20 at 8:01 pm

Judges can say whatever they want, and people on the ground can and will ignore it, if what’s at stake is vital for them and they are organized. Or, they could, for example, block the roads for days or weeks, until the judges smarten up and say something different. This is how it should work, politics. The welfare state, I feel, is a mechanism that disempowers the population by making it less vital, taking the edge off. Throw them a bone, give them a little, and you’ll save a lot, with no troubles.

43

Tm 10.14.20 at 7:13 am

Re 40 one more thing. If your theory (“social democracy (centralized ‘welfare state’) is a maneuver aimed at destroying syndicalism”) is correct, countries with the weakest welfare state should have the strongest unions, and vice versa. Does that sound right to you? It doesn’t to me.

And the minumum wage is not conceptually a “welfare state” function. Why mix these up?

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