Government should stop subsidizing the labor costs of corporations and raise the minimum wage in Massachusetts to at least the current Boston living wage of $13.89 an hour (MIT lays out relevant data in its “Living Wage Calculation for Suffolk County, Massachusetts.”)
The gap between the minimum wage and the living wage is a rough indication of the subsidy local minimum wage employers extract from us taxpayers.
Minimum wage in Massachusetts is currently $9. It is scheduled to rise to $11 in January 2017. That still leaves us subsidizing minimum wage employers by $5 an hour this year, $4 next year, and $3 an hour in 2017: almost 20 percent, assuming no inflation. Why? If we are going to subsidize anything (an arguable proposition, but one for a different discussion) it should be high-paying jobs that will raise our standard of living. That’s not minimum wage jobs in general, especially in our globalizing world where access to labor through improved communications is ever easier — and workers in Ireland, Indonesia, India, and the rest of the alphabet ever closer. Los Angeles legislated a $15/hour minimum wage by 2020 yesterday, which is in the same economic neighborhood as the Boston living wage.
As the Wall Street Journal reported yesterday, “There is no state in the country where someone earning either the state or federal minimum wage can afford a market-rate one-bedroom apartment,” citing a report from the National Low Income Housing Coalition (hat tip, WBUR). That is especially true here, where housing costs are high relative to other parts of the country. Workers paid minimum wage in Massachusetts have difficulties obtaining food, clothing, and other necessities. Public and private programs provide assistance in some cases with affordable housing, food, medical care, and other necessities — famously, to Wal Mart employees — but are less efficient than raising wages and letting workers spend the money for themselves would be. In the meantime, by shielding employers from the true costs of labor, we provide a public subsidy to business profits. A higher minimum wage will place the cost of labor where it should be: on employers.
Amirite?
thebaker says
We know $15 and hour sucks … So why do we stop at $15?
Christopher says
…of political realism and the law of diminishing returns.
thebaker says
The reality is fast food workers cannot even afford the fast food that they serve living at $15 per hour. No one can live at $15 an hour and it’s sad that we have to pretend.
Will someone please tell me there is hope!
scott12mass says
Looking in my paper this morning. Factory production tech (machine operator) Millbury $13.50 hr. Sheet metal fabricator Oxford Mass $ 15.00 per hour. But in Brookfield 4 bedroom, 2 bath, with 2 car garage on 4 acres land for $249,900.
jkw says
I think it is easy to get behind the idea that anyone should be able to get by with only one job at 40 hours a week, and that a family should be able to cover its costs with two jobs at 40 hours a week. People shouldn’t need to be working multiple jobs so that they can pay their rent and eat.
But if you set the minimum wage too high, it will raise costs. It would be great if everybody could be paid $40/hour, but I don’t think that most restaurants or retail stores would be able to stay in business with labor costs that high. So it makes sense to make some reasonable calculation of how much it costs to live somewhere, including all costs that most people consider necessary, and then set the minimum wage just high enough to cover that cost of living. This provides a fairly objective standard that serves a specified goal, which makes the political argument clearer.
thebaker says
“People shouldn’t need to be working multiple jobs so that they can pay their rent and eat.”
I agree, and that is the conversation we should be having right now.
SomervilleTom says
Statutory changes in minimum wage should not be the only tool used to keep the minimum wage at least as high as the living wage.
A family budget has many cost items, as well as its income items. Taxes are not the only cost item in a family budget that government influences. Government policy affects housing costs, food costs, transportation costs, and healthcare costs, and others.
Since Massachusetts is so firmly wedded to the concept of separate cities and towns, each with their own local government (and each with their own local property tax rate), perhaps each town could have a minimum wage specific to that town — perhaps even tied to the property valuation in that town.
Perhaps the minimum wage in Concord or Dover should be higher than the minimum in wage in Athol, Springfield, or Lawrence.
nopolitician says
If we allowed each town to set its minimum wage, wouldn’t that just spur a race to the bottom?
SomervilleTom says
Let me clarify my half-baked idea
I’m not stuck on the specifics how the local offset is determined. My point is to set a statewide floor, and then adjust that floor to reflect the property cost of a given city or town.
I sincerely doubt that property owners in a town would consciously lower the asking price of their real estate in order to “keep the minimum wage down”. If they did, the effect would be to make housing in the town more affordable to minimum-wage workers or commercial rents more affordable to companies.
Peter Porcupine says
I LIVE in a town with one of the lowest property tax rates in the state but have only worked within it’s borders for 3 or 4 years out of 40.
OTOH, by commuting to HIGH property tax places like Boston to work, I could have made a killing….unless you are suggesting I be paid less for doing the same job because of where I live?
SomervilleTom says
Indeed, I am suggesting that you might be paid less for doing the same job because of where you work (not live). That has been happening for professional jobs for generations — programmers in NYC make a LOT more than programmers in, say, NH.
Regarding your personal experience, firstly I somehow doubt that you’ve been a minimum-wage worker. Please note that I did not cite property tax RATES, I cited property valuation (assessed property values). If your town has one of the lowest assessed property valuations in the state, then indeed I propose that the minimum wage be lower in your town. If you are a minimum wage worker, and can make more money (including travel costs) by commuting to a town with higher property values, then my proposal would encourage that. You would, however, be competing with “townies” for that Boston-based minimum-wage job that you contemplate commuting to. Good luck handling the 7a-2a shift that a line cook or dishwasher often faces when you tack on the 6-10 hour daily commute.
My bottom line is that so long as there is an extreme differential in the wealth of our cities and towns (and assessed property values tend to be a proxy for that), then I suggest there should also be a differential in the minimum wage for workers.
ryepower12 says
It would just be a base. The number of people who make minimum wage is fairly small in terms of the labor pool, but the number of people who earn minimum wage + a few dollars above it is quite large. There will be a lot of pressure on employers to pay people who already earn above minimum wage something more than people who have less seniority or skill, or who are shift managers, etc. So we’d not only see a lot more people making $15 an hour, but also $16-$20 bucks an hour, too.
None of these wages is going to provide a glamorous, jet-setting lifestyle, but people can get by on them — much better than they can get by on $9 an hour.
TheBestDefense says
There have always been a large number of collective bargaining agreements in the US that set a worker’s wages at the minimum wage with a designated “bump.” Everyone under those kinds of contracts also gets a raise when the min wage goes up, in addition to the wage inflation you note. And that is a good thing.
jconway says
Or Investing in Families. However you frame it, policies that make college more affordable, that bring down housing costs, raise wages, paid leave, and maybe reviving the Moynihan Nixon basic income proposal (the only plan that came close to passing), are all great steps in this direction. But a true living wage as a minimum wage is the first big step that leads to all the others.
One CEO has already shown how this is done, and so far, has seen his company only do better.These companies outperform Wal-Mart.
Cooperative ownership is the final step, and should be in the platform of the party. We can’t mandate, but we should do everything in our power to encourage and expand it. Again, coops outperform non-coops. One of them is even called Wal Marts worst nightmare. Call it leftism if you want, I call it common sense and basic decency.
kirth says
From jconway’s These companies outperform Wal-Mart link:
This sounds like the way things should be.
nopolitician says
My aunt, who passed away 10 years ago at the age of 80, apparently had a pension from when she worked at Sears. I don’t think she worked there that long either. She had a couple of other pensions from her husband, as well as some stocks. She did not have to worry about money as she entered old age.
If companies don’t think they can turn a profit due to increased labor expenses, then maybe the answer is to provide a social programs – paid for by higher taxes on higher-earning individuals – so that instead of companies dealing with those costs as a direct cost of doing business, their employees won’t need as much income to survive.
For example: universal health care; free college education; stronger retirement income; child care; public transportation. Those things should be comparable to what people would get if they purchased them privately.
That would leave food and housing as the things a paycheck would need to provide.
Alternatively, we could go down the minimum guaranteed income path, though I think that could put something like a restaurant out of business because if you already have enough money to survive, why would you take a crappy job at a restaurant for a few extra bucks?
SomervilleTom says
I have several children in the restaurant business.
I don’t know about “crappy” jobs, and there are many. I do know that most men and women who choose to spend their careers in the restaurant business do so for personal, rather than economic, reasons. Most good restaurant cooks do so because they love feeding people, because they love cooking itself, because they are artists who have chosen food as their medium, and so on. The low wages of the restaurant business are viewed most of the restaurant workers I know as one of the prices they pay for spending their lives doing what they love to do.
scott12mass says
I knew a few waiters/waitresses. They didn’t report all their income from tips. What’s your experience? $15 per hour, tax free isn’t bad. I also know electricians who routinely trade “jobs” with other tradespeople, wire a house in exchange for a septic system. How should this be handled?
Christopher says
They shouldn’t be included in calculating minimum wage; they should not be expected as servers should be paid by their employers; they should not need to be reported. If they are given at all only the customer and server need to know IMO.
SomervilleTom says
Building on Christopher’s argument, in my view my tip is a gift I give my server, not a “wage”. The fact that we currently structure our labor laws differently is, in my view, a failing of our labor laws. My family members and friends are not required to report my gifts to them as income (I don’t give anybody $10K a year or more), nor should they be.
In my view, the gifts I give servers, even if called “tips”, are the same.
Peter Porcupine says
The current pittance system is a joke. Restaurant and other tip-dependent industries should at least pay the MA minimum wage and stop trying to balance the books ‘on the fishnet stockings of cocktail waitresses’ as George Will once famously put it with fanciful FICA and withholding.
thebaker says
As a practice I never tip unless it is required (you’d be surprised how many places actually don’t require it once you tell them you don’t want to leave a tip). On average I eat out probably 3-4 times per week, and I can go weeks sometimes with out tipping 1 server.
petr says
Tips are (or ought to be) a gratuity — a gift between a diner and a waiter, and having nothing whatsoever to do with an employers payroll. Just because you’re a cheapskate (and you are) doesn’t mean the rest of us have to be.
Rather than outlawing tips we should outlaw the practice of restaurateurs shaving a vig from the waitstaff.
jconway says
How does boycotting tips solve the problem of tipping? Servers are currently paid well below the regular minimum wage on the assumption you will be covering the rest of it with tips. Granted, this system sucks and I oppose it, but you aren’t really hurting the owners or changing this system, you are just hurting the workers who depend on them at present.
SomervilleTom says
I don’t want to hear any complaints from you about “the wealthy”, or how your taxes are too high, or any other whining about how “hard” life is for you. If you have enough money to eat out, you have enough money to leave a 20-25% tip for the men and women who work long hard days to give you a good experience.
The fact that you “eat out probably 3-4 times per week” and “go weeks sometimes without tipping 1 server” is itself shameful. The fact that you publicly admit it is, well, appalling.
What you are doing to the men and women who work in the restaurants you patronize is just as exploitative and just as immoral as any Gilded Age or current one-percenter taking money from the poor to fatten their own wallets. The restaurant minimum wage in Massachusetts is $3.00/hour. You effectively steal from your server and back-of-store staff in multiple ways. Here are a few:
1. When you stiff your server, your server gets only $3.00/hour from you. That means he or she gets, at most, $3-6 from the meal they provide you. In a Boston-area fine dining restaurant, where the average “cover” (one person, one meal) is $50, you’ve stolen $10 from your server.
2. The government ASSUMES that you did tip your server, and collects taxes from your server as if you did. That means that your server not only doesn’t get any tips from you, but also has to pay your share of her taxes from the tips of a more courteous guest. You’ve stolen another $1.50-$2.00 from your server.
3. In most restaurants, your server has to “tip out” the bussers, dish-washers, and sometimes even line cooks that prepared your meal. Your server will probably pay them as if you had tipped, because your server knows that he or she needs them in order for you to have the dining experience you want (but are unwilling to pay for). That will cost your server another $1.50-$2.00.
Each time you do that for a $50 meal, you steal $13-14 from the man or woman unfortunate enough to serve you. I hope you spend that blood money well.
If I were your server, and you did that to me, I would arrange for your next visit to be memorable. I would arrange for the host or hostess to put you at the worst table in the house, perhaps next to the squeakiest kitchen door where each and every server coming to or from the kitchen has walk around you and say “excuse me”. I would “accidentally” spill your gazpacho and or cold beverage in your lap. I would make sure that your “medium” burger was burnt to crisp and that your “well-done” burger was raw. I would make sure that your Caesar dressing was Ranch. I would throw your check on the table well before you finished eating and make sure it had at least two or three items you didn’t order. I would then stand on the other side of the restaurant and stare out the window while you attempted to get my attention. I’d make sure you waited another eternity after I collected your credit card. If you left cash, I’d make sure I shorted your change. I’d make sure the owner knew what was happening — most owners will arrange to be somewhere else while all this is going down. I would do all in my power to make sure that your experience at my table was so awful that you NEVER darkened my establishment’s door again. No server and no owner wants your business.
People like you are the bane of the restaurant worker’s life.
Christopher says
All the things you describe are ultimately the fault of the employer. It is not stealing to not offer to pay more than the price listed plus tax for the items purchased.
SomervilleTom says
Take your complaints to the employer. Stealing is stealing, whether or not it’s legal.
Christopher says
If a restaurant outright charged for labor like car mechanics do then yes, it would be stealing to drive off without paying for labor. When you just hope and expect that patrons will make up the difference without actually charging you can’t complain if some don’t. I do out of obligation and custom, but it is usually quite reluctantly. If you want to make sure I pay more then raise the menu prices.
centralmassdad says
but substantively false. Given the present structure of our restaurant economy, failing to tip based “on principle” is at least morally, if not legally, objectionable, is without question grossly exploitative and willfully so.
thebaker says
What are your feelings about take out? Say the 99’s or a Fridays etc. … this isn’t curbside mind you, where they take the food out to your car. I’m talking about calling ahead, and picking up your order like at Pizza Hut?
kirth says
Tom’s comment was far more temperate than what I would have said. No one who has ever worked at a job making them depend on tips would ever be so cavalier about giving them as thebaker claims to be. It’s unconscionable.
jconway says
I get that the tip system is unique to America, unjust, immoral, and inconvenient. But for the life of me, I don’t get the attitude of folks who say ‘I don’t believe in tipping’. Neither do I, neither does most of America. But unless this is the rare restaurant that bans tipping and pays a living wage, including the costs in the raised menu prices, you have to suck it up since the system really fucks over working people otherwise, as Tom pointed out above. You aren’t just being a bad customer, you are being a bad citizen.
I even strongly disagree with the notion that there should be a high bar you pay for good service and a low bar for bad service, unless the waiter is rude to me personally (and it’s occasionally happened) I will always tip 18-20%. And in those rare circumstances I still tip, just under 15%. I never leave nothing. Especially since the majority of restaurants tips go to a pool, so it really has nothing to do with the quality of your specific server.
Yeah we don’t tip auto mechanics, but until the law changes so that waiters and waitresses are rightly treated like the average workers they are, that’s the way it is.
Christopher says
…but philosophically, if I’m not responsible for the system why does it fall to me to compensate for it?
SomervilleTom says
I see it as a necessary evil of being part of society. The Iraq invasion of 2003 was a colossal blunder. I and many like me knew it at the time and said so. Nevertheless, my taxes paid for it.
Perhaps such aspects also give us “skin” in games that we might otherwise ignore. Most of us pay more for health insurance because we believe that even the poorest among us should receive emergency health care. We are not responsible for the woefully broken health insurance system, yet the burden still falls on use to compensate for it.
One vision of the proper role of government is that “government does those things that the people cannot do better themselves”. If the people (in this case you, me, and other tip-payers) are paying more, and could pay less if the government did a better job of making employers pay their fair share, then our extra payments help motivate us to do more to fix the problem in government.
thebaker says
I’ll leave a tip from now on
SomervilleTom says
I think we’re both parents, my children work in the business. I’m a little touchy about things that hurt them. I apologize if I was perhaps overly harsh.
jconway says
I am hoping to hit up some of the new Union Square spots next time I’m in town.
thebaker says
I think you and I agree on a lot of issues, but we get tangled up in the little details. I absolutely hate the idea of wealthy restaurant owners who take advantage of their staff like this. I won’t support them a day longer. I’m now looking for places that do not use that business model.
Brothers Deli looks like a nice alternative. The cafeteria style reminds me of school a little bit … serve yourself, throw out your trash and leave your tray in the designated area. The food is great too.
hesterprynne says
…whether the Earned Income Tax Credit, which, as it happens, is the subject of the post in the thread below, is an example of the corporate welfare that has the government making up for the inadequate wages that businesses are now paying. There’s certainly an argument that it is.
From my perspective as an anti-poverty advocate, right now and for the indefinite future, we certainly need both minimum wage increases and EITC increases. But longer term, it’s worthy of more pondering.
Bob Neer says
For your interested readers here? Thank you!
TheBestDefense says
from the MassBudget website:
The state Earned Income Tax Credit (EITC) is a refundable tax break provided by the Commonwealth to lower-income workers in order to increase the after-tax rewards to work. It is available only to tax filers with earned income and provides benefits primarily to workers with children (to learn more about this and other programs affecting Massachusetts children, see MassBudget’s Children’s Budget).
The Massachusetts EITC operates under the same eligibility rules as the federal EITC, with the state credit value calculated as a straight 15 percent of the federal EITC amount claimed by the tax filer. A tax filer’s federal EITC eligibility and credit value depend on marital status, the amount of income the filer earned during the tax year, and the number of dependent children.
The largest credits are provided to families earning between approximately $14,000 and $24,000 a year. The value of the credit declines slowly as income rises and disappears entirely for families earning more than about $50,000. Far smaller credits are available to very low-income filers who do not have children. The value of the credit is applied toward the filer’s tax liability and any amount that exceeds taxes owed is refunded through direct payment to the filer.
In 2015, the maximum value of the Massachusetts EITC will be $936.1 Typically, between 415,000 and 430,000 filers claim the Massachusetts state EITC each year, for a total cost of roughly $134 million in FY2015.2
TheBestDefense says
There is an important new analysis of the effects of increasing the minimum wage here http://onion.com/1FDu105
TheBestDefense says
Sorry, but no, you are not right.
If you want to “stop subsidizing the labor costs of corporations” then there are a lot of programs that get eliminated. Start with the EITC , which has always been understood as a taxpayer subsidy to working family for the inadequacy of their wages (see upstream from here). Next in line would be food stamps (SNAP) for families that work but do not earn enough to feed their families. I suppose tax credits for child care would have to go also since most employers do not provide child care for their employees.
There is a long list of other benefits that could be added to this list, with legitimate arguments on both sides of whether they are corporate subsidies or social obligations, but the aforementioned three seem undeniably to meet your target of corporate labor subsidies. So if you want to eliminate them, what do we do with the tens of millions of families who get screwed by your proposal, including those who receive these social benefits but who would gain no benefit whatsoever from an increase in the minimum wage?
Every complicated problem has a simple answer…and it is almost always wrong.
Trickle up says
The way to phase out the EITC subsidy is as Bob proposes—by raising the minimum wage.
Christopher says
…those things would be needed a lot less. This has long been a key difference between the parties. Both would like to see the welfare rolls pared down, but Dems want it to be less necessary while the GOP just wants to kick people off.
TheBestDefense says
the thousands of people who are well above the min wage but rely on the EITC. Not unless he is proposing to raise the minimum wage to well over $20 per hour. And he did not propose that, whereas he did propose that the majority of taxpayers should subsidize our high wage earners:
“If we are going to subsidize anything (an arguable proposition, but one for a different discussion) it should be high-paying jobs”
Christopher says
I don’t think anyone is suggesting that those programs can or will disappear, but they will have to make up a lot less of the difference, with maybe some dropping off entirely, if the minimum wage is raised. Regardless of how much it is, there will still need to be assistance for those who find themselves unemployed anyway.
TheBestDefense says
in the first sentence of his post:
Government should stop subsidizing the labor costs of corporations and raise the minimum wage in Massachusetts to at least the current Boston living wage of $13.89 an hour
That means the poorest workers in America get cut loose, at a minimum. I don’t understand why government policy should be set to punish workers for the bad behavior of the employer community
petr says
… There is a function between wages and EITC (made concrete and real by the very name it has): more people with better wages will lower the overall… ‘subsidy’… outlay of the EITC.
It sounds as though you think that subsidy is just going to get — or ought to be — simply axed out of some purity of ideology (“poorest workers […] get cut loose“). I don’t see how that could possibly be the case. EITC is only required to pay out when there are people requiring assistance. We could, theoretically, raise the minimum wage to $200/hour and keep the EITC on the books, just without ever paying anyone so much as a single EITC dime. The existence of the program ameliorates a problem, it does not create one. If the problem goes away, the program can remain doing nothing… but forcing the program to do nothing does not, in the converse, make the problem go away.
TheBestDefense says
the EITC should be dumped, which is Neer’s proposal (“Government should stop subsidizing the labor costs of corporations and raise the minimum wage in Massachusetts to at least the current Boston living wage of $13.89 an hour“). I worked on the first two successful EITCs in Mass, the first by former Sen Tolman creating it and the second by former Rep Marzilli expanding it so of course I objected to Neer’s proposal to “stop subsidizing…”. After all, I did write Every complicated problem has a simple answer…and it is almost always wrong.
Neer’s lack of understanding in this area showed when he then had to ask what the EITC is, so I don’t take his post too seriously.
Much more worrisome is his strategy of offering to take away benefits from the working poor by raising the minimum wage to an entirely inadequate level. I cannot imagine a single head of household living in Boston, maybe a woman with two or three children at home, and living on $15/hr or $30,000/yr without what Neer called “corporate welfare” like food stamps, public housing or subsidized child care.
It should go without saying that ending the gross income disparity in the US is needed but there are tens of millions of real human lives that will continue to depend on government assistance even after we have continuously updated living wage law and that date is far far away. Yes, the Neer proposal was an ideological statement divorced from reality.
scott12mass says
I am fascinated by the whole subject and when I see someone doing their job I often find myself asking ” How much would they have to pay me to do that job?” Airline pilots earn every penny, pro athletes overpaid. I worry that with the government providing so many programs rent control, food stamps etc. we are actually perpetuating long term servitude. If market forces are allowed to work we might actually help poorer people build the type of generational wealth which will mean that a third generation immigrant family can move to Wellsley. I have this conversation with the septic guy who comes to pump my tank and we talk about how both his kids are going to college and they will never be driving his truck doing his job.
We can’t go cold turkey and stop assistance but we need to encourage a system where the grandmother cleaned hotel rooms, the mother worked the front desk, and the granddaughter owns the motel.
Christopher says
We can allow for a bit of rhetorical hyperbole, and it should be just as obvious that Bob does not favor eliminating public assistance altogether.
SomervilleTom says
This exchange illustrates the strategy of the 1%.
Notice how it pits the well-intentioned social consciousness of some against the equally well-intentioned (even if incorrect) economic interests of others in the 99% (the 1% doesn’t care), and focuses the debate away from the real problem — income and wealth concentration.
If the wealth and income now concentrated at the very highest fringes of the wealth and income distribution was returned to the 99%, much of this conflict would disappear like morning mist over a cool mountain lake.
Today, the “third generation immigrant family” cannot build the generational wealth needed to “move to Wellesley” because that wealth has already been moved offshore by the 1%. That problem is best solved by recapturing that wealth, not further penalizing the already-poor served by our already inadequate safety net. This is why working-class support for Mitt Romney is so dissonant — Mr. Romney and his family exemplify the way that the 1% plunders the working-class.
Just to pick on the example offered by scott12mass, in today’s world (at least in Massachusetts), it’s well-nigh impossible for the granddaughter to get the financing needed to own the motel, and even if she does the motel has to compete against giant chains that pay minimum wage to all involved, jumps through hoops to avoid providing health insurance for the employees, and in doing so keeps room rates so low that the family-owned motel can’t survive. There’s a reason why so few of those family-owned motels still exist. That reason is NOT that the owners were greedy or that the public assistance programs are too generous. Meanwhile, the would-be patrons can’t afford to pay a higher rack-rate because most of those patrons have had their disposable income sucked into the same offshore accounts.
The 1% is sucking ALL the wealth out of the consumer economy. That’s why the consumer economy is so grim.
Peter Porcupine says
‘There’s a reason why so few of those family owned hotels still exist….”
In Somerville perhaps.
In a quick and unscientific look at Cape Chamber websites, the individualways family owned hotels outnumber the national chaims by at least 4 to 1 and really much more.
You speak of metro west and Boston economies as if they pertain to the entire state, and to our state as if it were the nation. It’s the What’s the Matter with Kansas phenomenon. It’seems why many cannot get excited about concentrations of wealth or be discouraged about the working class being unable to rise up. They look around and it is counter to their own valid experience so they dismiss it.
A new restaurant in Orleans is owned by the grandchild of a busboy whose child managed a seafood place. We see bootstrapping every day.
When you do these 1 percent statistics – are they averages or medians? Because a couple of George Soros types SKEW an average. Are there any median numbers about concentration?
SomervilleTom says
The “skew” of an income or wealth average is the point of the exercise! When people speak of “average” income or wealth, they tend to assume a “normal” distribution, relatively balanced around the average and with relatively thin tails. The point of the wealth distribution is that the upper side is EXTREMELY skewed, so that the wealthiest 1/2% are hard to graph on a linear scale. Someone whose net worth is in excess of $1B is more than a thousand times wealthier than someone whose net worth is $1M. Most people in Massachusetts don’t come close to $1M in wealth (all wealth numbers I use are none-home wealth — the value of the principle residence is not included).
A tiny slice of the population (1/100th — 1%) holds an enormous share of the state’s wealth. It turns out that even getting data about the distribution is difficult — our information sources are not eager to make this data easy to access. Within the 1%, the top 0.5% have FAR more than those those on the bottom of this already rarified bracket.
Wealth distribution tends to be a scale-free distribution — linear on a log-log scale. That means that there are tens of thousands of people at the low end of the distribution for a single individual with tens of thousands times as much wealth at the top end.
One informative approach is to use quintiles. A wealth distribution is binned into five quintiles — each contains 20% (1/5th) of the distribution. Then, within the top quintile, look at the top 1% (of the total distribution).
The point is that when we talk about “average” or “median”, we typically end up with ZERO insight into just how wealthy the very wealthy are. You mention George Soros, and he’s a perfectly reasonable choice. Massachusetts has a number of extraordinarily wealthy people.
I am genuinely curious about actual statistics (as opposed to anecdotes) about motel ownership in MA. My comment is based on driving Route 1 from Boston to the NH line, where the old motels (and their fabulous neon signs) are pretty much all gone, and Route 2 from the NY line east into Cambridge. My perhaps incorrect impression is that the old motels are pretty much gone — replaced by “Quinta”, “Motel6, “Quality Courts”, or the other chains.
Christopher says
…that this comment could have just easily applied to our exchange on tipping above, another instance of social conscience and economic interests of the 99% butting heads.
SomervilleTom says
Refusing to pay a reasonable (20-25%) tip on the price of a meal amounts to theft, especially when the diner knows full well that current Massachusetts law and practice is to suppress the server’s hourly wage so that tips are treated as income.
That theft is the same whether diner is scraping by themselves or is a billionaire.
Christopher says
I’ve been tipping 15-20%. I believe it is the right thing to do because I do know how things work (though I wouldn’t be so sure that is common knowledge). The social conscience side says we should tip while my economic interests say hey, I’m trying to get by too. If the argument is well, you shouldn’t eat out then, congratulations, you’ve destimulated the economy because people will spend less altogether if they are obligated to pony up so much for the employer’s shortfall.
There’s also no consistency. As I mentioned elsewhere some charge for their labor, like car mechanics; some are customarily tipped, like servers, paper deliverers, and hotel cleaning staff; some never AFAIK get tipped such as checkout clerks and gas station attendants. Elsewhere it sounded like you agreed with me that tips were a gratuity – a gift that is only between the customer and the server. I still strongly disagree with your assessment that it is theft to not tip, just stingy.
SomervilleTom says
We both know that tips are expected in Massachusetts restaurants. We both know that employers pay lower wages based on that practice. The government imputes income on the difference between the $3 “restaurant” wage and the $9 “minimum” wage, assumes that the $6 per hour comes in tips, and taxes accordingly. Discussions about hotel staff, gas station attendants, and such is a distraction: we’re talking about restaurants, and there isn’t any question about whether or not tipping is expected by all parties.
My argument is that when you eat out, you should add the tip to the price you think about when you contemplate going out for dinner. The lower 15% rate was common practice decades ago. In today’s Massachusetts, 20% is the prevailing minimum. Many restaurants apply an 18-20% tip for parties in excess of some number of people (6 or more, for example). If your budget for a night out is $85, then you should limit your restaurant tab to $70 and tip your server $15.
I agree that tips SHOULD be a gift. The reality is that they are not.
“Stingy” is ordering the $12 kid’s portion instead of the $18 entre because of the price. “Theft” is stiffing the server who graciously brings either.
scott12mass says
If you go out you are helping the economy (and the employees) and I’m sure any restaurant is happy to have you. If I go out and find a bargain (Annies Country Kitchen in Sturbridge- Wed night 2 entrees $13.95) I will add a little extra to my tip knowing the wait staff works as hard to bring me my dinner as they do the “high roller” at the next table eating surf and turf. When the place becomes the next big thing the restaurant can raise their prices and move into the 4 star experience. Stingy seems harsh.
TheBestDefense says
It does not mean “phase out” or any other thing. Neer is an intelligent and very well educated man. I will not re-interpret his words and put my meaning on them, an unfortunate practice that too many BMGers engage in.
If he had called for an end to corporate tax subsidies, like the ITC, the R&D credit or single-sales factor he would have had a much more sympathetic ear here. If he called for significant community/state impact fees for businesses that underpay, I would have been interested in the specifics. But punishing the working poor because public policy does not hold employers socially accountable is a really bad policy to come from the progressive community. Adding a comment that we need to consider subsidizing high wage earners send the post into the land of Bizarro.
Christopher says
…that you have taken one’s words out of context when you really should know better and make him sound evil, when he more likely than not agrees with you more than not. Just like when you recently accused jconway of wanting to take away entitlements from supposedly complaining seniors. YOU are the outlier here; the rest of us know exactly what they mean.
TheBestDefense says
I did not even come close to suggesting he is evil. I called him “intelligent and very well educated” and said I read his words literally and quoted them exactly. I just think his lack of understanding of what he calls “corporate welfare” leads to bad policy proposals. There is nothing evil about disagreeing with me. Just back it up with the facts and don’t make it personal (hint, hint).
jconway says
I would agree with our senior Senator, as Bob has in the past, that a $22/hr minimum wage or living wage would be the ideal. As you frequently point out, such a notion would be dead on arrival in our current legislature. So focusing on a $15/hr minimum wage is a good place to start, it is a policy that would significantly minimize the corporate welfare effect Bob and other economists have pointed out occurs via the existing (far too low) minimum wage.
Mentioning the corporate welfare and framing raising the minimum wage as a welfare reform effort does not constitute an endorsement of cutting welfare subsidies, cutting or eliminating EITC, or altering social policy at all. If anything, it is a way to reframe the issue around the fiscally conservative and socially progressive notion that workers deserve to get paid their worth by the companies that employ them, and that the social safety net shouldn’t be abused by big business which is using it to get around it’s moral and societal obligations.
Opposing corporate welfare is a political framing device, not the goal of this policy. The policy goal is to ensure that working people are able to continue to afford living in this state, one I know you and Bob share.
nopolitician says
Why not create a minimum wage in the $15/hr range with an EITC that gets people to the $22/hr range?
jconway says
I am not the one arguing raising the minimum and expanding the EITC are mutually exclusive propositions. I am definitely for a both/and approach to this issue.
fenway49 says
calling for elimination or reduction of the EITC eligibility as concerns individual beneficiaries. I did see him suggest that, to the extent that we take action to raise wages (which won’t go to a minimum $22 any time soon), we relieve some of the burden on the public fisc resulting from low wages. There is little question these subsidies provide a safety valve allowing employers to continue paying wages too low for workers to get by on without help.
As I see it, what Bob’s proposing — simply to raise wages, no more and no less, and decrease thereby the amount of public subsidy needed — already is built into the system. As the EITC synopsis from Mass Budget that you cited says, “The value of the credit declines slowly as income rises.”
I took his line about high-wage jobs not to suggest that we should subsidize high-wage workers, but rather create incentives for employers to create high-wage jobs. The current state of affairs creates a very attractive incentive to pay low wages, safe in the knowledge that the rest of us will pick up the slack via EITC, food stamps, etc. That’s a bad setup and we should be thinking of ways to change it. In no way, however, do I mean that we should cut back on any struggling individual’s access to EITC, food stamps, etc., in the interim.