Saturday, September 05, 2015

Why Did The California State Legislature, Controlled By Democrats, Defeat A Bill To Increase The Minimum Wage?


Richard Mathews is a candidate for California State Senate District 27 (Malibu, Encino, Santa Clarita, Thousand Oaks). Richard has a history of progressive leadership in the California Democratic Party, having served as a vice chair of the L.A. County party and a member of the executive board of the state party. Focusing on the climate-change crisis and local environmental concerns, Richard has helped the party take strong positions on these crucial issues.

Richard is also an activist who continues to take action on the issues that concern his local community. Whether it’s calling for the thorough cleanup of the Santa Susana Field Laboratory (site of a nuclear-power meltdown and toxic dumping), organizing and bringing awareness of the dangers of oil-train traffic through his district, or responding to the recent oil spill that affected Malibu, Richard is quick to step up and take action where action is needed.

Long-held progressive values are the backbone of Richard’s commitment to both social and economic equality. He has led the fight on raising the minimum wage, opposing the death penalty, and obtaining equal access to economic and educational opportunities. He wrote the state party platform language that calls for eliminating nuclear power. He made one of the party's top legislative priorities restoration of Glass-Steagall banking protections.

Richard has a strong background in science, having studied and worked in astrophysics at Caltech. He then turned to a successful career in computer engineering. He recognizes that our government leaders need a better understanding of science and a good working knowledge of the scientific process. Seeing such critical thinking skills as essential for making decisions on the most important issues of our day, he considers his experience and perspective a much-needed addition to our state legislature.

Richard has been recognized as one of the few true progressives with a real chance of winning. To find out more about his campaign, visit

We asked him to introduce himself by helping us understand how the state legislature, controlled by Democrats, could have failed to pass a minimum-wage increase last week. Please give it a read, and if you like what you see, consider contributing to Richard's grassroots campaign here.

Minimum Wage Bill Defeated
by Richard Mathews

Last week, the California Legislature killed a bill for increasing the state minimum wage. The bill would have set the minimum to increase in steps to $13/hour in two years and then tying it to inflation for the first time.

Congress also has bills before it to increase the minimum currently stagnating at $7.25/hour, but Republicans will not give it a chance.

Overcoming this is why my leadership on this issue is needed in Sacramento. I succeeded in winning support for increasing the minimum wage in the California Democratic Party’s platform. As your state senator, I will win higher minimum wages for millions of California workers.

In 2011, the state party approved my resolution that called for a national increase to $11/hour and tying it to inflation. You might think that would have been an easy thing to get Democrats to accept, but it wasn't. This resolution was approved in committee by a single vote. It required hard work to lobby those committee members. It involved parliamentary maneuvers to make sure I had the needed votes.

In 2012, we got the state party platform changed to include the call for tying the minimum wage to inflation.

In 2013, in my position on the Legislation Committee of the state party, I got the party to list a minimum wage bill as one of its top legislative priorities. The state then passed the law to increase the minimum wage to $10/hour starting in 2016. The bill originally called for an inflation adjustment after that, but the adjustment was removed at the last minute.

The inflation adjustment is crucial because inflation has effectively reduced the value of the minimum wage, and we shouldn't have to fight this over and over again. We never corrected the minimum wage for the double-digit inflation of the '70s and '80s, and it is far past time that we do so. Our economy thrived on the higher value we had in the '60s. We can repeat that success.

The federal minimum wage has been increased 22 times. Real GDP per capita has steadily increased, even when the minimum wage has been raised. Jobs have grown even when the minimum was increased.

Since my first efforts on this, Raise the Wage has grown into a huge movement. We've won $15/hr in L.A. City and L.A. County, a level that is suitable for our high cost of living. I will bring an increase to all of California, and we will adjust for future inflation.

Science and Economics

My background is in computer engineering and astrophysics, so it is important to me to follow the science.

The Socratic Method was used by the ancient Greeks. You just think through a problem and come up with what "must be" the answer.

What were the successes of the Socratic Method? A belief that the world is made of four elements: earth, air, water, and fire. A belief that you could turn lead into gold if you could just find the right recipe. A belief that the Earth is the center of the universe. The highest technology developed in that time was not much more than steel and the wheel.

On the other hand, the Scientific Method relies on experimentation. Data. Facts. You repeatedly go through a cycle of developing a model, using that to make predictions, running experiments, and using the results to confirm or refute the model. The goal is to improve the model to make more accurate and more detailed predictions and repeat the cycle.

What are the successes of the Scientific Method? Computers. Smart phones. Internet. HD TV. Sending men to the moon. Sending spacecraft to the edge of the Solar System.

We have a lot of economists today who work by the Socratic Method. They say that inflation must be soaring despite what the numbers tell us. We must need to make people suffer. The free market must lead to the best of all possible worlds.

The existence of all that bad economics does not mean that all economics must be bad. There are good economists out there who really rely on data to produce solid results. Just as a physicist can model zillions of molecules of air using the ideal gas law and reduce all the variables down to just temperature and pressure, so good economics can accurately model the way billions of people contribute to the economy.

You can look at 50 states. You can look at 20 or so developed countries. You can look at hundreds of years of economic data for each. Together, you have thousands of data points. You make predictions, and you test those predictions against new data that comes in. You use natural controls on experiments by comparing jurisdictions where something changed and comparing with similar jurisdictions that didn't have similar changes. You include variables for the change you are interested in studying as well as for everything else that incidentally changed.

In my political life, I have worked on many economic issues such as budgets, job creation, boosting technology and infrastructure, and banking regulations. I always look for economics based on science. If I read studies and they don't show predictions leading to experiments leading to conclusions, I ignore them.

Minimum Wage Science

When you apply science to the minimum wage, you find that the fear encouraged by our opponents is completely unfounded. Increasing the minimum wage has never created a statistically significant loss of jobs. It has never created a significant increase in prices. I has never slowed the economy in any measurable way.

But, using the Socratic Method, you might say, "This doesn't make sense. The money for the higher wages must come from somewhere." You'd be as wrong as those who believe in a flat Earth (which is funny because even the ancient Greeks knew the earth was round and had even done quite a good job at measuring its size).

If one company increases wages, you'd be right. The money does have to come from somewhere. Some combination of the following must happen:

the company cuts costs, for example by cutting the number of employees;
the company increases revenue by raising prices;
the company reduces profit.

But this is not the case if many companies raise wages at the same time.

The American Economic Association sent a letter on the minimum wage to President Obama and Congress last year. It was signed by more than 600 economists, including seven Nobel Prize winners and eight who have served as the organization's president. In calling for an increase in the minimum wage and then indexing to inflation, they wrote,
In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.
It is crucial to remember that we are talking about income not assets. It is hard to increase everyone's real assets at the same time. It is not so hard to increase everyone's income at the same time. The key is to make money move faster. Higher wages do just that.

To use some simple round numbers, say you have a thousand people in a civilization. Each has a thousand dollars. The total money supply is a million dollars. Now say each dollar changes hands once a month. The civilization's combined income is $12 million per year. With a thousand people, the average income is $12,000/year.

Now speed things up. Everyone still has $1000, but dollars change hands twice a month. Total income becomes $24 million per year, so the average is $24,000/year.

The money to increase incomes didn't have to come from somewhere. The average person still has $1000. We didn't add money to the economy. But the income for every person could double.

This is what happens when we raise wages broadly.

Say you own a pizza parlor. Since the 2007-2008 crash of our economy, business has been very bad. Many of your former customers don't have enough cash to be able to order your pizza. If you (and only you) increase your wages, you'll have higher costs but no more customers. If everyone increases wages, a lot of those former customers will have some leftover cash and start ordering pizza again. Your profits will increase because you are selling more pizza. Your profits will decrease because you are paying more to your workers.

And here is the big thing: every study that has ever looked at real data has found that the increase in profits and the decrease in profits just about cancel. The increased wages are paid for by speeding up the flow of money through the economy.

For example, Card and Krueger compared what happened in New Jersey when the minimum wage increased with what happened in nearby portions of Pennsylvania that had no increase. They found jobs were not lost. In fact they found that low-wage jobs were gained. While they did see an increase in overall New Jersey prices, these increases were not associated with stores most affected by the minimum wage increase.

The Center for Economic and Policy Research reviewed studies on the matter and found the most likely reasons for minimum wage increases not affecting the number of jobs are "reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners ('wage compression'); and small price increases."

Increasing the minimum wage does not cause people to lose jobs. It does not cause prices to shoot up. It does not cause profits to fall.

Increasing the minimum wage does reduce suffering of poverty for many people. It does give people the opportunity to start lifting themselves up.

Join me to make better lives for ordinary people. Join me to apply sound science to developing good policy. Whether it is economic science or climate science, high tech computers or water delivery, science and engineering make our lives better--if we actually listen to the scientists.

Richard M. Mathews
Mathews for State Senate 2016

Again, you can contribute to Richard's campaign for the state Senate here.

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