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economy

Residents need more money in their pockets

At Thursday evening’s League of Women Voters forum for state legislative candidates, one of the questions was about increasing minimum wage to $15 per hour.

Tennessee has no state minimum wage, so the federal minimum of $7.25 per hour applies here. Minimum wage isn’t a local government issue, since state law prevents cities and counties from mandating a minimum wage, and anyway it wouldn’t make sense for a place like Oak Ridge to require a wage higher than that in the community next door.

At the forum, incumbents Rep. John Ragan and Sen. (and Lt. Gov.) Randy McNally, both Republicans said that the market should determine rates of pay, not government. Their opponents, Democrats Richard Dawson and Stuart Starr, both supported increases in the minimum. I’m disappointed by the incumbents’ opposition to a higher minimum wage, because I see the inadequate incomes of many local workers as a serious challenge for our whole community. Oak Ridge has far too many hard-working citizens who are having difficulty making ends meet without public and charitable assistance. I said as much in one of my responses to the Progress PAC questionnaire:

The biggest challenge I see … is that too many people don’t have enough money.  [This is not only a problem for these people, but also for our housing, schools, businesses, and civic affairs.] …The U.S. economy no longer generates jobs that pay the kinds of wages to low-skilled workers that earlier generations received. … I believe that we need a higher minimum wage in Tennessee, but city government can’t do that on its own…

The summer I was 17, I had a retail job that paid the federal minimum wage. According to the Bureau of Labor Statistics Consumer Price Index Calculator, the hourly wage I received back then was equivalent in buying power to $10.36 in September 2018. That’s substantially more than the current federal minimum of $7.25 per hour. Notably, a full-time worker getting $10.36 an hour should be able to afford a place to live here in Oak Ridge (unlike full-time workers getting $7.25, who are getting turned down by landlords who judge that they don’t make enough money to pay rent).

Over the last 80 years (since it was first enacted in 1938), the U.S. minimum wage has set a floor on the wages and salaries for all American workers (employers who want workers with more than minimum qualifications typically need to pay more than the minimum in order to attract and retain good employees), and helped create and support the middle class. I think our nation and state need to start raising that floor again, because hard-working people should not have to depend on charity to survive, and they deserve to have the resources to be good parents to their children, be good customers for business, and good contributors to the community at large.

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Are state and local budget-cutting slowing economic recovery?

This thought-provoking analysis by Nobel economist Paul Krugman probably has implications for the decisions that Oak Ridge needs to be making on various aspects of the city budget. He says that state and local budget cuts are “exerting a powerful drag on the economy as a whole.” He compares government spending during the Obama-era economic expansion (starting in June 2009) with the Reagan-era expansion (starting November 1982):

By this stage in the Reagan recovery, government employment (which is mainly at the state and local level, with about half the jobs in education) had risen by 3.1 percent; this time around, it’s down by 2.7 percent.

Government purchases of goods and services by this stage of the Reagan recovery (adjusted for inflation) had risen by 11.6 percent; this time, they’re down by 2.6 percent.

And the gap persists even when you do include transfers, some of which have stayed high precisely because unemployment is still so high. Adjusted for inflation, Reagan-era spending rose 10.2 percent in the first 10 quarters of recovery, Obama-era spending only 2.6 percent.

He says “We’re talking big numbers here. If government employment under Mr. Obama had grown at Reagan-era rates, 1.3 million more Americans would be working as schoolteachers, firefighters, police officers, etc., than are currently employed in such jobs. And once you take the effects of public spending on private employment into account, a rough estimate is that the unemployment rate would be 1.5 percentage points lower than it is, or below 7 percent — significantly better than the Reagan economy at this stage.”

We could read this as saying that local governments should be increasing property taxes (and water and wastewater rates) to get more money moving faster within our local economy, but Krugman says the spending should happen at the federal level:

We can take a big step toward full employment just by using the federal government’s low borrowing costs to help state and local governments rehire the schoolteachers and police officers they laid off, while restarting the road repair and improvement projects they canceled or put on hold.

That federal spending isn’t going to happen. Oak Ridge has not (yet) laid off police officers, but the schools have cut teaching assistant positions, and there are some capital projects we’ve deferred… How would our economy — and retail shopping areas — look right now if we dug into our pockets and spent more on our local needs? (That’s not likely to happen, but this is the kind of discussion we ought to be having.)

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