Monthly Archives: June 2016

Puerto Rico’s minimum wage and statehood

Puerto Rico is in deep trouble and it’s getting worse. Unemployment is at 12%, double the next worst state or territory (Alaska), tourism is down, and poverty is at 41%. Tourists have begun to go elsewhere in the Caribbean: Bermuda, Haiti, Jamaica and Cuba. The island is effectively bankrupt and would have filed for bankruptcy last year except that they legally can’t. But neither can they pay their bills. The territory will go into default in less than 2 weeks, on July 1, 2016 unless congress creates a new funding mechanism for them before then. Statehood would allow Puerto Rico to go bankrupt, but there is no way for statehood to be achieved by July 1.

Puerto Rico's minimum wage is vastly too high; here it is compared with other US states.

Puerto Rico’s minimum wage is vastly too high for its median wage. From Preston Cooper, Economics21.

While bankruptcy might help Puerto Rico short-term, as would a new line of credit, it is worthwhile to ask why Puerto Rico is in this bad shape. Why are they worse off than Guam, for example; Guam is far more isolated. Puerto Rico isn’t run particularly well, but it’s no worse than Guam or  Illinois. My first thought of what Puerto Rico should do differently is that they need to lower their minimum wage.

As the chart on the right shows, the wage of the average working Puerto Rican is very nearly the minimum wage. This is because, Puerto Rico’s economy is essentially tourism, and it competes for tourists with lower-wage Caribbean countries, Jamaica, Haiti, and Cuba. Neither Alaska nor Guam compete for tourist dollars with low cost alternatives. And Guam, in particular has a strong military presence; those are their main tourists. Competing for tourist dollars is a disaster for Puerto Rico that they could solve if they could lower their minimum wage. And a lower minimum would not cause people undue suffering because Puerto Rico is a place one can live cheaply. A single person may need to earn $8.50/ hour to live minimally well in Michigan, but his Puerto Rican cousin can get by on far less in Puerto Rico. With a lower minimum wage, tourism would be more attractive, and the government would not spend so much because they could pay their minimal-skill workers less. The net result is more Puerto Ricans would be able to find jobs, and the government would have a better chance to balance its books.

What prevents the territory from lowering its minimum wage is that it’s part of the US, and we set the minimum at $7.25/hour. Many people might prefer to work for less, but they can’t unless the federal government grants them an exemption. Without it, there is no obvious way for Puerto Rico to ever pay its bills.

Four years ago, in my first blog post, I suggested that Detroit should lower its $15/hour ‘living wage‘, a wage unduly burdened the city budget, and added to Detroit’s rampant unemployment and corruption. A year later, the city removed this barrier as part of bankruptcy, and saw significant improvementsI’m not alone in suggesting a lower minimum wage. The alternative is state-hood followed by immediate bankruptcy.

Robert Buxbaum, June 19, 2016.

June 14. First Bourbon whiskey

On this day, June 14 1789, whiskey was distilled for the first time from maize (corn) by Rev Elijah Craig . He named his product “Bourbon whiskey” as a reference to his home in Bourbon County, Kentucky. Until the innovation of the Rev Craig, US whiskey was made mostly from rye, usually with some malted barley added as an enzymatic modifier for the rye starch. George Washington, the first US president, made whiskey from rye this way, becoming the largest distiller in the US in the late 1700s. He used very little malt.

For reasons that are not at all clear, consumption of Bourbon whiskey has far surpassed that of rye whiskey in the US. Here, Senator Mitch McConnell tells congress about the spirit of Kentucky, Bourbon whiskey. And here is his speech set to music along with other news of the day, and a comment by President Obama saying he’d enjoy having a drink with Senator McConnell. What would that drink be? I’ll guess a mint julep, the classic Kentucky concoction, typically made with Bourbon, sugar, and spearmint.

On the topic, I should mention that the favorite drink of Lyndon B. Johnson, was Bourbon and branch water. And that Theodore Roosevelt served mint juleps at The White house (if you played tennis with him) using his own, White-house grown mint, but that Theodore Roosevelt made his mint juleps with rye, not Bourbon. June 14th is also flag day (though only celebrated in Pennsylvania), and the day of the mutiny on the HMS Bounty, and the day of the Marijuana act, 1937. Hawaii joined the union this day, and Paris fell in WWII.

GWKuhn outflow point. During a storm this outflow is filled to the roof.

GWKuhn outflow point. During a storm this outflow is filled to the roof.

Robert Buxbaum, June 14, 2016. This is also the day I got to see the George W. Kuhn sewage retention facility. A few days ago, I walked into the outflow pipe, some 60 feet wide by 22 feet tall. –> see picture. Among the things I was looking for were convenient connection points i could use to separate the storm from the sanitary sewage flow through the facility. Some months ago, I suggested that Michigan might change its state bird to the wild turkey.

Skilled labor isn’t cheap; cheap labor isn’t skilled

Popular emblem for hard hats in the USA. The original quote is attributed to Sailor Jack, a famous tattoo artist.

Popular emblem for hard hats in the USA. The original quote is attributed to Sailor Jack, a famous tattoo artist.

The title for this post is a popular emblem on US hard-hats and was the motto of a famous, WWII era tattoo artist. It’s also at the heart of a divide between the skilled trade unions and the labor movement. Skilled laborers expect to be paid more than unskilled, while the labor movement tends to push for uniform pay, with distinctions based only on seniority or courses taken. Managers and customers prefer skilled work to not, and usually don’t mind paying the skilled worker more. It’s understand that, if the skilled workers are not rewarded, they’ll go elsewhere or quit. Management too tends to understand that the skilled laborer is effectively a manager, often more responsible for success than the manager himself/herself. In this environment, a skilled trade union is an advantage as they tend to keep out the incompetent, the addict, and the gold-brick, if only to raise the stature of the rest. They can also help by taking some burden of complaints. In the late 1800s, it was not uncommon for an owner to push for a trade union, like the Knights of Labor, or the AFL, but usually just for skilled trades for the reasons above.

An unskilled labor union, like the CIO is a different animal. The unskilled laborer would like the salary and respect of the skilled laborer without having to develop the hard-to-replace skills. Management objects to this, as do the skilled workers. A major problem with unions, as best I can tell, is a socialist bent that combines the skilled and unskilled worker to the disadvantage of the skilled trades.

Not all unionists harbor fondness for welfare or socialism.

Also popular. Few workers harbor a fondness for welfare or socialism. Mostly they want to keep their earnings.

Labor union management generally prefer a high minimum wage — and often favor high taxes too as a way of curing societal ills. This causes friction, both in wage-negotiation and in political party support. Skilled workers tend to want to be paid more than unskilled, and generally want to keep the majority of their earnings. As a result, skilled laborers tend to vote Republican. Unskilled workers tend to vote for Democrats. Generally, there are more unskilled workers than skilled, and the union management tends to favor Democrats. Many union leaders have gone further — to international socialism. They push for high welfare payments with no work requirement, and for aid the foreign socialist poor. The hard-hats themselves tend to be less than pleased with these socialist pushes.

During the hippie-60’s and 70’s the union split turned violent. It was not uncommon for unionized police and construction workers to hurl insults and bricks on the anti-war leftists and non-working students and welfare farmers. Teamster boss Jimmy Hoffa, supported Nixon, Vietnam, and the idea that his truckers should keep their high wages at the expense of unskilled. Rival teamster boss, Frank Fitzsimmons pushed for socialist unity with the non-working of the world, a split that broke the union and cost Hoffa his life in 1975. Eventually the split became moot. The war ended, US factories closed and jobs moved overseas, and even the unskilled labor and poor lost.

Skilled workers are, essentially managers, and like to be treated that way.

Skilled workers are, essentially managers, and like to be treated that way.

The Americans with Disability Act is another part of the union split. The act was designed to protect the sick, pregnant and older worker, but has come to protect the lazy, nasty, and slipshod, as well as the drug addict and thief. Any worker who’s censored for these unfortunate behaviors can claim a disability. If the claim is upheld the law requires that the company provide for them. The legal status of the union demands that the union support the worker in his or her claim of disability. In this, the union becomes obligated to the worker, and not to the employer, customer, or craft — something else that skilled workers tend to object to. Skilled workers do not like having their neighbors show them high-priced, badly made products from their assembly line. Citing the ADA doesn’t help, nor does it help to know that their union dues support Democrats, welfare, and legislation that takes money from the pocket of any one who takes pride in good work. We’ll have to hope this split in the union pans out better than in 1860.

Robert Buxbaum, June 5, 2016. I’m running for water commissioner. I’d like to see my skilled sewer workers rewarded for their work and skill. Currently experienced workers get only $18/hour and that’s too little for their expertise. If they took off, they’d be irreplaceable, and the city would likely fall to typhus or the plague.