to try to try to prioritize and it's a very important thing to not just do things that have an easy our ally. >> organizationally, as an executive, one person asks how have you organized your own leadership and your team around the client experience? ..

we are all one company and it's not just hung up on silos and exactly where peer i.t. is the same way. there is essential i.t. but they very much view their clients like controlling what they do and help setting priorities. the key thing is a lot of communication and i think a lot of senior level involved in. i don't mean senior people making all the decisions, but typically, especially those taken that kind of things, you need someone senior to make the call that we are going to prioritize this project over that project. a lot of collaboration. one of our core values this collaboration. it is hard to say how you get a

culture, but it takes a great culture which causes collaboration and creates innovation. >> are you concerned about discoverability to stay in illinois given the state's tax structure and deficits? people are going -- they are in premed at because they are anonymous. >> e-mail, i think that chicago is our home. we are not going anywhere. i think that from a citizen's perspective, i am concerned about the current fiscal state of our state and i am concerned about our ability to attract new

businesses and obtain other businesses. you know if a spouse's company in the son of illinois, i made this an employee. so we are all affected by what is going on. i would like the statistics in our state that has not been good on us recovering, i'm not upgrading and we have got to fix it. we have been strong in the past. we need to get back to not being worse than california. [laughter] >> how would you advise governor rowan or on funding, financing and policy towards our state higher education from the university, community colleges et cetera?

>> i certainly think that in general there has been a big withdraw of funding from higher education. not just illinois, but across the country. that is part of what is led to the huge increase in student loans that i've mentioned before. i think prioritizing education. i can't speak specifically about funding, but generally education has got to be one of the best investment that we can make as a society, as a government as well as individuals. secondly, we have to spend this manner. i am not close enough to know what is going where peer just in general, my observation is schools have been tending to put you much money into infrastructure overhead kind of things. sometimes because people will donate for a building, but not

for submission. we need to make sure the money is going into educators and into the basics. generally speaking, investments in our education system will pay off in terms of attract and employers, in terms of having a capable workforce and growing our economy. >> i think that is great. as one of the professors, i agree with you 100%. david it has been a great discussion. would you like to make closing thought or points to the audience? >> i think it is a very exciting time to be in any business with what is happening in technology with consumers, with the ability to reach customers in different ways. it can be overwhelming.

we used to talk about -- >> just a moment left in this event. we will they pick your will they think you're a go like to from world and president jim yong kim on ending global poverty. this is hosted by the center for strategic and international studies. it is just getting under way. >> right here in front of us the emergency escape is on that corner. we will go outside and made across the street under the cherry blossoms. please follow me if we have to do some rain. i will be very brief because we want to hear dr. kim. this is a remarkable man who has done an exceptional thing with his still short life. i can't believe everything he has been doing. and now is taking on one of the most audacious goals possible to eliminate extreme poverty by 2030. there so many problems in washington today. whether it is iranian deal

isis. but here we have generally inspirational opportunity to focus on the problem. i can't tell you how grateful i met some of dr. kim talent and energy is willing to lead all of us into a consciousness about what is possible. it is not the problems we are dealing with. it is the opportunity for our future. i would like to say thank you relatedness after and we need to get right on with this program. so with warm applause, welcome dr. kim. [applause] >> good morning. thank you, john, for having us here and for that kind introduction. thank you for being here and for those on the webcast, thank you for watching. this is the second time i have spoken at this beautiful room and i am very happy to be here

again. before i begin i want to pause and remember the 147 students at the university college in kenya who were senselessly murdered a few days ago. schools and universities are sacred ground and all who study there should be safe as a former university president and it's a very close to home. i will actually be talking about conflict fragility and violence a little bit later. just 15 years into the new millennium, the economic development in poor countries and emerging market is truly a critical crossroads. master the attention of the near horizon concerns about the slow moving global economy, uncertainty about the price of oil and conflicts in the middle ukraine country and eastern parts of africa.

we see that the decisions made this year will have an enormous impact on the lives of billions of people across the world for generations to come. 2015 is most important year for global development in recent memory. in july, world leaders will gather to discuss how we will finance our development priorities in the years ahead. in september world leaders will come together with the united nations to establish the sustainable development goals, a group of targets and goals set for 2030 in december, world leaders will gather again in paris to work out an agreement based on government commitment to less than the severe short and long-term risk of climate change. at the same time we witness the emergence of a major new player in developing aviation infrastructure investment bank led by china. now with more than 50 countries and regions signing on as

members with the right environment labor aviation infrastructure investment bank in the new development bank established can become great new forces and economic development of poor countries and emerging market. with the world bank see the development bank says potentially very strong allies in tackling the enormous for bringing much-needed infrastructure to the developing world. our mission at the world a group is defined by two goals. to an extreme poverty by 2030 and boost shared prosperity a 40% poorest in low and middle income countries. these goals are ambitious and as we think about the development banks, we have to admit there is more than enough work to go around. a 2030 we will likely need 40% more energy and face a 40% shortfall of fresh water,

pressures that may be further accelerated by climate change. we estimate an additional one to $1.5 trillion additional every year in infrastructure, rose, bridges, energy plants and increasingly the facilities. the world bank including the new ones could form alliance is, work together to port development that addresses these challenges we will all benefit, especially the poor and most vulnerable. it is our hope, indeed our expectation that these new institutions will join the world's multilateral development banks and private partners on a shared mission to promote economic growth that help support it. i will do everything in my power to find innovative ways to work with these banks. next week during the spring meeting of the world break group international monetary fund in washington, i will continue

discussions with chinese officials about the exciting potential collaborations. ambitions for economic development couldn't be higher. we no longer talk about billions of dollars for economic development. we talk about trillions of dollars which means we must be creative and use our resources to leverage the much-needed private sector investment to build infrastructure and create jobs. the decisions we make this year and the alliance's reform in the years ahead will determine whether we have the chance to reach the goal of the poverty in 15 years. good news is the world has made substantial progress already. when the population of 5.2 billion people, 36% at an extreme property. today the world population of 7.3 billion people an estimated 12% live in extreme poverty.

over 25 years have gone for nearly 2 billion people in extreme poverty to fewer than 1 billion. we still have nearly 1 billion people living on less than $1.25 per day. few of us can even imagine what that is like. let's remember what poverty is. poverty is 2.5 billion people not having access to financial services. poverty is 1.4 billion people without access to electricity. poverty is having a quicker children to bed at night without food and poverty is not going to school because in order to survive everyone in the family needs to make a few changes everyday. some say it's impossible, especially in 15 years, but we know it's possible. in part because of our success and because we've learned from years of experience about what has worked in particular context

and what is not. later in the year i will talk in-depth about strategies to boost prosperity for the bottom 40%, especially in the income countries. today i want to talk about a broad strategy to lift nearly a billion people out of extreme poverty and into the modern world. inside the world group for the past 50 years we continuously distilled and analyze our global in fighting poverty. as a result our advice to government has evolved over time. we now know our strategic investment involves even more. our strategy to end extreme poverty based on the best global knowledge available can be summed up in just three words. groh, a vast and insured. let me talk about each one. first, growth. the world economy needs to go faster and more sustainably. he needs to grow in a way that ensures the poor receive a greater share of the benefits of

the growth. we can reach the end extreme poverty only if we mark a path today towards a more robust and inclusive growth that is frankly unparalleled in modern time. decades of experience.if economic growth is the primary driver of the increase personal income and poverty reduction. sustained growth require stability in the form of low inflation manageable debt levels and reliable exchange rates. government policies must prioritize growth in sectors that increase incomes of the poor. they will continue to support government to make investments in a broad variety of areas in the fight to extreme poverty. in countries with greater amounts of mineral wealth, governments can encourage growth by investing in improved education systems in the development of more diverse economy. and most of the developing

world efforts to end extreme poverty will require us to focus on boosting agricultural activity. despite the global migration, 70% of the world's extreme poor still live in rural villages. they are mostly farmers work in informal jobs providing services to rural population. our experience in china shows and poor economies, growth in agriculture is four times more powerful in lifting people out of poverty than growth in manufacturing services. how can countries follow china's example. it depends on the local circumstances. sometimes it's a matter of giving farmers more control over how and what they produce. this is what vietnam did through the door to more economic renovation of the late 1980s. over the next three decades these became a top exporter of rice, coffee and tea in its poverty rate fell from 57 and

25%, helping farmers improved yields it requires increasing access to better water electricity. according to one study in bangladesh, six years after constructing 3000 kilometers of roads to connect communities to markets, household income increased by an average of 74%. promoting growth in agriculture depends in part on the integrity of the global system and at next meetings we will be in a discussion paper to develop a strong system one that raises incomes of the poorest provides adequate nutrition at the same time combat climate change. that is the growth part of the strategy. the second part of the strategy is to invest. either that i mean investing in people, especially to education and health. the opportunity to get children

off to a start happens just once investments early in life is far greater return than those made later on. poor nutrition and disease could have lifelong implications for mental and physical health, educational achievement. clean water and sanitation facilities at home and in school also have a substantial impact on future professional opportunities to help children avoid infections that cause developmental disabilities and ensure consistent school attendance, even after the beginning of. invest in the growth of women in particular are important because they have a multiplier effect on the well-being of an empowered through education, they have healthier children and are more likely to invest in the next generation. in schools, we also must set clear learning standards.

the level of learning among young people today in many countries is alarming. over 50% of young people in kenya who have completed six years of schooling cannot read a simple sentence. over 70% of children in mozambique do not have basic numeracy skills. those low achievement levels have devastating implications for when people look for jobs. we know using new technology can help transfer of educational outcome. for example bridge international academy is a software and tablets in schools to teach over 100,000 students in kenya and uganda. after two years, students average scores for reading a high risk and high above in the cost per student average academy is just $6 per student per month. one of the most effective ways to encourage investment extreme

poor and educational service delivery is accountability. found out -- a 90 day seeing patients. according to other research in india, primary teachers in public schools are at 25% of time and primary care doctors are 40% of the time his governments and providers create incentives for public employees to do better. those that do so will reach far greater returns on human capital investment. the final part of the strategy is to ensure. this means the government must provide social safety nets as well as systems to protect against disasters and the rapid spread of disease. national social assistance

protect against cutbacks in employment and promote growth in human capital development. for instance cash transfer programs can be substantial and cost effective. brazil's familia has cut extreme poverty by 28% for a cost of just 0.5% of gdp. despite successes like this, 870 million people in poverty still do not have any access to social assistance. another critical element is protecting people against catastrophic risk. examples include universal health care schemes, efforts to improve the quality of health care services, disaster risk management and financing tools like catastrophic dogs or drawdown facilities. for those not in finance this may sound technical. the so-called catastrophic bomb

make funding immediately available to countries responding to natural disasters. similar approaches should be used to protect against pandemics. ebola revealed the shortcomings of international and national systems to prevent, detect and respond infectious disease outbreaks. it also showed us the poor are likely to suffer the most from pandemics. the world bank group has been working with partners on a new concept that would provide much-needed rapid response financing in the face of an outbreak. the idea behind the pandemic emergency facilities to mobilize them leverage public sector resources to public funding and market private insurance mechanisms. in the event of an outbreak, countries would receive rapid disbursement which would in turn help contain outbreaks of us save lives protect economies. there is no single blueprint for countries in their efforts to end extreme poverty. the strategy outlined suggest

there are clear priorities for the future. first, agricultural productivity must increase. second, we have to build infrastructure that provides access to energy irrigation. third, we must promote freer trade is specifically provides greater access and enables enables entrepreneurs and lower middle income countries to grow businesses and create jobs. fourth we have to invest in health and education especially women and children and finally, we have to implement the social safety net and provide social insurance initiatives that protect against the impact of natural disasters and pandemics. nine months ago the world bank started one of the most ambitious reorganization in our history. we knew we needed to restructure in order to meet the evolving needs of lower middle income countries. and a world where capital is

more easily available, we need to add the greatest strength and that is the ability to marry our vast knowledge of innovative financing to deliver programs on the greatest impact on the poorest. a new global processes crosscutting solution areas and regional unit are working closely with government to develop customized poverty reduction programs. these are based on analysis of a wide range of local factors including demography and location of people in extreme poverty. our aim is to help countries translate global experience into practical knowledge and solve their most difficult problems. we know and in extreme poverty will be extraordinarily difficult. in fact the closer you are a goal, the more difficult it will be. the most persistent poverty will be in fraudulent environments.

in five years we expect more than half the world's extreme poor will live in conflict affected areas. conflict as we know when we've seen over and over can have devastating effects efforts to fight poverty. poverty is okay on flickr. for example due to joblessness discrimination corruption. these factors for example, made it easier for extremists in the middle east and africa. more violence destroyed elting bridges, schools, clinics and most importantly lives. the destruction of course cost is more poverty. we can help break the vicious cycle if we implement development policies and programs that promote growth, investors in the capital and ensure people against risk that can plunge them into poverty.

initiatives that strengthen the institution will also be very. governments must be more accountable to citizens of work to reduce arbitrary treatment at the hands of security forces and the demand for bribes for poor people. this too will help minimize the likelihood of violent conflict and eliminate drivers of poverty. when conflict persists, the hard truth is that poverty reduction is extremely difficult. progress is possible. over the last two years i've made three trips to africa to the great lakes region, to the horn of africa. our purpose was to take advantage of the opportunities when we are fighting ourselves. in these three regions we worked with partners to collectively move billions of dollars to promote regional development. we've taken steps to increase economic cooperation, which we hope will make it likely.

we've also increased the poor and most horrible come reducing the drivers. partners have included the european union, african development bank african union. this kind of collaboration is what gives us hope and a fighting chance to end extreme poverty. still it won't be easy. development has never been easy. we find encouragement in the record of the past 25 years. we reduce extreme poverty and shown that great gains can be made as the strategies grow, invest in ensure. in the fight to end extreme poverty, many countries have conceded in taking something that seemed impossible and made it possible. the end of extreme poverty is no longer just a dream. the opportunity is before us. governments of the world must seize this moment.

private-sector partners must step up. the world bank group, multilateral partners and new partners on the horizon must also seize the moment. we have to now collaborate with real conviction and distinguish our generation as the one that ended poverty. we are the first generation in human history that actually can add extreme poverty. this is the great challenge and a great opportunity. we will be guided by a half a century of evidence to back his spirit is doable. and there will be, i believe a significant achievement. we can end extreme poverty with a final push must begin right now. thank you very much. [applause] >> i wish i could start every

day with that. thank you.or kim. first, dr. kim has a board meeting. he will have to leave have to leave us hard stop at 10:25 p.m. >> the reality of fighting poverty. you have to go to board meetings. and i am just going -- i will moderate to bring questions up but i would like to start with one question if i may. that is when you said this isn't about winning the billions of dollars. this is spending trillions of dollars. when you talk about trillions to me talk about private-sector. governments usually know how to work with the nonprofit sector but they don't know how to work properly. what are your thoughts on how you will establish this partnership quite >> if you look at the numbers john camino official development assistance, foreign aid was about 130 billion last year.

all of us and if you add up every dollar, it is somewhere in the order of 180 or 200 billion plus. but we are talking one to 1.5. there is no way to get there. it is a very difficult time and capital now is without question beginning to of the emerging market. in order to be able to reach this goal we have to be much more clever about how we utilize the development system and link to it to the kinds of investments that we know will be the creator of jobs. how do you do that question work one of the things are trying to

do in one of the papers we will be presenting next week is one in which all of us although multilateral development banks sat down together and said let's get all the different sources of financing for development. let's put them all together and think strategically. if you look at all the different sources and start really would improve domestic resource, we've got to help countries have taxes in a more fair and we move away. that has got to be on the table. i was in london bitterly paid tribute to the u.k. government and prime minister cameron for sticking with this pledge of providing 0.7% of gross national income to development. there were a lot of criticisms inside the u.k. it is remarkable they set up under the criticism they keep going. why should we provide aid to

countries that they themselves don't collect taxes, especially from the rich. this is a question put on the table. one of the things we are learning is the public and private sector are part of the great hope going forward. for us we focus specifically on supporting the small and medium enterprises in developing countries that can create the kind of jobs that lift people out of poverty. it is a very complicated business getting that right. even within their own organization where people are very focused in the public sector and focus on the dirt and they are now talking to each other much more, but it's relatively new. my own sense is we have to bring the private sector into our development. people have been extremely dedicated to getting into the development conversation from the beginning. for the millennium development

goals, the private sector with never part of the conversation and we asked them to make donations. this time for the first time the private sector will be at the table talking about how we can meet these goals. >> for 25 years i had a bias about it, but it's not a bad day for the private sector to make profits, especially for channel away to make good in the world. we really believe there are many many women situations out there. the bottom line is unless we create bankable projects projects in which there will be a return, we are not going to get infrastructure. we have focused so much on doing this that we've created something called the global infrastructure. specifically it is focused on using all of our safety is at it. doing this kind of thing and bring it to the table so we can prepare the prospects. a sovereign wealth fund doesn't

have a whole staff of people who are used to putting together projects. so what we are hoping this will put those projects together. we will bring our safeguards and procurement standards to the table and prepared those projects and the decision will be on whether to invest. we feel we will create a very clear picture of risk and reward. a lot of these people they have all these ideas about projects be too risky. we think by bringing our experience to the table they will understand the risk reward ratio is very favorable. we are going to open a period your hand is up at the microphone. we don't have the night thank you t. ipds taiwan. there the question is about china's initiative to establish

the a.i. ip. what do you think of this event and what are the ways that the world they can cooperate with aiib? >> thank you. the world bank has very close relationship with china. it is a remarkable relationship and it goes back a long way but the recent relationship shaped by my predecessor way worked close with the chinese government to put together a report called china 2030. the chinese is on investment to one focused on consumption services. all of these things are still very high, but the lower growth rate of 7% are continuing. this is part of a long

conversation we been doing with china. we did one on urbanization, now one on health. we've been talking about the infrastructure big for the beginning. my position has been missing from the beginning. we have so much need for infrastructure that we welcome any new player. the chinese government has been very clear to us that this is not competition arrest but that they have been very very clear that they want to cooperate and we've already been cooperating. it is still early. they don't have articles of agreement. they haven't decided what instrument they will put together. i can think of many potential joint projects. we have this global infrastructure facility they could invest there. the fundamental issue for a busier enemy cannot be other institutions. your enemy has to be poverty. if your enemy is poverty, the natural thing to do is welcome

new players interested in developing the infrastructure that will end poverty. >> alex in the second row with a blue jacket please. >> good morning, dr. kim. my name is simon ntg. my question is pretty much the african point of view. most of the things he raised was pretty much about how developed countries use the tax to aid most of their developing countries. what is the world bank doing in a situation regarding having social safety and social security or situation of the tax system because if u.s.a. world a group actually involve and engage this developing countries in the aspect then they will learn as the policy of the world

bank to engage to come into that line. even if there is no money in terms of poverty for the low income or poor people but the system and infrastructure in place. so that is one aspect. >> i have too many other people. >> let me take what i think i understood your question to be. you know on the one hand there's one thing that i think is changed most dramatically about the world they grew. it is the extent to which we engage our client in discussions about what the right and to do is. in the early 1990s i was part of a group called 50 years is enough. we were on the streets trying to argue for the closing of the world they grew. we lost that argument as i have this job now.

and i have to tell you i have not seen any institution that is open to the world think in taking criticism and change in its practice over time. now the world bank group works closely to try to figure out what they want in terms of their own development. secondly, we are now aggressively moving forward so that every single project for beneficiary feedback. in other words the people benefiting the program will get feedback from that. we have also worked on programs that increase the accountability by very simple things like putting posters on the outside of school saying to the community the hours the teacher is supposed to be there and giving them a number to call if they don't show up. working with countries, accountability working with the citizens themselves as extremely important. a critical part of it and one of the things i mentioned is

building his detention is extremely important. we are working very hard to build institutions. there are countries, extremely poor countries are the top 1500 wage earners are exempted from paying taxes. we've got the call about what it is. this is not acceptable. we want to bring about their tax systems than we think that what we will find is that often the collecting of higher taxes or doing other things like removing fuel subsidies which are basically the most regressive tax system you can imagine. those things bringing more money into the public budget will allow countries to be able to provide the kind of social support mechanisms like cash transfers that we know to be effective. the strategy that i laid out,

grow invest, cher is not the strategy of the world bank group. for a long time we focused on growth to gdp. this particular formulation is new. putting growth, investment in people and ensuring the poor against plunging into poverty this is something new for us and we want to help every country especially in africa, get there. a huge part of the focus is in africa. that is where some of the most difficult challenges exist, but it is also the place where we have the highest ambition. >> alex in the fourth row baby with the green blouse they are. >> thank you. julie howard with food security. thank you for focus on agricultural product entity. i wonder if you would comment on the world bank's decision to withdraw court funding from the centers of the international research and world bank leadership and most important is to shins.

>> we have an withdrawn funding from ctir. we recognize the importance of agricultural research and we are in the process of finding how we can support it over time. we are focused on agricultural research getting better at the expansion of extension services. this is all very real. it is simply what we did was a part of the budget that had been without review simply renewing different grants to different groups over a long period of time. we simply moved that up into the light of day and find the right way to support their other parts of the budget these particular efforts. >> right here in the third row please. >> and john harper said george washington university. you said almost nothing about the institutional foundations and requirements particularly

civil society and the period >> you know, it is a 20 minute speech. [laughter] but those issues are critical. the civil society was on accountability. we've been working very close late to increase accountability. there are many ways we have been doing it. for example, afghanistan or travel is so difficult. we have actually brought villagers and members of the civil society into the project itself by giving them cell phone cameras so they have cell phones and cameras and they take pictures of the project. they have a function that can get rid of the pictures if they are ever questioned that they don't get in trouble. the level of involvement with civil society wasn't happening 20 years ago when it's part of their tremendous change in the world they grew. also tenure is a critical issue in one that sorting out is often

one of the most difficult thing to do. a country i know well, e. has been a calm a problem. we work on it and you are right. it is extremely important ashley and agriculture. >> first row right here. >> often died from this year. -- you checkout to increase poverty. could you elaborate on any world bank initiatives are planned to encounter the poverty emanating from the hot pot in the middle east like libya, yemen, syria iraq, gaza and so on. >> you know when i move with leaders of governments in the area, especially new leaders sometimes they ask us for support for arms. we can't do that.

but it is a constant conversation that i have been having with the great thinkers and leaders in that particular region. to what extent is the problem ideological and to what extent is the problem economic? i get a surprising variety of answers and they span the entire range from people who say you cannot approach this from an economic development active. it's an ideological problem. it is very much an economic goblin. so my guess is that it is somewhere in the middle. right now what we are really really focusing on is to try to do everything we can to at least eliminate the potential recruits that are there because they can't get a job and don't have an education. what are the major things we are trying to do? i agree with dr. ali, the

revered president of the economic development bank. we are going to work together on a major education issue. what we know is even though the gdp per capita in some countries in the region have gone sky high, educational outcomes are still very low. and so i think that something fundamentally different has happened in the prospects for quickly improving educational outcomes. so what i've told you about is essentially tiki learning modules from the con academy. any of you who -- i've done it myself. southpaw and is an amazing teacher and there are fantastic teachers in every language. what they do is essentially put very simple but affect a lesson into a very simple format on software. so at this academy does is

essentially put very low-cost tablet and tablets are as inexpensive as $25 to make. they put them in the classrooms and as the students learn the great secret is that teachers are learning too. rather than waiting 25 or 30 years to improve the quality of teachers you bring great teachers into the classroom right away. for $6 purse per month, they are able to do that and the teachers walk around and help the students who need the most help. the great news about the middle east if there is a shared language, shared literature. there is a way that we think we could take scale a new kind of educational program. we focus on areas that are weakest the science technology, engineering and math. will that make a huge difference? i am not sure. we know it's a huge issue and we

know that if we can have a regionwide discussion and take on another huge issue which is water. we are not naïve in thinking that measures focused on economic development full text. though we now are convinced we've got to try it. we've got to be aggressive about it in ink about the intervention we may take to scale that might have an effect on the conversation. >> this will allow us only one more question. gentleman in the third row. >> thank you. good morning. charles neustadt for the state department. given the fact that the chinese systems are so different, both economically politically and ideologically from those in the west, is it really possible to work with bad to help end

extreme poverty or in particular, are they seriously interest in doing that and what with the strategies be with the west in the world bank would have to use to work with them on that problem? >> gca from the state department ? >> used the term soviet. i am too old to change. you know, one of the lessons for the bank and the new development bank will learn is multilateralism is very hard. it's always been really hard, continues to be hard and the reason it is hard is for us, the reason i have to run back is that our boring lives with us. the conflicts that exist in the

world are present on the board. one of the great things about having a board that lives or dies is the people on the board get to know each other and what is happening is that they find ways of getting past difficulties that they wouldn't, i don't think if they only came a few times a year. so is china serious about reducing poverty? the chinese have lifted more people out of extreme poverty than anybody in the world by far. probably 600 million people. they did it for a very strategy inhibits growth that happened to a great extent in the manufacturing sector, but also agriculture. are they serious about it? absolutely. are the russians serious about us? they are also a number of very good standing of the world trade group and endorse fully our goal of ending extreme poverty.

i would say the end of extreme poverty is one of those things that the entire world has been able to agree on. it is probably the one sustainable development goal going forward in september but everyone seems to agree on. for us it is not a question of ideologically whether we agree or not. for us, it is a question of just ensuring that we get every single bit of experience and solutions in other areas than provide them to everyone who has the stargate. you know, for the first time in history, my understanding and i may be wrong, but my understanding is that in april of 2013 when the 188 member world government introduced -- endorsed the goal to end extreme poverty, was the first time the world bank group as a whole had

ever had clear goals. you know, one of the sword of fundamental lessons in enrichment is if you try to accomplish something you have to have a clear target with a clear ending. the end extreme poverty by 2030. if you go backwards, you have to rethink fundamentally if your organization is structured in the right way to get to the end of poverty. we restructured because we knew global knowledge was not flowing as well as the code throughout the organization. i think we're all happy you did that because with the emergence of these new banks the one thing they are not able to do quickly is to have 50 years of local knowledge inside the dictation. we want to be the group that provides back to god and everyone else. >> at least 50 other people would like to ask questions. we don't have time because president kim have to get back

to the bank. let me say this is an agenda allied not just for the world bank, but to all of us. this is a goal everyone in this room and everyone in the country should embrace. we should all stay thank you for your vision, your leadership. and would you please thank him with your applause. [applause] [inaudible conversations] >> you can watch the remarks of the world bank president again any time on our website. go to c-span2.org. coming up at noon, senator rand paul is expected to announce he is running for president. c-span will have live coverage from louisville, kentucky. senator paul will be the second to announce.

>> up next, a discussion on raising minimum wages. [inaudible conversations] >> well, good morning, everyone. welcome back to the peterson is to do for international economics. i'm not opposed there, president of the peterson institute and it is a great pleasure that we are looking at something a little below the surface, but of profound importance, which is how and why wages get that where they do for low-wage workers in the u.s. and in the global context. if i can speak for a moment

leaping into our panel and then our guest speaker later, thanks to a series of major grants from the orinda foundation, the peterson institute has been working on inequality and inclusive capitalism for a while. we did not get there first and most with the inner equality bestseller, but we've been doing substantial work around the issues particularly from herd of labor market and comparative financing across countries and how this affects outcomes for actual people. our basic premise, which i hope today and all of our guest speakers i know will reflect is that when you start talking about the tendency to be farmers then the weather. you sort of say it is bad and then just accept that is the way it is. however you rail against the weather and go off onto crazy

fixes. our permit and in our project and i believe everyone here today is to say we may not be able to affect the weather but we can differentially come up with moves, appropriate drainage gutter cleaning and maybe even proper redistribution of water rights if they're really going to push it. so it is then not. we've seized upon the issue of issues. obviously, there is the macro economic background. this gives me a chance to plug that tomorrow. we will be having our semiannual local economic prospects here in this room talking about the u.s. economy, mclarty talking about china and one of our speakers today on europe. so there is this not her background as the u.s. economy improves, we expect the wages to

pick up but there is something more work in terms that the actions taken. mark barda who's to an initiative but also fundamentally the labor share of the economy is close to an all-time low for the postwar period. that is a number that generally never used to fluctuate very much over the business cycle and has been sustained at a lower share of national income for many years now. and the question is, does it have to be that way? when does that make sense for companies to change that and that is what we will address today. we are fortunate to be releasing a set of short papers in our new briefing series which we put together meant to be very

topical and poignant and two of the contributing authors will be speaking today. by kali, justin will first who will be first as a senior fellow here only from the university of michigan economics and public house fee. he is a rockstar on twitter, columnist at "the new york times" a man who runs ridiculous numbers of marathons and someone who has importantly forced us to up our game on labor issues which was why we brought him over and we are delighted to have him with this. speaking vacuum will be the aforementioned jacob kierkegaard is an associate at the institute since 2002. we are meant to be proud of jacob who has grown up into being double threat, the leading american commentator and forecaster in many ways that the political economy of europe. but for today, it is exemplified

not just by the work in our new briefing on wages, but his recent working paper someone who sees the connection and comparisons across the labor market than pension schemes around the world. it is great to have them contribute substantively to that discussion. i'm grateful because of the importance of the discussion in friendship with area actors in the public debate we have with us today to other speakers. damon silvers, direct or a policy and federal counsel for the afl-cio. we didn't have enough substance for the afl-cio. that wasn't meant as a slight. that was meant as a positive thing for men. he's done an incredible number of things. he remained pro bono for the state of new york. he's a member of the inner by three committee of the fcc, treasury department research advisory committee, public company accounting advisory

group. he was deputy chair of the congressional oversight panel for t.a.r.p. from 28252,011. it covers the whole range of regulatory and financial issues and then the firm a strong public service to. previously, 2622,008 was chair of the competition subcommittee of u.s. treasuries of the auditing profession. we are putting them back into labor camp today, but i'm sure he can handle that. finally speaking on our panel will be michael strahan who was recently named deputy director for economic policy studies and has long been a resident scholar at the american enterprise institute. to give him a similar circuit dance, he is the economist at aei who most of us read most. michael is well known for taking iconic classic b. is motivated by substance and print book not by press, but he manages to get

himself in the press quite a bit nonetheless as contributor of the "washington post" has previously done extensive road research with the labor dynamics institute, the u.s. census bureau, the new york sun says research center and will be giving us an additional give. thank you area much for joining us and i would like to first collect justin walters, please. >> so my talk here is simple. what i want to do is make a case that there is a legitimate business case to be made for employees to be paid higher wages than they currently do. ..

when you treat them fairly then they will work harder, work longer, they will stay with you and there will be savings. there are opportunities from doing this. the ford plant at the time employed 14,000 men on the line making cars but under to keep 48,00148,001 data higher 52000 people every year. ut a turnover costs can undermine businesses efficiency. so, therefore, the pace of paying a little more making stain on the line more attractive might yield real benefit. the argument then is you pay a little more, you get a little

better. and this is by no means a new argument. economists refer to it under the rubric of efficiency wage every. it's a theory like all great economic theories that was first surfaced in marshall, and later on in fact some of its most important champions were our current thatcher janet yellin and her husband a nobel prize winner george. the arguments collective. because we are economists we like to think about things in terms of incentives. that claim is if we're paying you better than your current job you value being in your current job more. if it's a case the want to make sure, you want to minimize the possibility that you will lose that job. by that logic you work harder. so that sort of the mean-spirited version a note shirking version of the clinic which will do is pay your workers are little more. the empirical research on this has been quite useful but it's

come up with a bunch of very different margins the necessary what we write that in our economic models. one of the obvious things is if you pay a little more you're likely to higher quality workers come to your firm. if you think about what's happening at the present moment right now with mcdonald's and wal-mart in aetna and the like all suggesting they are willing to pay higher wages every think that's an advantage to the street. there are bunch of low skilled workers would rather earn $10 an hour rather than $8 an hour. my guess is many of those workers are going to aetna rather than their competitors. a double stroke lately comes to firms that involved in customer service. customer service means knowing about and identifying with what he does your customers want. if you are more or less paying your workers particularly separate society where they can't afford to be a part of or engaged in the same sorts of activities as your customers they may simply not understand.

to take a from like aetna, aetna is moving towards a lot more having folks on the frontier with customers inquiries. if you want someone to do with your inquiry it makes more sense to be summit in those with health insurance is. who understands the difficulties of dealing with bureaucracies over these things and can identify and be a part of what it is that customers are calling about. otherwise the whole thing gets a real sense of being in different language and we've all had those frustrating moments with local service centers were feels like the person on the other end end of the line has no way they will be talking about. some cases it's not because they don't. the dimension which i think resonates most clearly with our economic models which are about trying to prevent shirking as it turns out the from turns out the firms they hire which is typically have fewer discipline problems. what is it we behave ourselves outward? for some of us it's innate

professionalism but it's because we value our job and we tallied the job more for the way we are treated. absenteeism tends to be lower in workplaces with higher pay. a lot of the studies focus is on to march. one is absenteeism and the other is turnover. the reasons for that are not necessary is the most far-reaching or import margins but rather to use it for us as economist to measure. it turns out turnover is overwhelmingly the most studied a margin. there are a large number of studies showing the higher the wages within workplace, the better the work the more likely they are better to stay. so job turnover tends to fall. peoples learning on the job and sense of the skills tend to develop better as well. so that's the stuff economists

and a very good job of measuring. i think there's a whole other realm of stuff that really matters that we simply can't measure as well. usually right on these models we think about it's important to pay workers well so they're thinking of how they're doing relative to other outside options. but i do sometimes it just as important treat people fairly. and the sense of being treated fairly which is not necessarily a cold calculating ratio of an existing wage to outside us a general sense i feel treated could really matter. i think if you look at, there's no shortage of firms that have a think dysfunctional cultures of conflict coworkers and management, between labor and capital. a lot of that dysfunctional dysfunctionality construct a sense of not being treated fairly which in turn has something to do with how workers are treated. there's a real sense that when workers are treated well and paid fairly, management gains a sense of legitimacy. you can think about different firms you've been.

i know joseph want to go to the station a closet right now i feel i am treated very fairly by the peterson institution. i do not if i wanted to i could take out 200 beds of lined paper. my five children likes to draw might really like that. but i don't do it and they don't do because this institution that i regard as having a great deal of legitimacy. i should also think another reason why i don't do it. i don't do because if i was seen walking of the front door 200 that the paper right now, one of my colleagues who believe the institution is great deal of legitimacy may go and talk to adam about it. when an institution has legitimacy, workers tend to monitor themselves and monitor each other. you can compare this to any number of low-wage workplaces you may have gone to visit where he have to go up to some behind the counter in demand three pats of lined paper until ask you want and what you kind of be charged to.

what you have instead often is instead of this since a generalist trust and fairness you have to put in extra marketing and extra supervision. you have to do that because institution is not felt legitimate sophomore couples to become more comfortable slacking on the job. my fellow workers don't have a shared interest in the institutions greater goals. i think this legitimacy thing really matters. one of the things you do see is when you look across companies, the higher the wages the fewer the supervisors involved. hiring extra supervisors and extra people to monitor which is not a productive activity is incredibly expensive. supplying essential legitimacy is something very important you can buy with higher wages. the original forms of efficiency wage theory actually start off by talking about health. where we think about the developing world we would be talking about there are villages where people simply don't eat enough to have a decent level of productivity. it's hard to make the case in

the u.s. that we should raise wages of people can get enough calories to get through the day. in fact, a bigger problem is we have a few too many calories. but i think there are important versions in which health actually really does matter. and that lower wages can be a real impediment. one of the interesting avenues of research right now in psychology, think about psychological burdens and how they deal with them. one of the things we're learning, there was a book called scarcity about this, that being poor is incredibly stressful. and stress puts a great cognitive load onto. the greater cognitive load your bearing as you go to work the less room that you have to make good decisions when you're in the workplace. one of my favorite experiments, very civil, go to a local shopping center of the take a bunch of people and they say they have been do a little test. most people did pretty well on

the test. one way to make people do bad on the test is before you finish the test, say i want you to think about your car just broke down and have about $1500 worth of repairs to make to your car. it turns out when you take poor people and you asked them to think about $1500 worth of mythical repairs they did much worse on the test when you take rich people into the same thing, like 15 of those, fine, they get on with allies. the way to think about this of course is at test here is a stand-in for performance on the job. the greater cognitive load may lead people to make bad decisions on the job. you can see this is a rich vein of researcher for psychologist it's much harder for economists to get at this but the idea that there are workers who make bad decisions, and we can list some of the we see people who can't afford to smoke smoking. they spent all day trying to keep their stuff together, and

at the end of the day just don't have the self control. much the same way that they may be make mistakes. they are likely making mistakes on the line as well. the first clip i wanted to make is simply that there is for his own reasons to believe that paying low-wage workers will actually be profitable for companies. data literature i think gives us some sense and some flavor of what that's like. of course, that's not an argument that goes everywhere for everything, and the more that it involves them a the greater your turnover costs are, the more attractive that will be. the more possibilities for conflict between workers and management, the more important supervision is. the more important dealing with customers and customer service the more compelling that are you going to be. the second claim only to make is that the yard but we should pay some workers a little better, which at first coming from an

economist sounds completely bizarre, sounds like something outside the tribe in some thing and can be radical is the least radical you could make. if you look at most firms out there, most firms pay workers more than they have to. in fact, very few of the people in the u.s. labor force are paid according to the federal minimum wage. this idea, this instead you should pay people a better and hope for a little is one that almost every manager out there already understands. the third question that i want to raise is is this is all relative? so maybe some of this is about if you can future from to pay your workers a little more, what matters is paying your workers more productive to other workers to it might work for one for from but not for the whole economy. in the jargon we prefer to use this might work in partial equilibrium but not general equilibrium. i think it really depends, it's not entirely obvious but the first thing is in our models technical models which we can

write down what workers care about is their wage relative to their outside life. in really what a lot of us care about is the new treated well and fairly. so maybe it's not just about relativity. the second observation is the outside option too many workers is not what i be better off working at wal-mart or kmart it's what i be better off working at wal-mart or the unemployed? is between work and not worth it if that's the case it's a lot question that it is all just relative. i think the other point i want to make is that many of the pathways would think that are not about relatively. i want to come back and think about things like legitimacy or the psychological cognitive load of being poor. being poor is actually, being poor is not a purely relative thing. so struggling to make ends meet i think probably does undermined

the productivity of many, many workers. if you read about the american poor they are full of examples of someone who is recently good job, then the car broke down and dodid no is getting back to work the next day. that leads them to get fired and you have an even worse looking resume for the next job. there are real issues of can i get reliable transport to work? can i get reliable childcare? am i worried about my paycheck running out at the end of the month? these are things that depend more on absolute, which there's reason to believe if other firms would raise their lower wages, that they, too, can get real productivity gains. so the argument here is very much the way an economist would describe it as too big libbey. you can pay your workers a fair

bit more and get a fair bit more. if the opposite is about one for one, then either of those is going to be roughly equally profit. so becomes a question for a ceo which of those two choices don't want to make. obviously, you might think that one is more positive broader implications than the other. now, it's very difficult the important thing to say it's a difficult to exactly what the offset is. i've spent a lot of time reading just about every case study we are aware of a firms have decided to take the high road and see what sort of payoffs they get in front to take the logo. i've spent time talking with h.r. executives about how they think about these choices. it turns out we are good at quantifying small things and really bad at quantifying big things. as i said we can manage it pretty well with the turnover consequences are of higher wages, but things like legitimacy and the broader productivity payoffs are

incredibly badly managed. we think they are there. we don't know whether the yield a 50% return to the employer or 100% return, or 200% return. i think i'm struck by when i talk to the h.r. executives who are making these decisions is that they are foggy and buy as much uncertainty as we are. there may be a knee-jerk instinct to think the right thing to do is always to keep wages as low as possible but there's a real possibility it is actually worth exploring what higher wages look like and what sorts of payoffs one can get. we don't have, there's no example in the literature, and if i could ask sco to do this i would and their workers would pay before, i would love to see sco take half of the plants i wages, monitor the hell out of both groups. then they would know whether this was a good or a bad situation. but the truth is that new ceo has ever run that experiment

and, therefore, any ceo is choosing either the hype or the low road is doing so through uncertainty. given that answered i think there's a reason to believe there's good reasons for firms to be experimenting a little more but it's just a different and that practice but one that potential has really good payoff. let me stop there. [applause] >> well, thank you very much. it's a great pleasure to be here today to talk about these issues and it's obviously also always great to follow justin. i figure i should perhaps try to say a little bit about the macroeconomic setting that the microeconomic dynamic that justin talked about operates in and did a little bit about the broader political situation where i would argue there's also some issues. first and foremost there's also from a research perspective, this is a very nice subject to

work on right now because we are in an analytical gray area between anecdotes and a clear trend when we look at what's going on with self initiated corporate initiatives in the united states. you can either become a dominant national trend or it can fizzle away. i think it's fair to say that when we think about it here at the beijing institute would like it to spread as a wildfire. -- peterson institute. i think also we should recognize that this may not be entirely more straightforward for some corporate as it is for others and there are some objective analytics for each firm and we try to do that dig into which type of firms made this type of initiative, whether it is high wages or of initiatives we have seen recently from microsoft and others, compelling their contractors to pay sick leave

and other things. whether or not they would be more appropriate for some firms some sectors and for others. it's important when you think about what is the true extent that these types of initiatives can reach with respect to the share of the total u.s. labor will force and others. but i think it's fair to say that in my opinion at least there is basically two a broader set to macroeconomic issues and the broader set of political issues in which the trends are being played out right now. i the macroeconomic front i think it's fair to say that the macroeconomic logic that justin just laid out is probably more effective when you are in a labor market like we have in the united states that is objectively tightening. there may be quite likely more of a first mover advantage for individual firms in the

situation man in a period where there is an abundant of unemployed workers. it may even be that if we are in a situation as with lenders to him in the united states today, where perhaps the real hurdle is alerting people from the ranks of the outside the labor force back into the labor force, irrespective irrespective of their skill level, it's actually perhaps an even better point in time to raise wages because i think there's quite a lot of analytical results that will show the one of the things that really or perhaps the most important thing that lures people back in the labor force is actually higher wages. there is also perhaps a situation from the corporate side, well, i think it's fair to say that the marginal benefits for corporations for doing all

the other things with the cash on hand is perhaps declining at the moment. we know for that the thread been low levels of investment broadly speaking, from corporations. there is perhaps are at a level where the stock market is such that mergers and acquisitions are no longer as attractive as they were and therefore, the lack of alternative and perhaps it's the low interest rate environment, that basically now in a country where there is a little institutional pressure for higher wages corporations simply find themselves in a situation because of declining returns of these other avenues, it actually makes sense right now to pay their workers more. and that of course is a fairly not very benign interpretation of the situation, but i think perhaps also there's a broader

political setting in which the recent trend is occurring. if you look at most of the polling it is clear that income inequality and poverty issues have become an increasing concern for the public in the united states. and i think it's also fair to say that right at this moment there is little legislative livelihood of things improving, at least at the national level. but i think ironically it's also very important to recognize and justin mentioned it to me we're talking about this event last week, that actually this is an area in which there's been a lot of executive branch action taken. quite in the same trend as what many corporations are doing because if you think the what barack obama, the ceo mentioned

last year in his state of the union speech it was in fact, mandated to executive order that the contractors are federal government pay $10.10 an hour. so in that sense one could even make the argument that the subsequent corporate action would actually minute on some of the corporate action that the ceo, barack obama the earlier. we have subsequently seen this year in which the call was for workers of, for federal contractors to basically. that has subsequently picked up by microsoft or but basically i would argue we are in a situation that, where because of the lack of legislative action by congress you end of the rising level of public anxiety of this issue, there really is an opportunity for a corporation to get a significant pr benefit from doing this.

basically they are adhering to have, become a responsible stakeholder at this very point in time. and i will also perhaps go further and say that it's kind of a little bit like the previous and well-known model for affecting corporate behavior that we've seen when we were talking about sweatshop labor in the third world and the likes. the dynamics is a little different but it is certainly a very american and private sector led initiative to drive this. yet the interesting thing here of course is that it is not in fact, labor standards in the third world that are being addressed but it is actually perceived deficiency in the labor standards and wage levels of workers, of some workers at least in the united states. which, of course, means that when you then look at the u.s.

labor legislation code and you see, well, deny states is quite unique among the oecd country. for instance, having no legislative parental have on the books, and was highlighted in the last day of the game doesn't have mandated sick leave it. and then he think about where is the next step of this type of pressure is going to be found. i would say that these are probably the next steps for which these types of corporate actions will be taken. and as i said it basically means that we are inviting in a very fortuitous both macroeconomic but also broadly illegal situation right now. so i think what we are seeing is from that perspective certainly very welcome and it has an opportunity to actually be taken

quite a lot further into other initiatives and other areas of labor standards, not just wages. i think i will stop there. thank you. [applause] >> well, thank you very much. this is a wonderful conference. thank you, adam for including the loyal opposition. it's a pleasure to be here. the discussion is about voluntary wage increases for lower wage workers. i will take voluntary to mean non-legislated, that a firm is just one to market pressures rather than the legislation or executive decrees. and i will discuss voluntary wage increases as they relate to federal minimum wage legislation and to the living wage movement. so a little different spin than we heard. but first let me say that i

welcome voluntary wage increases for lower wage workers. i welcome a situation where firms are responding to market pressures, and are raising the wages of low-wage workers. i think in this discussion he it can get kind of technical that i think sometimes people sound like they're defending low wages and that's not something we should be defended but we should be defending appropriate wages. is significant as for the macro economy, for the labor market. it would add evidence in support of the hypothesis that the labor market is tightening which is something that we should all want. and very importantly it is very good for low-wage workers themselves who should be our primary concern to many of them have trouble making ends meet. just an great job talk about issues of cognitive load and the stress that had financial problems can lead to a person, that helps make them that pushes them in the direction of sometimes being a bad worker but also pushes them into other

directions that are that as well in their personal lives so we should be very happy when some of those pressures are alleviated to these workers are playing by the rules. they have jobs, working hard, getting a pay increase is a fantastic develop for them. we should all be happy about it. i will now turn to my remarks which is voluntary wage increases in the context of public policy and i will make three points. the first is according to press reports, average wages could even after these volunteer wage increases, average wages among firms and industries that disproportionally employ low-wage workers will still be lower than the desire to federal minimum wage of the president and congressional democrats. this is hazy because not all the data is out there but my understanding is that the firms in these industries that have announced voluntary increases so far will be under $10.10 an

hour. mcdonald's, for example, promises to pay an average of $10 an hour for some of the firms which is less than the $10.10 an hour that many on the left desire. this is also true for wal-mart but it may not be true for some firms that have a broader to sufficient wages within their from but it is true and jacob i think makes the great point that industries matter. it is true or seems at least to be true at this point in firms who are in industries that are thought of as disproportionally paying low wages and hiring low-wage workers. of course it's far short of a living wage movement's call for a mandatory $15 an hour minimum. it's far short of the wages that somesome municipalities perhaps most famously seattle are putting in place for their firms as well. so this system a $10.10 an hour is likely to hide for a federal minimum wage. very few firms who are announcing pay increases are still below what the president and congressional liberals would

require the minimum to be for all firms. so we need to keep that in mind when trying to map discussion of the voluntary pay increases into our discussion about national public policy. and again this $15 an hour with some minutes pounds are moving towards and what the wage movement wants its way to i. the second point i would make is that these voluntary increases do not justify raising the federal minimum wage. it is an empirical fact that wages aren't mysterious. just in case that has a job i think of walking through the microeconomics of why wage increases make sense in many cases and in many cases those empirical realities are either not the main focus of economic theory or are missing entirely. it is also fact that standard economic techniques can only ask when a fraction of variation in wages. but to me those facts suggest we

proceed with caution about policies that may result in significant employment losses among lesser skilled and vulnerable americans. to listen to many on the left you would think that what i just said is a friendship you. but, in fact i don't think it is. -- fringe view. the referee for so many of our public policy debates recently reported that raising the federal minimum wage to $10.10 an hour could result in hundreds of thousands fewer low-wage jobs. the cbo reported $10.10 federal minimum would result in a $31 billion of increased earnings for low-wage workers. this sounds good but if you dig a little deeper the cbo found only 19% less than four out of every $5 about 31 billion would go to families below the poverty line. whereas one-third of the

$31 billion would go to families earning more than three times the poverty line. thousand and wage is a very inefficient tool to help low-income families, families below the poverty line. and it may result in significant employment losses among the very population minimum-wage advocates are trying to help. so we should celebrate that some things are raising wages presumably these increases are in the best interest of the firms and in the best interest of the economy at large, and they clearly help the workers. we should recognize mandatory increases are very different than voluntary increase the mandatory increases very likely could carry unintended consequences. my third point is that despite the gloom and doom i just delivered, we shouldn't do nothing. i think that there is an appropriate public policy response at the federal level to the situation of low-wage workers find themselves in and

that is to increase the earned income tax credit. eitc is a subsidy. the basic idea civil. if you work and if your household earned below a certain amount than the government write you a check. the eitc the recession because it is targeted at households with low income rather than a workers with low wages. those are very, very different populations. as is suggested by the cbo's dissipation the analysis as to which households would get how much of that $31 billion increase in earnings. previous eitc extensions have pulled significant americans into the workforce and the eitc lifts millions of people including millions of children out of poverty. so to take a step back we should have as a goal that no one who works full-time and heads of household lives in poverty. that is a social goal and consequently, the goal should be met with social resources. proponents of involuntary

legislative minimum wages implicitly argue that the burden of meeting that goal should be place on the sole don't take the shoulders of the businesses who employ low-wage workers and other customers of those businesses who will see higher prices. the eitc is better than this. it to marshal resources from all of society to help meet that social goal. instead of a few businesses, the eitc supports work, encourages earned success, and fight poverty using resources from mcdonald's and wal-mart and target sure but also from well-to-do economists, from wall street financiers, from corporate ceos and from hedge fund managers. all of society should be employed to achieve that noble social goal. the eitc is designed to make it happen is sue dash is a superior told to the federal minimum wage. and i will leave it at that. [applause]

>> well, good morning. let me begin by saying going to shock you and say that i couldn't agree with all of the people who have come before me that raising low-wage workers pay is a good idea. and i find myself a little surprised to be a mixed such a robust and passionate consensus. this is i think the first time in which i've been at the peterson institute for a moment at which everyone including my friends from the american enterprise institute all embrace the afl-cio's current strategic campaign, which is called raising wages. and i welcome all of you to it. now, i think there's a set of

things that have to be said about this to make sense of some of the back and forth around the areas but maybe there wasn't so much consensus. the first is that we really misconceived was going on in america's labor market and america's broader economy. we talk about the issue again with today as an issue of poverty. there's no question it is an issue of poverty. and just be clear about this because i suspect none of us in this room or very few of us in this room work for an hourly wage, that we are talking about a current minimum wage that full-time is roughly $14,500 a year, depending on how long you get paid, and how long you work and $10 minimum wage is roughly $20,000 a year. before you get too outraged at the possibility of somebody might be paid that much what it doesn't deserve it spend a moment think about how your life would work if that was what you were paid.

so poverty is important because what i described is wage levels in which people live in poverty. whether they live in poverty according to the index as we keep officially is not really the issue. at any of these wage levels people depend on them but the reason they haven't issue is those wage levels that level of the minimum wage large firms of the kind we've been discussing here paying those wage levels are an embedded part of a larger problem, which is wage stagnation across the entire labor market up to roughly the 90th percentile over a period of decades. in that environment our economy has all sorts of problems. what was referred to in adam posen's introduction the story the fantasy. it is a fantasy when you look at it from the perspective of very

low-wage workers whose incomes are so low that even your talk about aliens of people and the kind of wage increases were discussing today don't have amec or economic effect. but long-term wage stagnation across what amounts to the entire labor market does. and so when we talk about policy solutions where to ask ourselves, what is the impact on this larger problem? in addition to asking the question that michael put in front of us which is what is the most effective way to increase incomes of the poor. now here are a couple of basic observations that i will make, and then i assume will have a group discussion. the first is the question of what our minimum wage should be is obviously embedded in the question of the pay increases that have been made. i love the term that jacob used, was itself paltry wage

increases, or self actuated wage increase by large-company. i'm going to come back to that in a second. that really does disservice to the people who work for those companies. just talk about the minimum wage for a moment. the minimum wage today is roughly 35% of the average hourly wage. at its peak in the late 1960s it was 53%. if the one major problem that is associated with arguments about the impact of raising the minimum wage on low-wage employed is the issue of wage compression. it's what drives the numbers that michael was talking about the whether or not you agree with those numbers, and i suggest as michael hinted, the bold of market academia is a little more optimistic about raising the minimum wage and cbo is. but the point is it's all driven

by compression. and compression is about wage stagnation across the labor market. so if we're trying to thinks it's about how to raise the wages of the poor want to thinks it's about how to reverse the shift from returns on wages returns on capital, returned on wages outlined in the papers you have, more broadly. but if we wanted to return, if we wanted to return to historic levels of minimum wage just looking at the effects of inflation we would be talking about a minimum wage about $11 an hour today. not years from now but today. the second question, the second point i would make is this issue of voluntary wage increases. wal-mart which is the first firm to have initiated to announce wage increases for its employees, that got a lot of

attention, wal-mart is the company's largest private-sector employer. wal-mart has been, wal-mart employees have been engaged in a multiyear effort to get wal-mart to raise their wages. they have gone on strike. they have picketed wal-mart. they engage in all the things that historical associate with collective bargaining but they've done some without an exclusive marketing relationship with the company. mcdonald's workers, the latest announcement, have done the same thing as have employers of many other fast food companies. april 15 is the date on which workers at a wide range of employers, including particularly mcdonald, intend to go through another round of strikes and protests demanding as michael alluded to $15 an hour and a union. again they're engaging in collective bargaining but they're not doing it within the

national labor relations board structures. although in both cases wal-mart workers and mcdonald's workers have been pursuing their legal remedies at the national labor relations board, particularly windows firms have illegally retaliated against him for exercising the right to collective action by firing them. both of these companies are enmeshed in heavy-duty social conflict. what they are doing is they're engaging in collective bargaining, too. and they are making offers to their employees. the clear subtext of the offers is please be quiet and go away. on april 15 we will see what mcdonald's workers think of that offer. faceting thing which relates to justice question that shouldn't be be able to run an experiment, is that mcdonald's offer to raise its wages by 1 dollar an hour from $7.25 envelopes to

$8.25. mcdonald's offer has been made only to the 90000 employees who worked directly for mcdonald's corporate. meaning mcdonald's itself owns a bunch of mcdonald's restaurants but it's a small portion of the overall mcdonald's in the country. postma dollars are owned to the franchise system and they have not been guaranteed that wage increase pics i suspect we will be seeing a bit of that experiment in the weeks to come at least in mcdonald's. but the main thing to understand here is that what is going on at mcdonald's and a wal-mart and that the other fast food companies is collective bargaining. it's just collective bargaining in the street meaning instead of sitting down at the table and negotiating, people are yelling at each other through megaphones. workers use literal megaphones and the employer uses all the apparatus that are available to a large well resourced operation to make its offers. now, if we think that that is a

better way to raise wages and it seems as though there's some consensus in the room that it is, then that is a better wage -- a better way than the minimum wage. i think there's no disagreement in this room, maybe that is michael will have to explain to you but i think there's not disagreement that way on to the minimum wage. if we ought to the minimum wage, the question is where it should be set would seem to be higher than where it is now which is that at a historic low in relationship to the rest of the labor market. there's a good argument. minimum wage is not good enough as a way of dealing with the problem of wage stagnation across the labor market including relatively low-wage work like fast food and wal-mart whether are powerful arguments you look at those firms that the out to be paying well above the minimum wage. they are not a pretzel stamp. but the question is how but if you believe what is going on

right now in the streets so to speak, collective bargaining by wal-mart and mcdonald's workers with wal-mart and mcdonald's management, if you think that's the right way to do it, then you ought to ask yourself how do you sustain that and broaden it. because the reality is and there's a secret about this, the reality is that those workers are being supported by other workers who are part of the old collective bargaining system that is sent to the national labor relations act through exclusive representation through paying union dues and the like. if you want to have a labor market in which there is, in fact, a robust system of collective bargaining and all issues do not become essentially issues of public policy, right so there's some room for customization in firms, then you have to actually have one. and something we don't talk about very much here, but which ought to be said is that wage stagnation in the united states

is directly correlated with the dismantling of the collective organ system, particularly in the private sector, in a way that is not true in other oecd countries. and to i would suggest to you two things. one is to the extent that we all agree that wages that is good for low-wage workers to enjoy wage increases, and the. >> would all agree that it's good for workers as a whole to wonder wage increases commensurate with her growing productivity, then the question is, not sure we have a minimum wage but where should it be. and i'm afraid there's a way to get around it. it needs to be higher than what is now an order for two simply do its job. and we need to think really carefully about how in today's economy, and today's labor market, today's globalized world, how do we ensure that the interaction that is going on between wal-mart workers and mcdonald's workers and wal-mart management and mcdonald's management, which is leading to their wages

increased after years of stagnation, in fact wal-mart really falling compensation to if we think the interaction is a good thing how do we ensure that the workers who engage in it are not doing so at the risk of the jobs which is around at what's going on now and it's why the national labor relations board has brought charges against wal-mart for firing workers were engaging in this process we all like so much here we ought to ask us is how do we ensure that that process is routinized in in the world of network affirmed in franchises and precarious work. because really if that's what we say we want that's what we need to do. thanks. [applause] >> could ask our full panel to come up? i'm going to make a couple remarked to try to pull this together. just for those of you tuning in on webcast or on c-span and

coming in later, just a reminder that all of today's remarks and the luncheon speech by art bartolini, ceo of aetna, we'll all be if it were on the website. transcriptional go up shortly afterwards. our briefing anchors other supplemental address will be a double on the same webpage www.eie.com. because of my happy warriors go at it let me just make a couple points. the first is actually on this word voluntary. i know but don't want to get into fax with damon because he usually gets them right but on this one aetna raise wages months before, more than a month before wal-mart and did so with no strike threat. and again there were not the only once but they were the big ones starting this year it which is why we bother to have mark bertolini come. but more important, you know, i

think i asked all the panels unethically asked outside guest to talk about how this went to minimum wage. i think it was right to go there but want to also stress what we are talking about in terms of the so-called osha and low-wage sector, or voluntary basis for low-wage sector. berkshire people at the minimum wage are people who are young or part-time or who have little attachment to work. there are reasons i personally am in favor of large and wage hike and reasons why you might want to do that. but i think it is reasonable to think about the millions of people who are sort of working class were in jobs who may be slightly less precariously held at the potential to be long-term if not permanent jobs. and/or full-time workers and are often has a household. the issue is whether or not there is an economic case to be made as well as a business case as well as a pr case. we are here for the economic

case. that company should be investing more in that set of workers to instead of cul-de-sac sensitive investing huge amounts of money into people what is the high skilled in the distribution, whether it makes sense for private sector to invest in the people at what is to particularly alone in the scale scale of distribution as i think jacob and justin put implicitly and this document in good detail in our briefings that are out today, this is not the huge share of the workforce but it is a larger share of the minimum wage workforce. it is not something that had become is going to do. will back to mcdonald's. we can be upset with mcdonald's or any other fast food joint because they put on a very low-wage model. we can ask ourselves whether that's a sustainable model. but the issue is there is a broad range of companies in this

country who input isn't solely low-wage labor. that's a we tried to identify not specific companies but sectors, types of firms where it could be broadly sensible to invest in that because it's not like you are an individual cleaning service or an individual mcdonald's franchise where you move your labor input and backed away your profit margin. i think that's part of the question we have to think about is how realistic is it. we would argue it's realistic for a large part of the countries. the second would want to make before turning to is bringing us back to the international context which jacob did in part. he has a great essay in our new briefing. it is very important to put the kinds of things that michael cited from the cbo in context. when we talk about the cbo saying it would be ask hundred

thousand work, jobs lost three cautions. first, that's not dynamic scoring. we talk a lot about dynamic scoring on fiscal side. that's also a strict partial equilibrium result. i want to be clear for the audience. it's about what is the immediate impact. it's not about if there are the kind of productivity a facts that justin was was talk about and that was at an economy and to reallocate workers. potentially that's not what we're talking about. the second point is a couple when a thousand, 5000 people is a lot of human beings. we should care about that. but the u.s. workforce is 150 plus million human beings and we churn 5 million jobs a month. so we're talking about an ethic that is something below 1 million, when you talk about that as effective a trade deal or as the effect of wage

increase, human beings are never a rounding error but from a post point of view getting caught up in something that is a 10th of a percent of total employment is not just the way you want to evaluate a policy like raising them in which. i know michael was saying that but i just have to give some context. the final point in terms of the internationalization which jacob didn't have a chance to say is that we know cross country, cross-sectional he emphasized the collective bargaining them we will emphasize the outcomes that the our investment you can not just of european countries including justin's native australia, including some of the asian and richer latin america countries, where the wage gap is much smaller. and they managed to export and he managed to have relatively high labor force participation in jacob has done some very good work in the last few months on the fact that labor force participation has actually gone

up in western europe even in countries where wages were not horribly -- including germany. it is not this iron law that if you pay more he ceased to do business. doesn't mean it always pays but it might. so with that in mind or more important what our panelists have in mind to let me opened up to the floor for questions and comments. go ahead and hand the mike back up front. first nancy and then this gentleman. please identify yourself, please come if you're going to make a political statement, pretend it's a question. >> sorry. adam, nancy with the ilo. first i just want to thank the peterson institute for organized this briefing and this meeting after looking at these issues. one of the issues i was hoping to hear from the panelists, maybe a little more and then this just the very beginning

but when michael was talk about public policy affects let me just say of course i think eitc is one of the best programs going, but i was hoping that some of the analysis from the economists would look at the remarkable amount of taxpayer subsidies that goes in effect to companies that have low-wage workers because of the public services that those low-wage workers have to accept to live. and i saw just one study about workers in ohio, and it was tens of thousands of workers who were relying on public welfare assistance because as full-time low-wage workers, so imagine how that affects spreads in the united states. and i just want i wonder if anyone could speak to that because it's a important public

policy issue. >> anyone on the panel care to speak? >> i can take a quick step -- a quick stab at. this is basically a political question. i say it in a sense that it really depends on what your baseline is. so you can say all these guys at wal-mart who work at wal-mart or on foods give. if they were not on footsteps if they were not being paid and low-wage they wouldn't be on food stamps. so we are subsidizing the hell out of wal-mart. wal-mart's response will be if they were not working wal-mart on low-wage they would be working at all. the food stamps subsidy would be even bigger so effect wal-mart is hoping that's the case. it's a question of what the rice baseline here is and, of course this is just a question i think very much political frame to anything else but i do think there's an important policy issue. the way described is, if you believe that there really are too profitable wage policies high road and low road, we as a

democratic population might prefer to take the high road. when firms are doing bad things, polluting the river and the like, the economist answer is you catch people doing bad things and to get them to do good thing. if you think they're too profitable business and that this is their taking the low road, just making us all worse off, then i think a then i think the strong are that we should either catch those guys making that choice or are subsidized the of the guys making good choices. >> there have been a lot of studies of what those costs look like and the singular fact that wal-mart, which is added there is times the largest the company with the largest capitalization on our security market, is also the company that employs the most people on

medicaid. that sort of thing has been looked at a law. i think justice justin's answer draws is something they're important to understand. it's that if you postulate a political economy, a country which the choices are unemployment or low-wage work for billionaires subsidized by the public all right, then you make then you end up making very bad choices no matter what you do. and let me spell out what i mean. in the economy that we've actually built right, the walton family i run these numbers in this website have not decomposed, at the walton family the six of them and the koch brothers some very other wealthy people involved, have network collectively of

$230 billion. that is equal to the net worth of 44% of our population. the subsidies you're talking about have reduced that outcome. they are not your thing that a producer but they have that outcome. if you want you can hypothesize that somehow the politics that those numbers and driver going to produce the kind of results right, that just in hopes for. ..