involved. as far as washington is concerned and i'm an open book as you know, rand. there are quite a few requests we have been made. the administration has been what i call not very understanding of the

other and i will say not just work with each other, but

synchronize our approach to this. here the united states has an important role in the region. their partners need to be our p,$) our missions7t1ñq needs to bei]r iraqis-).eñrfá[ér people like it or not, that is the reality. people have that decision. with all of the upfkn bobpl==hm the -- upheaval over the 12 years, the democracy60.kj@÷ moving forward, people say it is not democracy, i give you that full granted but the indicators it is an important prerequisite, it is moving in the right direction, at a1'.vñcip high cost. we are -- our people work to move as far away from the elections and the last elections an the incoming prime minister is a sign that we want to move away from my dictator, and

whoever it is, that is not an issue and we want to move away from that and we are here to tell that. support intelligence sharing and ammunitions and other things, it isqx#le we are here for. economic supportç moving forward because of the current prices that we have. so there are a lot of issues. this is what you might call a

determinant visit, no. it needs to be one among many for us to have that discussion. and same for the traffic flow in baghdad as well. we shouldn't have our politics by exception. it should be the norm in resulting at that. there is a lot of work to do. frank discussions about iran, that is an area. we will be open about that. we don't have any secret. no secret handshakes. it is a clear and present danger we have. we have to address that. we'll have that discussion with them. and we need to understand where do we fit in in relation to the post-nuclear discussion. in that aspect of it. where do we fit in in the post-yemen situation. do people want to split on the right or left of the situation. we don't want to be on the rightxffo db+d)8t 6+"ti ju lefrkñ of the side.

we have important areas on both sides for our country. it is important to have this situation. >> one here and i'll try to get to this side next. >> thank you very much. [ inaudible ] turkish press. i have th&ee questions. first, you mention about the mosul operation and the involvementnieslocalities. what do you mean of the participation of the localities and what level, what level of government is expecting from the localities because there was recently a background briefing by the officials and they said that in april ?vú may, there will be an operation inht mosul, there might be a operationx"b1:ñ ç in mosul and it up< to the baghdad decision and is there a forecast the local atlantas and what is the position of the baghdad

government about an idea to form -- anw3 army within the countries and especially which will be used sometimes for the groups maybe oriented by the government and the third one, in terms of your relations with turkey, how would you characterize the cooperation with turkey and between the turkishe- government between you. >> only the turks get three 3 questions. >> margaret riders. i'm a consultant. i just returned from my fourth job in the country based in baghdad and i started working in iraq in 2005. i appreciate the three r'subkkzl

now into three or four countries.ídgw so just try to make your message stronger about how you're going to address these key areas.

>> mr. ambassador? >> okay. i'll answer the second question or second three questions. hope -- the whole project is about hope. the suffering of having car bombs in every district, poorúniaxj districts in shiite towns in suburbs over the last 12 years has been about hope. that is what they have suffered. and the pry proportion $as been about people talk about the margin of sunnis and others but in reality if you look at the car bombs have been in shia towns. so people are reading things as they want to read it, and no the reality. we may have not been doing a good job of talking about the country of numbers and so on. maybe. but going backé@ to the key point,

we are developing a new countryws;=4á?0ñ1(b4im at the -- with the ashes ofd with the traces of culture of violence all over. that is@qy the key important point for people to realize that. i'm not blaming or giving you the blame just a diagnosis of the problem. which means that the three r's and theé@ governance the key at tribute, we need it. i can assure you, i have seen many vice ministers sometimes ministers, director generals, that say that is not for me to make that decision. they want to take it upward. that is the culture they come from. and they want to -- they don't want to be blamed for any change. without having an adventure and entrepreneurship and risk-taking how do you want to develop your

country. and this may take timeñi or generations but we have to take the right step. so going to the key issues with [t sectarians and among islam or not. and i know with'÷==c÷-! catholic organization, it wasn't that. it was all about power and vice so here is an issue we ne distinguish. other wise if we go to the shia

situation, thenu everybody else would miss out. because this organizationjháwñ"ç to destroy the norms offá nation states. they wanti] to declareó/ agreement. we still don't agree to sign it now, after 12 years. so that -- i think that is a clear sign that an issue -- if we have control of -- as people talk about that, surely we would

have signed that ages ago. so here it is an issue of nationalism. and we wouldn't. we have a need with iran and have a desire as a neighbor as much as you have mexico and problems with immigration and canada -- or maybe not. but any way. >> we fought several wars with them. >> well, the other issues is that the canadian want to be american and the american want to be canadian. but as much as that we have with iran. it is not that we don't want them to get involved. we do want them to get involved because we have a common threat. but at the same time, do we want them to control? no. we by the way -- last week our prime minister met with the leaders of the congress and the senate and he said to them, in my recent discussion with iranian officials, they said because of the freedom in iraq,

that we are posing a threat to the iranian national interest with freedom. maybe that is true or not. that doesn't matter. the point is we are distinct and we want to have our own way of life and we respect the neighbor and we have common threats. and let's not forget they were the first to provide offer, unconditional. for others there was a lot of conditionality. as to the point ever mosul and operations and so on the level of change has to be of tribes and they have to be involved in it and the various communities play a part as well. we don't want to do it without the peshmerga. and what is the role moving forward. we don't want to resolve one problem and create other problems for us. and so peshmerga being involved is important for us for commitment for all to get involved in isis.

isis is a problem for all of society not just localities. so as far as yemen is concerned we have said we do in principal support having an arab army to deal with the issue but yemen is not the right project to implement that. the problems are more domestic people are projecting it as a regional problem more domestic issues need to be addressed and give them more leeway and more discussion rather than a military solution. i don't think it has been given enough breathing space for discussion before playing a military role. in relation to turkey, if we compare the situation like a year ago 18 months ago i think we have a lot of good traffic flow between the two countries the leaderships, the prime minister being there, the prime minister of turkey has been to iraq and i would say it is a more predictable relationship and we appreciate the issues of

the threat of turkey claims in relation relationship to its own domestic problems but please don't compare isis to any other problem and the reason turkey has to play a role in stabilizing in syria and with iraq, and without involving syria we'll always have our back door open. we need to close that and get some better discourse into the politics of resolving syria? >> [ inaudible ]. >> no. it was not an iraqi timeline. we drive this. and we need help and support and when anybody talks it is for them to explain, not for us. >> i will catch this one in the back row. >> johnny deran from voice of america culture service. the many core issues between the

central government and kurdistan hasn't been addressed so far, if this continues what guarantee do you have that the kurds will stay with iraq? the popular organization forces of hashabby has been seen as serie gods and there has been fear and hesitation if daesh was crushed they would turn their guns toward the kurds, is there any guarantee that will happen? >> and let me take one here too. >> malid salah. ambassador, thank you very much. my question is regarding the participation of the peshmerga and mosul. the question is while baghdad is cutting the kurdish employees

and the sources of baghdad to the kurds, why peshmerga should participate in a fight which it is not its own fight and peshmerga from kobani to [ inaudible ] they are fighting isis. thank you very much. >> well i'm astonished by saying it is not their fight. a thousand kilometer border and a threat to minorities and christians and others and a threat to irbil and a destruction of property and heritage and culture and the unity of a culture is all signs of somebody's fight. i would think with isis, it is everybody's fight. it can't be just somebody's fight. >> ambassador, i say from kobani to -- [ inaudible ]. >> i don't want to talk about the geography of the kurds. i don't want to talk about the geography of the kurds. i have my own views here.

but i will say is, it is a fight for humanity for civil law, for integrity of persons, let alone of nations of states to prevail. that is the key issues we have here here in a ideological and physical sense not just to the heritage but to the future of our societies in the region. by the way, let me be clear. when i talk about the isis i don't talk about the brand of isis, i talk about the ideas of isis and i talk about the -- the way they projected it or it has been materialized where, let's forget, if i'm isis and i want to change the name, i'm talking about the new name and the new mutation of isis. we have al qaeda before and people think this locality needs to be contained and found it can't be contained.

more passports of different nations are now with the affiliation to isis than any other day before. more european and others. we find them in baghdad and elsewhere, and iraq and elsewhere. so here we are talking about a threat to the civility of the region. if players in the region don't take that upon themselves, then they shouldn't call about international support. we need to take that upon. if it is ideological we need to address it if it is geopolitical we need to address it. there is a problem in iraq to address every wealth, for natural resources and heritage and history. so there is a bigger picture. the kurds and everybody else needs to be strategic in their thinking. is it just for now or move forward and this is what we are saying. by the way, let me be clear as well. the kurds have always seeked independence. they have the right for that.

they joined the project after 2003. after 14 or 13 years of independence after 1990. so they have joined the projects, agreed to the constitution. we all need to work together to define that and understand the limitation. we advise that constitution and coexist for independency. if they want independence let's have a different chat about it. but don't associate that for isis. isis is a bigger threat over all. i think we need to mature u7 to that fact. otherwise let's not call for the national support. >> oh, i -- >> oh, sorry. i think the issue regarding salaries and everything else. recently there have been payments made. it is an ongoing discussion. i don't see the iraqi issues as

a key milestone. i see it as a gradual development. that gradual development means more confident-building measures one step at a time. fair enough. it is a marathon run. i don't see it as a 400 yards or a sprint run. it is a marathon. we should be less conditional in our discussions. simply because i think the threat is bigger. the integrity not just the state of iraq in the sense of borders but the society. i want to see less strategic borders because of threat or fear or intimidation of each other. your neighbors will not move away if you have a border or not. they stay your neighbors. and the voice of america the first questions regarding al hashad and the krg and so on, i

think i tried to answer that. the hashad is a natural, healthy development, once the state wasn't able to protect its citizens. should we be in this position? no. we should have only the army and so on. but, is it in a city we we have to deal with? yes. are we working in the day after scenario in letting the state have the control. we are talking about national guard and other discussions and so on. it is a long project for us. it is not the neat project, but it is necessary for us to work on. >> thank you mr. ambassador. i'm going to use the last few minutes to see if you and the ambassador have something to add. >> i'm going to yield to the ambassador because he is the guest of honor. but i was going to answer a question that i think remained unanswered from the lady to me.

>> i apologize. >> no. it is fine. on the media, that is the part i'm going to talk about. there seems to be a lot -- again, we all appreciate the press and its role and we can't live without it. >> i can live without it, by the way. i'll make that declaration. >> but beyond that i think that there is -- there seems to be an alarming group think among the reports that are about iraq about what is going on. it seems like all of the -- the reporters, it depends on whether they report for a conservative or a liberal or an american all of them speak in the same language, talk about the same things looking for the same troubles to report on. and when they don't find anything, they just look for anything. the first -- here is one of the biggest battles that happened in iraq major liberation of

tikrit a major event that is probably the most important event since mosul was taken. and what does the first report from france press on it, they loot shaving cream and tooth paste. i'm kidding you not. you go back to the report, that is what they were looking for. before the report came about. that is sad. and there also seems to be a tone of people conflicting the iran and the shia and hezbollah and there is a deep-rooted or deep symptoms of anti-shia-ism among experts in the west, and so many journalisms. i'm speaking about someone here who wrote the books one of the

earliest on the arab-shia, the co-authored book and no one can skip it reading and looking at the narrative being formed. and those who control the media from the government side, from the shia side they meet that with silence and do not want to escalate and that is backfiring because if you do not control the narrative or at least balance the narrative the other side will become the truth to many minds. remember, you are dealing with people without the nuances or the innocence of what goes on there. and when you read all reporters talking about the same thing that is a problem. one is taking from the other and we all know about that. i mean the experience from 2003-2007, how many words were taken from the five-star hotel and the green zone were people

would send poor iraqis to report and put it in nice english and send it back to new york or washington. and all of that. and when you go and investigate, none of the reporting was going on. and same thing on. it is easy to think in the journalistic box and to say the same thing because you don't have to be challenged and there are few exceptions here and there. but that is -- just follow twitter. it is just amazing, i wouldn't call it conspiracy, but amazing agreement, let's put it that way, quote, unquote among all of the people who love to disagree on everything, but yet they agree to the last point and the last dot and last talking about the [ inaudible ] and all of that and if you don't find anything how about shaving cream and toothpaste. i think what i needed to take. >> mr. ambassador. >> two points. i think it is important for

people to appreciate iraq in a sense of one parameter, which is to do the balance between justice and peace. it is a tribal society and the perceive of justice is important and at the same time we want to move forward and bring stability and peace to society. how do we look at that? and if we look at south africa or belgium or elsewhere, the key issue is how do we balance those two parameters, justice and peace. it is difficult for us. we are trying to get it right. but it is an ongoing project. so please bear in mind, when you look at iraq in that mindset as well. that is one of the boxes. the other issue that i'll finish with is that the level of change required within the iraqi society is different than in the majority of other air abe

country -- arab countries. in other arab countries people disagree what is the level of change? just the presidency or the system of government or the whole state or the whole nation state or the type of government royalties versus republican or so on. that type of republican has no longer taken place in iraq. isis has their own narrative. but aside of that it is the nuances of the politics. which means it is a good sign to work on. we need to resolve the governance. people associate democracy with services. there are two different requirements. you can have the best democrat but doesn't mean they have the best governors. that is an area to work with. internet suppose-- international support for that is helpful but look at the uniqueness of iraq. and my final point is please don't look at iraq through the

prisms of iran or any other ism's. it is not an easy form to read. it is not clear. it is a blurry picture. but that uniqueness has what -- what i hope that america can appreciate it more than any other because of the last 12 years project. because however, we have no desire but to have a good relationship with all others more than the united states. we want to say thank you enough that is part of our culture and we do mean that and do need and want to have that relationship with the united states strategically, thank you. >> mr. ñ1qñambassador, abbas cad heme it is in our culture to say thank you to you, for being with us.

and you are a marathoner and we are half-way through the session and it is our time to say thank you for a terrific hour and a half. [ applause ] >> thank you sir. >> thank you. >> irs commissioner john koskinen will give an update about the irs including employment retention and cuts. that starts this afternoon at 2:00 p.m. on c-span. this sunday on q&a senior editor and the gop candidacy. >> they want somebody who looks like he's stood up for them.

i'm amazed now to the degree to which primary voters on both sides are motivated by resentment. and the sense of being put-upon. and those people really don't understand us. and here is a guy who does understand us and he's going to stick it to them. and that happens on both sides. hillary clinton will give her own version of that kind of thing. and i don't think that was true 30 years ago. i mean resentment has always been part of politics obviously. but the degree to which it is almost exclusively the motivating factor in truly committed republicans and democrats. >> sunday night at 8:00 eastern and 7:00 p.m. pacific on c-span's c-span's. >> up next a conversation on worker wages and corporations about the economy.

from the peterson institute this is 90 minutes. >> well, good morning, everyone. and welcome back to the peterson institute for international economics. i'm adam posen, from the peterson institute. and we are looking at something below the surface today but of profound importance which is how and why wages get set where they do for low-wage workers in the u.s. and in a global context. if i can speak for a moment, leading into our panel and then our guest speaker later thanks to a series of major grants from the aranda foundation the peterson institute is working on inequality and inclusive capitalism for a while. we did not get there with the

inequality best seller but we have been doing substantial work around the issues of comparative labor market and comparative financing across countries and how this effects outcomes for actual people. our basic premise which i hope today and all of our guest speakers i know will reflect when you talk about inequality oríóñ exclusion, is like farmers talking about the weather and you say it is bad and then just accept that is the way it is or you rail against the weather and go off on to crazy fixes. what we -- our commitment and our project and i believe of everyone here today is to say, okay, we may not be able to affect the weather but we can come up with grooves drainage and gutter cleans and maybe proper redistribution of water

rights if we are really going to push it. so it is in that spirit that we've seized upon this issue of wage increases. now obviously there is a macro economic background. this gives me a chance to plug that tomorrow we'll be having our semiannual global economic prospects here in this room at noon under the leadership of david stockton talking about the u.s. economy and nick lardytkftñ talking about china and preston, one of our speakers today. >> jacob kirkegaard on europe. and we do expect wages to pick up. but there is something more at work here and something more at work in terms of the actions taken by american companies we're going to be featuring later today, the ceo, mark berto lienee who took a function in this position, but the labor share of the economy is at clo a;m

to an all-time low from the post-war period. and 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 it make sense for companies to change that and that is what we're going to address today. we're very fortunate to be releasing a set of short papers in our new briefing series which we put together, meant to be very topical and pointed and two of the contributing authors are speaking today. my colleague justin wolfers who is a senior fellow here and on leave from the university of michigan where he is a professor of economics and public policy. he is of course also a rock star on twitter. columnist from the new york times. a man who runs ridiculous

numbers of marathons and someone who has importantly forced us to up our game here on micro and labor issues which was why we brought him over and we're dliefted to have -- delighted to have him with us. and speaking second is the forementioned jacob funk kirkegaard. we are proud of jacob who has grown up into being a double threat. the leading american commentator and forecaster in many ways of the political economy of europe which we'll turn to tomorrow. but for today and exemplified not just by his work on our new briefing on wages but his recent working paper someone who sees the connections and comparisons across pension schemes across the world and great to have him contributing to that discussion. and i'm also grateful because of the importance of this discussion and our friendship

with various actors in the public debate we have with us today two other speakers, damon sill verizon the director of policy and special counsel for the afl/cio and we think of him as the mr. substance, and that wasn't meant as a swipe but a positive thing for damon. he's done a incredible number of things. it is a special attorney general probono for the state and the research advisory committee and the public advisory group and he was deputy chair of the oversight panel for tarp from 2008-2011 to covers a whole range of economic and regulatory avenues and has done so from a strong service perspective and from 2006 to 20108 was from the

advisory committee on the auditing profession. and we are putting him back into the labor camp today and i'm sure he can handle that. and finally speaking is michael strain recently named director of economic studies and long been a scholar with the american enterprise institute. so to give you the similar sort of thing he is the economist at aei who would -- we would probably read most. michael is well-known for taking iconic classical views not by press but manages to get him in the news most. contributor to the washington post and done research with the labor dynamics institute and the new york census research center and will give us additional perspective on today's issues. so thank you very much for

joining us and i would like to first call up justin wolfers, please. >> so my task here is simple. what i want to do is make the case that there is a legitimate business case to be made for employers to be paying higher wages than they currently do and i think that case is strong at the lower end of the labor market and i want to be clear that what i want to talk about is micro economics and not macro economics. so this is not -- it was widely attributed to henry ford that he started paying his workers $5 aday to they could all afford to buy ford cars. this seems like a tremendously inefficient way to afford ford cars. it is the claim that when you

treat your workers well and fairly and they work harder and work longer and they will stay with you and there is potentially cost savings. there are real profit opportunities from doing this. the ford plant at the time employed 14,000 men on the line making cars, but in order to keep 14,000 men on the line they had to hire 52,000 people over a year. can you see how turn-over costs like that can really undermine a business's efficiency so the case of paying more and making staying on the line more attractive might yield real benefits. so the argument then is that you pay a little more you get a little better. and in this -- and this is by no means a new argument. we economists refer to it under the rubric of efficiency wage theory. it is a theory like all economic grade that first surfaced in marshall. and later on in fact some of the

most important champions were current fed chair janet yellen and her husband george aco love. and the arguments go like. because as economists we think about incentives if we pay you more in your current job you want to minimize the possibility that you'll lose that job. by that logic, you work harder. and so that is sort of the main spirited version and the no shirking version and that you want to pay your workers more. and the imperial version is useful but come up with different margins than necessarily what we write down in our economic models. one of the obvious things is if you pay a little more, you are likely to get higher quality workers to come to your firm. if you think about what is happening at the present moment, we're at an interesting moment with mcdonald's and walmart and

etna suggesting they want to pay higher wages but there is an advantage to their firms. they are lower worker skilled workers and they making $10 an hour and they would probably rather go to etna rather than other firms. and customer service means knowing about and identifying with what it is your customers want. and if you are paying your workers so they are part of a completely separate society where they can't afford to be a part of oren gage in the same sorts of activities as your customers they may not understand it. so again to take a firm like etna they are moving toward having more folks on the phone dealing with customers inquiries. well if you want someone to deal with your health insurance inquiry it makes sense for someone who knows what health insurance is who understands the difficulties of dealing with bureaucracies over these things

and identify and be a part of what the customers are calling about, otherwise the whole thing gets a sense of being in a different language and we've had those frustrating moments with phone call service centers where it feels like the person on the other end of the line they don't know what we're talking about and because sometimes they don't or not living the same life that you or i may be. and what resonated mainly about our models to prevent shirking and those with higher wages have less problems. why do we behave ourselves at work, because we value the job more the better we are treated. absenteeism and studies have shown that absenteeism is lower in workplaces with higher pay. and now a lot of the studies and the better evidence focuses on

two margins. one is absenteeism and the other is turnover. and these are not the most far reaching and most important margins but those that are easiest for us economists to measure. but turnover is the most studied margin. and the higher the wages within a workplace the better the workers feel treated an the likely they are to stay. and job tenure is better and the learning and the set of skills tend to develop better as well. so that is the stuff that i think economists have done a very good job of measuring. i think there is a whole other realm of stuff that matters that we can't measure as well. and usually when we write down these models we think about it is important to pay workers well so they are think being how they are doing relative to outside options. but sometimes it is important to treat people fairly and in a

sense of being treated fairly, which is not a cold calculating ratio of an existing wage to an outside offer, but a general sense of how you feel treated could really matter. and i think if you look at there is no shortage of firms that have dysfunctional culture of conflict between workers and management and labor and capital and a lot of that dysfunctional -- dysfunctionality comes back to a sense of not feeted fairly -- treated fairly comes back to how workers are treated. and when workers are treated well and paid fairly management gains legitimacy in the eyes of workers. if you think about different firms that you feel in upstairs if i want to go to the stairery department, i feel treated well. if i go upstairs to the stationery department, i could take out 200 pads of lined paper and my 5-year-old who draws

might like that. but i don't do that. but i don't do that because it is an institution that i regard. and i don't do it. because if i was seen walking out of the door with 500 pads of paper, because one of my colleagues might go to talk to someone about it. and so workers tend to monitor themselves and each other. now compare this to low-wage workplaces you may have gone to visit where you have to go up to someone behind the counter and demand three pads of lined papers and they ask you why and which account number to charge it to. what you have instead, instead of this sense of generalized trust, you have to put in extra monitoring and supervision. you have to do that because the institution is not legitimate so i feel more comfortable stealing and on the job my fellow workers don't have a shared

interest in the broader institution's goals. and this does matter. and when you look across companies, the higher the wages, the fewer the supervisors involved. now hiring extra supervisors and people to monitor, which is not productive is incredibly expensive. so buying the sense of legitimaty is something you can buy with higher wages. the original forms of efficiency wage theory start the off by -- started off by talking about health and thinking about the developing world and talking about villages where people don't eat enough to be at their full level of productivity. it is hard to make a argument for people in the u.s. to pay people the wages to get through the day but in fact we have too many calories.

but one of the most interesting avenues of research in psychology and thinking about people's psychological earnings and being poor is incredibly stressful and that puts a greater cognitive load on you and the greater load you are bearing, the less room you have to make good decisions in the workplace. so one of my favorite experiments is simple. they go to a local shopping center and take a bunch of people and they say, they have them do a little test. and most people did well on the test. one way to make people do badly on the test is before you admin administer the test is say i want to you think about your car just broke down and you have $1500 worth of repairs to make to your car. it turns out when you take poor people and you ask them to think about $1500 worth of mythical

repairs to a car in a shopping center, they did much worse. when you take rich people and they think 1500 dollars, that is fine and they get on with their lives. but the test here is a stand-in for your performance on the job. the greater the cognitive load of poverty may lead to bad decisions on the job. you can see the rich vein of research for psychologists and much harder for economists to are workers who make bad decisions and we see people who can't afford to smoke, smoking. they spend all day to keep their -- together and that is a european term and they may make mistakes by picking up a pack of smokes, they may make a decision on the line as well. so the first claim i want to make here is simply there is strong reasons to believe that

paying low wage workers well may actually be profitable for companies. and that -- that literateure gives us some sense of what that is like. that is not an argument know the more that it involves, the greater your turnover costs are, the more attractive that argument is going to be, the more possibility there is for conflict between workers and management, the more important the supervision is, the more important dealing with customers and customer services, more compelling that argument is going to be. second claim i want to make is that the argument that we should pay some workers a little better, which at first coming from an economist sounds completely bizarre and sounds like something from outside the tribe and something incredibly radical is the least radical claim you could possibly make. if you look at most firms out there, most firms pay workers more than they have to. in fact, very few people in the u.s. labor force are paid according to the federal -- on

the federal minimum wage. so this idea, this insight you should pay people a little better and hope for more is one that almost every managerlkm out there already understands. the third question that i want to raise is is this all relative? maybe some of this is about, you know, if you can get your firm, pay your workers more what matters is paying your workers more relative to other workers. this is something that might work for one firm, but wouldn't work for the whole economy. in the jargon we prefer to use, this might work in partial equilibrium equilibrium. and i think it depends, not entirely obvious. the first thing is, remember, in our models, technical models, we write down what a worker cares about is their wage in this job, relative to their outside option. in reality, when a lot of us care about is being treated well and being treated fairly. and so maybe it is not just about relativity. the second observation is that the present historic moment the

option is not would i be better off working at walmart or kmart it is would i be better working at walmart or unemployed. if that's the case, it is no longer a question it is all just relative. i think the other point i want to make is that many of the pathways we can think about not all about relativity, i want to think about things like legitimacy, or the psychological evidence on cognitive load and the 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 undermine the productivity of many, many workers. if you read of the american poor, they're absolutely full of examples of someone who had a reasonably good job their car broke down they had no way of getting wac baek to ingting back to work the next day and they got fired.

so there are real issues of can i -- can i get reliable transport to work? can i get reliable child care? and i worried about the -- my paycheck running out at the end of the month, these are the things that depend more on absolutes than on relatives, in which case there is reason to believe if other firms also were to raise their lower wages, that they too could get real productivity gains. so the argument here is very much the way an economist would describe it as one of being two equilibrium equilibrium. if the offset is about one for one, then either of those is going to be roughly equally profitable. so then it becomes a question for a ceo, which of those two choices do i want to make? and obviously you might think one has more positive broader

implications than the other. now, it is very difficult to -- the important thing, it is very difficult to know exactly what the offset is. i have spent a lot of time reading just about every case study that we're aware of, of firms who decided to tate high road and seeing what payoffs they get and firms that decided to tate low road. i spoke to hr executives about how they think about these choices. it turns out, we're really good at quantifying small things and bad at quantifying big things. we can manage pretty well what the turnover consequences are, if higher wages. but legitimacy and fairness and the broader productivity payoffs are incredibly badly managed. we think they're there. we don't know whether they yield a 50% return to the employer or 100% return or 200% return. the thing i'm struck by when i talk to the hr executives who are making many of these decisions is that they're fogged in by as much uncertainty as we

are. so there may be a knee jerk instinct among some that think the right thing to do is to keep wages as low as possible, but i think it is worth exploring what higher wages look like and what sorts of payoffs one can get. we don't have -- there is no example in literature, and, you know, if i could ask a ceo to do this, i would and their workers would hate me for it, i would love to see a ceo take half their plant half their plant's higher wages leave the other half in the doldrums and monitor both groups. then they would know whether this was a good or bad situation. but the truth is that no ceo has ever run that experiment, and therefore any ceo who is choosing the high or the low road is doing so through an enormous fog of uncertainty. there is reason to believe that there is good reasons for firms to be experimenting more it is just a different management practice, but one that has a potentially good payoff. let me stop there. [ applause ]

>> well, thank you very much. it is a great pleasure to be here today to talk about these issue and it is obviously also always great to follow justin. and i figured i should perhaps try to say a little bit about the macro economic setting that the microeconomic dynamics that justin talked about operates in. and then a little bit about the broader political situation where i would argue there is also some issues. but i think first and foremost there is also for my research perspective this is a very nice subject to work on right now because we are in this sort of analytical gray area between anecdotes and a clear trend when we look at what is going on with self-initiated corporate initiatives in the united states. it can become a dominant national trend or it can fizzle

away. and i think it is fair to say, when we think about it here, the peterson institute would like it to spread as a wildfire. but i think also we should recognize that this may not be entirely -- straightforward for some corporates as it is for others and there are some objective analytics for each firm and we try to do that, dig into the which type of firms made this type of initiative, whether it is higher wages or other -- some other initiatives we have seen recently from microsoft and others, compelling their contractors to pay sick leave and other things whether or not they'll be more appropriate for some firms, some sectors, and for others. this is very 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 force and

others. but i think it is fair to say that in my opinion at least there is basically two -- there is a broader set of macro economic issues and broader sense of political issues in which these trends are being played out right now. on the macro economic front, i think it is fair to say that the microeconomic 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 this situation than in a period where there is an abundance of unemployed workers. it may even be that if we are in a situation as we find ourselves in in the united states today where perhaps the real hurdle is luring people from the ranks of the outside the labor force back

into the labor force, irrespective of their -- irrespective of their skill level, it is actually perhaps an even better point in time to raise wages because i think there is quite a lot of analytical results will show one of the things that really -- or perhaps the most important thing that lures people back into the labor force is actually higher wages. there is also perhaps a situation from the corporate side that the -- i think it is fair to say that the marginal benefit for corporations for doing all the other things with their cash on hand is perhaps declining at the moment. we know for a fact that there has been low levels of investment, broadly speaking from corporations. there is perhaps we 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 even the low interest rate environment that does that basically now in a country where there is a little institutional pressure for higher wages corporations simply find their -- find a situation where because of the declining returns of the other avenues of deploying their capital, 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 is a broader political setting in which the recent trend is occurring. and i think if we think about it, if we look at most of the polling, it is clear that income inequality and poverty issues have become an increaseing concern to the public in the

united states. and i think it is also fair to say that right at this moment there is little legislative likelihood of things improving, at least at the national level, but i think ironically it is also very important to recognize and justin mentioned it this to me, and we're talking about this event last week, that actually this is an area in which there has been a lot of executive branch action taken. quite in the same trend as what many corporations is doing because if you think about what barack obama the ceo mentioned last year in his state of the union speech it was that he mandated through executive order that the contractors of the federal government pay $10.10 an hour. and in that sense, one could even make the argument that the subsequent corporate action was actually mimicked on some of the

corporate action that the ceo, barack obama, took earlier. and we have subsequently seen this year in which the call was for the workers or for federal contractors to pay sick leave, well that was subsequently picked up by microsoft. but basically i would argue that we are in a situation that because of the lack of likely legislative action by congress on this issue and the rising level of public anxiety of this issue, there really is an opportunity for a -- a corporation to get a significant pr benefit from doing this. basically appearing to have a -- become a responsible stake holder at this very point in time. and i would also perhaps go further and say that it is kind of a little bit like the

previous model for effective corporate behavior that we have seen and we're talking about sweatshop labor in the third world and the likes. this is -- the dynamics is different, but certainly 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 in the united states which, of course means that when you then look at the u.s. labor legislation code and you see, well, the united states is quite unique among the osce countries and having no legislative parental leave on the books, it obviously as was highlighted in the last state of the union doesn't have mandated sick leave

either. and then you think about, well, where is the next step of this type of pressures going to be found? well, i would say that these are probably the -- the next steps for which these types of corporate actions will be taken. and as i said, it basically means that we are in my opinion in a very fortuitous macro economic and broadly political situation right now. so i think what we're 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'll stop there. thank you. [ applause ]

>> well, thank you very much. this is a wonderful conference. thank you, adam for including the loyal opposition. it is a pleasure to be here. the discussion today is about voluntary wage increases for lower wage workers. i will take voluntary to mean nonlegislated, that affirm is responding to market pressures rather than to legislations 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 have 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 it can get technical, but i think sometimes people sound like they're defending low wages and that's not -- that's not

something that we should be defending. we should be defending appropriate wages. this signals very good news for the macro economy, signals good news for the labor market. it would add nefdz support of the hypothesis the labor market is tightening, something we should all want and very importantly it is very good for low wage workers themselves who should be our primary concern. many of them have trouble making ends meet, justin did a great job talking about issues of cognitive load and the stress that having financial problems can lead to a person that helps make them -- that pushes them in the direction in some cases of being a bad worker but it also pushes them in other directions that are bad as well and their personal lives, so we should be happy when some of those pressures are alleviated. these workers are playing by the rules. they have jobs. they're working hard. they're getting a pay increase is a fantastic development for them. we should be happy about it. so i will now turn to the main

focus of the remarks, which is voluntary wage increases in the context of public policy. and i'll just make three points. the first is that -- according to press reports average wages, even after the voluntary wage increases, average wages among firms in industries that disproportionately employ low wage workers will still be lower than the desired federal minimum wage of the president and congressional democrats. this is a little hazy because not all the dwrat is outata is out there, but my understanding is the firms in these industries that announced voluntary increases so far will be u.n. der $10.10. mcdonald's, for example promises to pay $10 an hour for some other firms which is less than the $10.10 an hour that many on left desire. my understanding is this is true for walmart, may not be true for some firms with au e broader distribution of wages within their firm, but it is true and jacob makes the correct point

that industries matter and it is true -- or seems to be true at this point in firms who are in industries that are thought of as disproportionately paying low wages and hiring low wage workers. it is far short of the living wage movement case's call for. so this system, $10.10 is likely too high for a federal minimum wage. those few firms who are publicly announcing pay increases are still below what the president and congressional liberals would require the minimum to be for all firms. and so we need to keep that in mind when trying to map discussion of these voluntary pay increases into our discussion about national public policy. and, again, this says to me the $15 per hour with some municipalities are moving toward and the living wage movement wants is way too high.

the second point that i would make is that these voluntary increases do not justify raising the federal minimum wage. it is an empirical fact that wages are mysterious, justin did a fantastic job of walking through the microeconomics of why wage increases make sense and in many cases and in how -- in many cases those empirical realities are either not the main focus of economic theory or are missing entirely. it is also a fact that standard techniques can explain only a fraction of the variation in wages. but to me those facts suggest that 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 what i just said is a fringe view, but in fact i don't think it is. the nonpartisan congressional

budget office the referee for so many of our public policy debates recently reported that raising the federal minimum wage to $10.10 per hour could result in hundreds of thousands fewer low wage jobs. the cbo also reported that a $10.10 per hour federal minimum would result in $31 billion of increased earnings for low wage workers. this sounds good. but if you dig a little deeper the cbo found that only 19% less than 4 out of every $5, of that $31 billion, would accrue to families below the poverty line. one-third of the $31 billion would accrue to families earning more than three times the poverty line. so the minimum wage is a very inefficient tool to help low income families, families below the poverty line. it may result in significant employment losses among the very population minimum wage advocates are trying to help.

so we should celebrate that some firms are raising wages, the increases are in the best interests of the firms and in the best interests of the economy at large. and they clearly help the workers. but we should recognize that mandatory increases are very different than voluntary increases. and mandatory increases very likely could carry unintended consequences. my third point is that despite that 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 that low wage workers find themselves in, and that is to increase the earned income tax credit. the eitc is a earnings subsidy f you work and your household earns below a certain amount they write you a check. it is efficient. it is targeted with households with low income, rather than workers with low wages. those are very, very different

populations. as is suggested by the cbo's distributional analysis, which households would get how much of that $31 billion increase in earnings. previous eitc expansions pulled significant numbers of jobless 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 a household lives in poverty. that is a social goal. and consequently that goal should be met with social resources. proponents of involuntary legislative minimum wages implicitly argue that the burden of meeting that goal should be placed on the shoulders of the businesses who employ low wage workers and on the customers of those businesses who will see higher prices. the eitc is better than this. it marshals resources from all

of society to help meet that social goal. instead of a few businesses, the eict supports work, encourages earned success and fights poverty using resources from mcdonald's and walmart and target, sure but also from well to do economists from wall street financiers, from corporate ceos and hedge fund managers. all of society should be employed to achieve that noble social goal the eitc is designed to make that happen it is a superior tool to the federal mip mum wage. and i will leave it at that. [ applause ] >> well, good morning. let me begin by saying that i'm going to shock you and say that i can 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 amidst 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 embraced the afl-cio's current strategic campaign which is called raising wages. and i welcome all of you to it. now, i think there is a set of things that have to be said about this, though, to make sense of some of the back and forth around the areas where maybe there wasn't so much consensus. the first is is that we really misconceive what is going on in america's labor market and america's broader economy. we talk about the issue we're dealing with today as an issue

of poverty. there is no question it is an issue of poverty and just to be clear about this because i suspect none of us in this room 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 that -- how long you work and that a $10 an hour minimum wage is $20,000 a year. before you get too outraged at the possibility that somebody might be paid that much money that doesn't deserve it, spend a moment thinking about how your life would work if that is what you were paid. so poverty is important here. what i'm describing is wage levels in which people live in poverty. whether they live in poverty according to the -- according to the indexes we keep officially is not really the issue. at any of these wage levels people who depend on them experience a life of poverty. but the reason why it is not the

issue is because those dynamics and those wage levels, that level of the minimum wage, large firms of the kind that we have 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 the period of decades. in that environment, our economy has all sorts of problems. the -- what was referred to in adam posen's introduction to the papers this morning, the fantasy. it is a fantasy when you look at it from the perspective of very low wage workers whose incomes are so low, even when you talk about millions of people and the kinds of wage increases we're discussing today don't have a macro economic effect but long-term wage stagnation across the -- across what amounts to the entire labor market does. and so when we talk about policy

solutions, we have to ask ourselves what is the impact on this larger problem? and in addition to asking the question that i think michael put in front of us what is the most effective way to increase the nkzincomes of the poor. now, here are a couple of basic observations that i will make and then i assume we'll have a group discussion. the first is, the -- the question of what are minimum wage should be is obviously embedded in the question of the pay increases that have been made and i love the term voluntary wage increases. or self-actualuated wage increases. i will speak to that in a moment. but 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 employment is the issue of wage compression. it is what drives the numbers -- the numbers that michael was talking about. whether or not you agree with those numbers and i would suggest that as michael hinted the bulk of labor market academia is a little more optimistic about raising the minimum wage than cbo is but the point is it is all driven by compression. and compression is about wage stagnation across -- across the labor market. so that if we're trying to think seriously about how to raise the wages of the poor, we ought to think seriously about how to reverse the shift from what returns on wages to -- from returns on capital to returns on wages that are outlined in the

papers you have, more broadly. but if we wanted to return -- if we wanted to return to historical levels of the minimum wage, just looking at -- at the effects of inflation, we would be talking about a minimum wage at around $11 an hour today not years from now, but today. the second question, the second point i'll make is this issue of voluntary wage increases. walmart, which is the first firm to have initiated to have announced wage increases for its employees, that got a lot of attention, walmart is the country's largest private sector employer. walmart has been -- walmart's employees have been engaged in a multiyear effort to get walmart to raise their wages. they have gone on strike. they have picketed walmart. they have engaged in all the

things that historically are associated with collective bargaining. but they have done so without an exclusive bargaining relationship with the company. mcdonald's workers the latest announcement, has done the same thing as have the employees of many other fast food companies. april 15th is the day on which a -- workers of a wide range of employers including particularly mcdonald's intend to go through another round of strikes and protests demanding as michael alluded to $15 an hour in 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, walmart workers and mcdonald's workers have been pursuing their legal remedies at the national labor relations board particularly when those firms have illegally retaliated against them for exercising their 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 this collective bargaining too. and they're making offers to their employees. the clear subtext of the offers is please be quiet and go away. on april 15th, we'll see what mcdonald's workers think of that offer. fascinating thing about it, which relates to justin's question about shouldn't we be able to run an experiment is that mcdonald's offered to raise its wages by a dollar an hour from $7.25 the lowest, up to $8.25. mcdonald's offer has been made only to the 90,000 mcdonald's employees who work directly for mcdonald's corporate. meaning mcdonald's itself owns a bunch of mcdonald's restaurants but a small number in the country. most are owned through the

franchise system thaechb franchise system and they have not been guaranteed the wage increase. the main thing to understand here is that what is going on at mcdonald's and as at wallmart and the other fast food companies is collective bargaining, in the street, meaning instead of sitting down at a table and negotiating, people are yelling at each other through megaphones. workers and the employer uses all the apparatus that are available to a large well resourced corporation to make its offers. now, if we think that that is a better way to raise wages, and it seems as though there is some consensus in this room that it is, that that is a better way to raise wages than the minimum wage we ought to first ask -- i think there is not disagreement in this room maybe there is michael will have to explain later, i think there is not disagreement in this room we ought to have the minimum wage

and if we ought to have a minimum wage the question of where it should be set would seem to be higher than where it is now which is that -- which is at a historic low in relationship to the rest of the labor market. there is a good argument that a minimum wage is not good enough as a way of dealing with the problem of wage stagnation across the labor market including at -- in relatively low wage work like fast food and walmart where there are powerful arguments if you look at the firms that they ought to be paid well above the minimum wage. they are not a pretzel stand. but question is how. and if you believe that what is going on right now in the streets, so to speak collective bargaining by walmart and mcdonald's workers with walmart and mcdonald's management if you think that's the right way to do it you ought to ask yourself how do you sustain that and broaden it? because the reality is that -- there is no secret about this, the reality is is that those

workers are being supported by other workers who are enmeshed -- part of the old collective barring ing system through exclusive representation through paying union dues and the like. and if you want to have -- if you want to have a labor market in whichrj- there is, in fact, a robust system of collective bargaining and all issues do not become essentially issues of public policy so there is some room for customization and 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 bargaining estimate, particularly in the private sector in a twhaway that is not true in other countries. i would suggest two things. one is to the extent we all agree that wages -- that it is good for low wage workers to enjoy wage increases, and i suspect we all agree that it is good for workers as a whole to

enjoy wage increases commensurate with their growing productivity, then the question is not should we have a minimum wage, but where should it be and i'm afraid there is no way to get around it, it needs to be higher than where it is now for it to do its job, a. and, b, we need to think carefully about how in today's economy and today's labor market, today's globalized world, how do we ensure -- how do we ensure that the interaction that is going on between walmart's workers and mcdonald's workers and management which is leading to their wages being increased after years of stagnation and the fact that walmart really falling compensation, if we think that interaction is a good thing, how do we ensure the workers who engage in it are not doing so at the risk of their jobs, which is the reality of what is going on now, and it is why the national labor relations board brought charges against

walmart for firing workers engaging in this process we all like so much. we ought to ask ourselves how do we ensure that process is rootenized in a world of network firms and franchises and precarious work? because really if that's what we say we want, that's what we need to do. thank you. [ applause ] >> could i ask our four panelists to come up? i'm going to make a couple of remarks 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 mark bertellini will be available on the website, transcripts will go up shortly afterwards, and our briefing and various other supplementary materials will be available on the same web page.

before i let my happy warriors go at it, let me just make a couple of points. the first is factual on this word voluntary. i normally don't want to get into facts with damon because he usually gets them right. but in this one, aetna raised wages a month before -- more than a month before walmart and did so with no strike threat. and, again, they were not the only ones but they were the big ones starting it this year which is why we bothered to have bartellini come. more importantly, i think i asked all our panelists and outside guests to talk about how this relates to minimum wage. i think it was right to go there. i want to stress what we're talking about in terms of the so-called voluntary low wage sector or voluntary wages for the low wage sector. a large share of people at the minimum wage are people who are

young or part time or who have low attachment to work. there are reasons and i personally am in favor of wage hike there are reasons you may want to do that. i think it is reasonable to think about the millions of people who are one stage up, the classic working class who are in jobs that maybe are slightly less precarious, we hope, and have the potential to be long-term if not permanent jobs and who are full time workers and who are often heads of household. and 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're here for the economic case that companies should be investing more in that set of workers. so instead of the golden saks and citigroup investing huge amounts of money whether it makes sense for private sector to invest in the people at the

low skilled end of the distribution. and as i think jacob and justin put implicitly and documented in pretty good detail by our briefings that are out today, this is not a huge share of the workforce, but it is a larger share than the minimum wage workforce and it is not something that every company will do. go back to mcdonald's. we can be upset with a mcdonald's or any other fast food joint because they run on a very low wage model. and we can ask ourselves whether, you know, that's a sustainable model, whether we want to legislate about that. but the issue is there is a broad rage of companies in this country who input isn't so in low wage labor. and that's what we have tried to identify not specific companies, but sectors, types of firms where it could be broadly sensible to invest in that because it is not like you're an individual cleaning service or

mcdonald's franchise where you move your labor input, away from your profit margin. that's part of the question we have to think about is how realistic is that and we would argue that it is realistic for a large part of companies. the second point i want to make before turning to our panel is just bringing us back to the international context which jacob did in part and 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 there would be x hundred thousand jobs lost. three cautions. first, that's not dynamic scoring. you know, we talk a lot about dynamic scoring on the fiscal side. that's also a straight partial equilibrium result i know michael knows this.

i want to be clear for the audience. it is about what is the immediate impact not about if there are the kinds of productivity effects that justin was talking about and that plays out in the economy and you reallocate workers potentially that's not what we're talking about. the second point is, couple hundred thousand people, 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 when we're talking about an effect that is something below 1 million, whether you're talking about that as the effect of a trade deal or talking about that as the effect of a wage increase human beings are never rounding, but from a policy point of view getting caught up in something that is tenths of a percent in total employment is not necessarily the way you want to evaluate a policy like raising the minimum wage. i know michael wasn't saying that, but i have to give context there. the final point in terms of the

internationalization, which jacob doesn't have a chance to say, is that we know cross sectionally, cross country and damon sort of touched on this, he emphasized the collective bargaining, we'll emphasize the outcomes that there are a vast majority, not just of european countries, including justin's native australia, including some of the asian and richer latin american countries, where the wage gap is much smaller. and they managed to export and they managed to have relatively high labor force participation. jacob has done good work on the fact that labor force participation has gone up in western europe. even in countries where wages were not horribly compressed including germany. it is not this iron law that if you pay more, you see -- doesn't mean it always pays. but it might. so with that in mind or more importantly what our panelists had in mind, let me open up to

the floor for questions or comments. jessica has a mike up front. please, these two people, first nancy and then to this gentleman. please identify yourself, please. if you mack ake a political statement, pretend it is a question. >> nancy with the ilo. i want to thank the peterson institute for organizing this briefing and this meeting and for looking at these issues. one of the issues i was hoping to hear from the panelists maybe a little more, and i missed the very beginning, but when michael was talking about public policy effects 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 subsidy that goes in effect to companies that have low wage workers because of the public services that those low wage workers have to access 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 systems because as full time low wage workers, so imagine how that affect spreads in the united states. i wonder if anyone could speak to that. it is an important public policy issue. >> anyone on the panel care to speak? >> i can take a quick stab at that. that's basically a political question. and i say it in the sense that it really depends what your baseline is. so you can say, all these guys at walmart, who work at walmart

are on food stamps if they weren't on food stamps -- if they weren't being paid a low wage, they wouldn't be on food stamps. so we're subsidizeing walmart. and walmart's response will to be they weren't working at walmart on a low wage they wouldn't be working at all. the food stamp subsidy would be bigger so walmart is helping. so it is a question of what the right baseline here is. and, of course this is just a question i think very much more of political framing than anything else. i think there is an important public policy issue here. the way i describe it is if you believe there are two profitable wage policies, the high road and low road we as a democratic population might think we prefer firms to take the high road. we generally -- when firms are doing bad things, polluting the river and the like the economist answer is you tax people doing bad things and get them to do good things. if you think there are two profitable alternatives for businesses and the businesses

are taking the low road are just making us all worse off, then i think there is a strong argument we should tax those guys for making bad choices or subsidize the other guys for making good choices. >> there have been a lot of studyies of what the costs look like. and, you know the singular fact that walmart which is at various times the largest capital -- the company with the largest capitalization and one of the largest capitalizations on our securities market, is also the company that employs the most people on medicaid. that sort of thing has been looked at a lot. i think justin's answer really draws out something very important to understand, though, about this. it is that if you postulate a country -- a political economy a country in which the choices

are unemployment or low wage work for billionaires, subsidized by the public all right, then you've -- 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 have actually built, the walton family, i run these numbers in this way i haven't decomposed it, but the walton family, the six of them and the coke brothers who are the -- some other wealthy people involved in our politics, have a net worth of $230 billion. that is equal to the net worth of 44% of our population. the subsidies you're talking about, right, have produced that outcome. they're not the only thing that produced it, but they have fed that outcome. now, if you want -- you can

hypothesize that somehow the politics that those numbers drive are going to produce the kinds of results, right that justin hopes for, which is that -- which is that we will tax low road employers to make up the difference. that would be a response. history and comparative political economies suggest that if you want a different response, the people work for these companies have to have some voice in our political economy. that, i think, is the proposition to which the ilo is dedicated to. we are beginning to see right now in fact we're having this meeting because, and i mean no offense to the folks at aetna who i recognize are in a different place, different situation, but we are having this discussion because low wage workers at fast food in the fast food sector and at walmart have braved being fired in order to try to raise the wages of themselves and their co-workers. that's the only way you get out of the trap that justin's --

that justin's analysis hypothesizes. i think you have to ask the question about public policy measures, be they the minimum wage, the eitc, the labor and employment laws, you have to ask the question, are they promoting a high wage society or low wage society? and we don't seem to like a low wage society, but we have consciously built one and need to make difference choices if we want a different one. >> michael, did you want to come in or -- >> yeah. i'll just -- i'll veb briefbe very brief. we have to think about it from a -- the broad 30,000 foot level of society and we have to recognize the different agents in society have different responsibilities. and so imagine you have workers firms in the government. it is, you know in some sense damon is arguing we have built this low wage system but if you're talking about fast food, restaurants and low wage workers, it is simply unrealistic to expect that a

firm that is trying to maximize profits, though perhaps imperfectly, will take someone who can bring in $5 or $7 an hour in revenue and pay them two to three times that amount of money. we'll bes slosing $5 or $10 an hour. that's unrealistic to expect a firm to do. the question becomes, who is responsible for making sure the employees of these organizations have adequate food shelter, health care and who can meet a baseline level of material standing, especially given we live in a society where we have a lot of billionaires as damon pointed out. to me that answer is government through all of society. so i don'tk3nb those workers to be poor and i don't want those workers to not have enough food, i don't want those workers to have to deal with the cognitive load that justin described. but i want more than mcdonald's and walmart to be responsible for making sure that the

outcomes happen. i want the coke brothers to be responsible. i want the walton family to be responsible. i want me to be responsible. even though i don't employ any low wage workers. so the way to do that is to tax people who have you know a lot of money and redistribute it to people who there are working hard and playing by the rules but aren't earning what we deem socially as an adequate standard of living. so you seem to want walmart and mcdonald's to bear the entire brunt of that, and that's implicit in the argument that somehow the government is subsidizing walmart and mcdonald's. i disagree with that framing. >> jacob. >> very quickly. if you take the big one which i would argue is the health care issue, the fact that the united states is virtually unique, in essence, unique among the industrialized world and having this direct employment link to health care the -- if you take other countries where you have essentially a single payer public funded system you could

then say, on the one hand, that imemploys s implies the subsidy to the entire corporate world is 100%, no firm needs to take any direct cost for health care, it is basically taken care of, if you like. but, of course and from the corporate perspective, that is -- i would argue certainly any person any corporate executive i have spoken to would be much -- maybe not -- people that provide this kind of service, but from -- if you're a foreign direct investor would you rather invest in a country where you have to deal with this issue or if it is just basically taken care of by the government? i would certainly argue that it is the latter. and therefore i think in international context at least i think it is probably the wrong framing of this as viewing it as a public subsidy to the

corporate sector. rather i think you should take a normative position and say look, this is actually one of the social goals that society wants to promote, which is true in all other industrialized economies. you should also take an efficiency perspective to this. it is hard to argue that there are any eofficialfirb efficiency gains to be had when you compare the cost of it with other industrialized countries. >> justin? >> so all of my discussions with michael strain and the rest of his cabal of liberals and with him suggesting that we should always only take action through the state and absolve any one individual of any responsibility, the alternative is to recognize the possibility that sometimes it is just the right thing to do and corporate social responsibility is more than just a buzzword but something that we should take seriously and that then suggests we should think more about a

little bit more than just the marginal product of the worker at mcdonald's relative to their age and ask more sometimes. i think a tool i wish damon and his colleagues would use more that is being lost is what you think of as the shame constraint. we have low wage workers in precarious work working for billionaires about the billionaires take their helicopter from manhattan to the hamptons and never touch anyone along the way. there was a time when we thought that -- we asked more of chief executive officers and firms, and that shame constraint is no longer there. that's a large part of what we're seeing driving the income distribution. and the same to which we can bring it back is actually a way to push ceos to take the high road. >> i'm not sure the afl wants to suggest that they have been lackadaisical on the shame front. >> i was going to say i'm feeling kind of -- like i've

been shirking. >> i'm also not sure we should be talking about hair length. >> let's pick up something, let me pick up on something justin said and take it a slightly different direction. there is the issue of do we do things through the state or not? there is a very coherent political economy, moral argument, the sort that michael is making. i think i want to make a practical argument which is -- which i think will be echoed to some degree by mark clayter. for many people in capital societies, work is an important part of their life. and how you're treated at work and in your workday is an important part of your life. i don't think any of us will deny this. the idea that we target things be it the eitc, both of which i support, happy to support those but those are about achieving

post work income outcomes. and they're about making sure that there is a floor. both of which are virtuous. there is something to be said for making work outcomes better for the vast majority of people and that that's a distinct part of life and a goal worth pursuing and that may not be legislatable. there may be collective business action, inspired by the peterson institute for international economics and the example of aetna, or perhaps pressured through changes in the world. but either way, there may be room to go the high road as justin says and it is not just about how much money you get home at the end of the day, it is about how you're treated in the workplace. that's a part that shouldn't get lost when we talk about this. very patient, thank you very much. >> hi. my name is jonathan, labor economist. and my question is for justin

jacob and michael a little bit how we got where we are. when we think about the prevalence of low wages, low wage society all of which is related to, you know, the very low share of labor income as a share of national income, damon lays out a sort of -- a sort of case for why we have gotten where we are, which is some fundamental change in, you know workers negotiating and the wage bargain. he's talking about a lack of unionization, and a substantial amount of bargaining going on outside what you would consider normal nlrb bargaining kind of an important starting point for thinking about how some of the problems, where we are today. justin laid out a, you know we have two equilibriums and stuck in the suboptimal one. i'm curious what he thinks -- why are we stuck in a suboptimal one and does it need to be --

how do we get out of it. i'm curious what jacob and michael think, we had a essentially long running theme in the labor literature from the declining job opportunities of older men that was, you know, started to take traction in the '80s and seen labor share of national income drift lower for several decades even with the very tight robust labor market of the 1990s, and what was also relatively low unemployment in the 2000s. that failed to arrest too, which makes you wonder how able we are as a society or market economy to do it now. >> yeah. before my colleagues respond, just another plug for our briefing, in the last essay which justin did, we have figured nine -- i should add this up on power plant, sorry, it will be on the website, but you do see the downward trend that jonathan just mentioned, but then an incredible acceleration of the downward trend of labor share over recent years.

and so there is both pieces to it. that's part of the reason why the whole argument that things are tightening up can only be a partial explanation. would anyone care to respond? >> i can take a quick swing at it. i think descriptively, you've seen changes in labor supply and demand, labor demand front, due primarily to automation and technology and what economists call the rootenization of tasks. you've seen a decrease in demand for certain types of workers and in firms pushing workers into the lower wage portion of their occupational structure and away from the middle wage portion. i think globalization is also played a big role in keeping wages down and i think economists are starting to recognize that the role of globalization is actually greater than many had previously thought. so those i think are the two big ones there. on the labor supply front, for men, you've seen a slowing growth in the acquisition of skills and so the college high

school wage gap is affected by that. i think, you know, kind of bringing you back to what justin said, to the previous question, also importantquestion it's also important, is that firms don't invest in workers that way they used to invest in them. part of that is firms reacting to the fact that workers are much more mobile, they hold many or jobs over their career than they used to. and this has frayed. and part of it i think is a relentless focus on hitting quarterly numbers that didn't used to be the case decades ago and firms trying to cut costs by cutting worker training which in turn makes workers feel less appreciated and less likely to stay. part of the answer to your question is that we need to adjust more. we tend to let firms off the hook, especially in any camp and

that firms need to have a better attitude of social responsibility and recognize that they're part of a society and a big part of that is training. and public policy can make some nudges in that area and i think a really promising avenue is apprenticeships where the government will anger a marriage, or not perhaps a community college, will arrange a marriage between someone trying to pursue an academic potential in a firm that wants an apprentice. but you know, trying to find way to nudge firms back into offering training opportunities and being better social citizens than they have been, i think is part of the solution to the problem you point out. >> you've done some work for us on the apprenticeship issue that michael has raised. do you want to say anything? >> i think i aglee with a lot of what michael said and i want to

highlight, though, the perhaps unique issue -- not unique but certainly i would argue more prevalent in the united states than in many other advanced economies, which is the role of educational expenditures. which while in the aggregate is quite high in the united states, that masks a remarkable you know distributional effect as well where everyone knows the cost of going to a top college, a top private school, et cetera. and factor that in with the very meager funding for many community colleges and many the type of apprenticeships programs that michael mention. i don't know if you can call it redistributional issue involved there, but i think it's a very important issue and it becomes more important when we start talking about the effects of the

minimum wage. i come from denmark where there is no minimum wage but there is enforced by you know, essentially a consensus norm. that means that the de facto minimum wage is $20 an our. you cannot argue having had a system like that that doesn't produce large scale inactivity unless you have very large expenditures on education. and thatq4t is not just education at the college level. it is actually a lot more expenditure at the -- you know, to the 50 to two thirds of people that do not get a college degree or above. i mean, that's essentially the essence of what this flex security means. it means flexibility but a lot of expenditure there. and i certainly think the lack thereof and the significant cut

backs in the last couple of years in the united states is a very aggravating factor in this issue. >> do you want to say something? >> the questioner asked the three of them. >> no you can talk. >> all right. >> but a little short. >> yeah, no. this -- i mean -- i observed three facts. i think we tell ourselves pretty stories in order not to talk about the actual deterrence of what makes wages low or high, which is questions of bargaining. power. although i very much agree with what jacob said, i think it's really important to note three things here. first is actually worker mobility is down. there's a whole labor economics agenda around why it's down, but worker mobility is down since the 1970s. it's not an explanation for why corporations aren't investing in

training. mike's second point about financialization is more of a response. but the real response is the collapse of collective bargaining in the private sector. nine out of ten, maybe 19 out of 20 apprentices in this country are aparen the tiss in joint labor movement employer apprenticeship largely in the building trades. and in denmark the what mike sl talking about is very real. but it's something like 70% or 80% of the workforce is covered by a collective bargaining agreement. it's a social consensus that's enforced and it's part of a system that's designed to produce a high wage economy. and that is kind of edge kalt spending is critical to the contrast. but i'll put a sharper point on it. we have 250,000 less teachers than we should have base than

they did in 2007. that's what we're actually doing. we're accelerating ourselves to a lower and lower wage. >> this will have to be the last question. >> would the panel address the question of immigration and its impact on wages? my own sense is in talking to employers across the country is that a ready pool of largely non-english speaking unskilled labor has done downward pressure on wages in the construction, fast food, certainly lawn >> somebody want to summarize the literature rel fast? >> well there was a boat lift in mariel.

that's all i want the say >> most of my work focuses on the high skilled immigration issue. where i think it's fair to say that by and large the wage effects are relatively subdued. i mean i haven't found much persuasive evidence. but i think on lower skilled workers i think that there is quite a bit of evidence that the fact that you have -- this is by the way an effect you find in a number of other countries notably in europe that if you have -- even if they -- they don't even need to be in the country, in fact. but if you have a latent migratory workforce available as a corporation, then there are downward pressures on wages for these types for some low-skilled workers in the agricultural sector. take a country like the uk where you have for instance not a

large illegal immigration pool of workers, but you have a lot under the eu freedom of movement, you have a large population of workers typically from eastern europe that could come at very short notice that are basically available quote unquote on demand. and there are, i think, pretty compelling evidence from the uk and elsewhere in europe that this does have an effect and i think some of the same issues work when the low skilled workforce is actually present in the country in illegal form. the issue here is availability for the firm. >> can i just say when the flc ix was a strong supporter of the corp hen ivs immigration reform e believe that is a moral issue but we also have the position because we think taking into account what jacob is saying

that the worst possible thing you can do in terms of wage levels in the eyes is pretend that you have closed borders but then extension nally have open borders but when the people get here we treat them as a second cast who have no legal rights. from the perspective of what would you think would be the worst possible way to do this in terms of downward wage pressure that would be it. and that is what our members experience both documented and undocumented, that's what our members experience in the workplace. >> we're coming to the end of this panel. i'll get to the logistics of how you get fed in a moment. i want to bring back one thing that was talked about particularly in justin's opening remarks but in everybody's remarks but i think it's gotten lost in the period of the questions. the key word is product tiffty. it's the key word in three

senses. the first is when we're talking about investing in workers, it's just with investing in capital goods or infrastructure, the interest is you invest in worker to accumulate more hours, you invest in workers to get more out of them. and that this is the point of the sort of dynamic view you have to take of these things, that it's not a comparative statics thing. you have to think about that. which goes to the bad and bad equilibrium question about the justin. this is the justin raises, transitioning from one to the another. in the u.s. in in 1990s, it is possible to move from one productivity to another and back. the second point about productivity which goes to something that jay con and damon just said in regard to immigration is that we know this is again -- it's like with trade, immigration.