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YOUR BOTTOM LINE
Minimum Wage, Maximum Fight; The Next Bubble to Burst; Pursuit of Career Happiness
Aired February 16, 2013 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: Thank you, Susan and Victor. See you at the top of the hour.
We know what we've recovered from. But a minimum wage economy, is that what we're recovering to?
Good morning, everyone. I'm Christine Romans.
The U.S. economy has added jobs for 28 months in a row, 6.1 million jobs created in the past three years. But the jobs we're adding are not the same quality as the jobs we lost. Survey from Rutgers University finds 60 percent of people who found work within six months say they settled for lower pay. These aren't jobs you can send a kid to college on or buy a house.
This week, President Obama detailed his blueprint for boosting the middle class. The only new proposal was an old one -- raising the minimum wage.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Let's declare that in the wealthiest nation on Earth, no one who works full time should have to live in poverty, and raise the federal minimum wage to $9 an hour.
(END VIDEO CLIP)
ROMANS: Free action was swift and fierce. Conservatives say, hey, that's a jobs killer. Progressives say it lifts families out of poverty.
The problem, you can't find studies to support just about any position. A study by David Neumark at U.C.-Irvine found the minimum wage actually means fewer jobs for low-skilled workers.
But a study by Alan Krueger, now the chairman of the Council of Economic Advisers, it concludes minimum wage hikes didn't reduce employment for fast food workers in New Jersey.
As for the overall economy, a study from the Chicago Fed found every $1 rise in the minimum wage increases household spending by $2,800 over the following year.
But just this week, Janet Yellin, the vice chair of the Federal Reserve, she said raising the minimum wage doesn't fix the problem, stagnant spending by households and businesses.
(BEGIN VIDEO CLIP)
JANET YELLIN, FEDERAL RESERVE VICE CHAIRMAN: I would say that it's not something that would make up for the shortage of demand that we have in the economy.
(END VIDEO CLIP)
ROMANS: Conservatives like Stephen Moore, editorial writer for "The Wall Street Journal", says the president is about to kill a million jobs.
Stephen, why would the president want to raise the minimum wage if it would increase unemployment?
STEPHEN MOORE, THE WALL STREET JOURNAL: Hi, Christine. Well, you know, I taught economics. And if any of my students ever said that we should raise the minimum wage, I would probably flunk them. I think this is a terrible policy.
Look, what you're doing by raising the minimum wage, Christine, you're sawing off the low-wage jobs that are starter jobs that get people in the economy and the job market in the first place.
I spent the last couple of days talking to a lot of fast food restaurant owners to people who run hotels and so on. And, Christine, what they're telling me is, look, we're operating on very thin margins right now. If they raise this minimum wage, we are going to have to lay off workers. I think it's going to hurt the economy with respect to more unemployment.
Look, if a worker isn't worth $9 an hour, what you're basically saying is that they can't work because no employer can afford to hire them.
ROMANS: I want to bring in Daniel Gross. He's a global business editor for "The Daily Beast." Dan, most small business owners, as Stephen was saying, most of them we talked to say they hate the idea of raising the minimum wage. I want you to listen to a few of them.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Of course, it's horrible. The way it's going to affect everybody. I'm going to have to lay poem off out of my own company. I'm sure every local business owner is probably going to have to do the same thing also.
UNIDENTIFIED MALE: I just won't be able to have employees. I just won't.
UNIDENTIFIED FEMALE: Everybody wants to make more money, obviously. But, at the same time, the small businesses are suffering.
(END VIDEO CLIP)
ROMANS: Are they wrong?
DAN GROSS, GLOBAL BUSIENSS EDITOR, NEWSWEEK & THE DAILY BEAST: Well, it will affect them immediately, but, you know, businesses since 1938, when we put the first minimum wage law have said you do this, set this standard, it will destroy jobs, destroy the economy. We are far richer and have far more jobs than we had in 1938 and in every year since we've raised the minimum wage.
I believe in high standards. We set standards for things like pollution control, and mileage, worker safety, overtime.
ROMANS: And those things cost a little bit more for your businesses.
GROSS: Of course they do. Every time we do, businesses squawk and yell. And then we are very good at adapting, figuring out new ways to do things and getting to a better place. And I think it's important to put a floor under wages, because the wages are not trickling down from the CEO down to entry level workers.
ROMANS: So, it's about standards. And for some people, quite frankly, it's a moral imperative. They say you're putting money into the hands of people who are the very lowest rungs of the ladder.
There are others, though, who say that those people at the lower rungs of the ladder, many of them, Zanny Minton Beddoes, are actually, they're actually people, teenagers, for example, who come from middle class families. It may not be flowing into the poorest Americans.
You're the economics editor at "The Economist", is the middle minimum wage, is it what we can do to create good middle class jobs, or is it a distraction from the fact we're not creating good middle class jobs?
ZANNY MINTON BEDDOES, ECONOMICS EDITOR, THE ECONOMIST: You know, I think I'm somewhere in the middle between your two previous guests. I think you should not exaggerate the job-killing impact of a responsibly set minimum wage. The conventional wisdom in the economics profession has shifted quite substantially over the last 10, 15 years.
So, a minimum wage, provided it's not too high, is not disastrous and can have some beneficial effects on equality without really impacting employment too much.
But that said, it would not be top of my list of what to do to boost quality in this country and to improve prospects for people at the bottom. Something else that the president mentioned in his State of the Union is much, much more important, which is preschool for 4- year-olds, universal preschool. Those kinds of things are much, much more important than minimum wage.
ROMANS: And tell me why -- tell me why that helps the poor and people in poverty maybe more than raising the minimum wage.
BEDDOES: Because what really matters is giving people the skills and the education, which they need to do the kinds of jobs we're going to have in the future, which will require more skills than many of the ones we've had in the past. And that's why I think you need to start early on.
And this country pioneered secondary education, pioneered college education. And it's falling back behind other countries in preschool. And I think that's the kind of new frontier.
And, particularly, if you look at the sort of gap between the 1 percent and the rest, the gap between the top and the bottom. The point of -- the minimum wage can help, if done responsibly. But much more important is to invest in people at the bottom. And I think that's why universal preschool really helps.
ROMANS: You know, in this program, we talked about a lot about there's K-through-12 in this country. We think there should be crawl through 12, but you have to figure out how to pay for that.
And that's -- I mean, other countries have do this. They have very high taxes. We're not in the situation where people want to pay for something new at the moment.
Everyone, stand there. Don't move.
Coming up, our bubbles -- yes, bubbles. The key to this slow and steady recovery, stocks, housing, are the gains here to stay or are you at risk of the next bubble bursting?
ROMANS: Is it just me, or does it seem like there are bubbles everywhere you look these days? Bubbles, just about every story about your money is a tale of recovering from a bubble that burst or worrying about another forming.
ROMANS (voice-over): Just like youth, no bubble lasts forever. And when economic bubbles get ready to pop it's like Charlie and the Chocolate Factory.
UNIDENTIFIED BOY: I'm a bird!
UNIDENTIFIED MALE: I'm a plane!
UNIDENTIFIED BOY: I'm going too high!
ROMANS: The next bubble could be forming right where they already burst. Home prices are rising. Amazing, right? But numbers aside, do you feel any richer in your home?
And what is tech trying to tell us? Google stock is near all- time highs. Apple has lost a third of its value. Demand for gadgets is strong. But overall business demand is slow.
There are tiny bubbles, cue Don Ho.
ROMANS: And giant bubbles. Think tulips.
Some of you think this chart screams bubble. Others say not so fast. Stocks are historically cheap right now.
No denying money has ever been cheaper. Look at the interest on your checking account. That's a bubble, too, because this guy is keeping interest rates so low, which makes us wonder: in rescuing America from a crash, is he creating the next bubble to burst?
ROMANS: Stephen Moore, Dan Gross and Zanny Minton Beddoes are with me.
Dan, you wrote a book about bubbles. It's called "Pop: Why Bubbles are Great for the Economy."
Why is this true?
GROSS: You know, it's a book that came out in 2007. And it's still in print, if you want.
GROSS: In America, this is how we create new infrastructure. You got the telegraph, the railroad, the Internet. We don't sit around and the government says build this line from here to here, people run around and go nuts and they build four railroad lines and four telegraph lines and they all go bankrupt.
But then somebody picks up the pieces, takes that infrastructure and does something with it. That's exactly what happens in the '90s when all those infrastructure technology companies went bust and then we built sort of the web 2.0 on top of that.
GROSS: When you have a bubble that's just paper or it's housing and we're not really developing any new way of building housing, the benefits are much less.
ROMANS: Is the Fed creating a bubble?
GROSS: I think there is a certain excess in, I would say, corporate debt. Consumers have done a great job deleveraging, taking down with it.
GROSS: They've learned their lesson.
But companies are able to issue debt. Good companies and bad companies, at very low interest rates and they're doing an awful lot of it.
ROMANS: Stephen Moore, do you -- I mean, conservatives tell me sometimes they're very concerned about all the money the Fed is printing and that they're throwing out the window into the economy.
ROMANS: And we are sowing the seeds of the next bubble by trying to get out of the crash.
MOORE: Yes. I think there are two bubbles in the horizon, Christine. One is the one you were just talking about, which is government debt. You know, the interest rates are as low today as they've been any time since the Great Depression. In fact, the interest rate on the 10-year Treasury bond in real terms is negative.
I'm going to predict that we're going to see that bubble burst. People are going to be very sorry that they bought these 10-year treasury bills at 1.8 percent interest rates. That train has come to an end and you're going to see rates rise which, by the way, is going to be very damaging to the federal government because we're the biggest debtor in the world.
The other one I quickly mentioned, Christine, I think there's a big bubble in higher education cost. I think that we've come to the end of that, you know, $50,000, $60,000 cost of educating somebody for one year of college. I have two kids in college. I'm feeling it in my pocket.
ROMANS: My condolences.
MOORE: I think you're going to start to see tuitions come down. You're going to see Internet classes, all kinds of new innovations in higher ed. They're going to reduce class. Amen to that, by the way.
ROMANS: You know, Zanny, it's interesting, because just in the last couple of weeks, we've seen these online classes that are considering some of them maybe you can actually get real credit for them. Maybe that would help pop that bubble.
BEDDOES: Yes. Maybe it would. There is a problem in higher education.
But I think we have to be careful about throwing around this term bubbles. You know, we've gone bubbles in spotting bubbles. I think before -- during the housing bubble, and we went on and on about the housing bubble. I think we were one of the first to spot it, if you will, in 2004 and '05.
That was -- the definition of the bubble that really makes sense is when valuations come unhinged from fundamentals and you're basically are buying things because you expect the price to go up.
I think if you look around now, there are reasons why I hope at some point long-term interest rates start to rise. But I think talking about bubbles in government debt or bubbles in higher education at some point becomes somewhat meaningless. I mean, yes, there are issues there. Yes, we need to think about them.
But I think we have to be careful about branding everything a bubble.
ROMANS: You don't think the Fed -- I mean, it's unprecedented. You'll agree it's unprecedented what the Federal Reserve is doing to keep the economy going?
BEDDOES: Absolutely. But I think they're doing it for a reason. And I think if you look at -- there's a logic behind what they're doing and it's a perfectly sensible logic.
Of course, there's a question: will they withdraw all of this liquidity of when the time comes? Will they be able to do that? And before then, will you see excess valuations in certain parts of the economy? Maybe you will. Right now, if you look at housing, I don't really see a bubble.
BEDDOES: You look at corporate stocks broadly, I don't really see a bubble.
So, I think we have to kind of understand why the medicine is being given and then, yes, we have to hope that it will --
MOORE: Yes. But, Zanny, the Fed doesn't have a very good record of putting the genie back into the bottle. That's my concern. You know, it's easy to flood the economy with cheap money. It's not that easy to pull it back.
ROMANS: All right. Dan Gross, Stephen Moore, Zanny Minton Beddoes, nice to you all. You have a really good weekend.
Up next, rethinking education. Students are getting a jump in the lucrative field. But is the focus on jobs at this age the wrong approach?
(BEGIN VIDEO CLIP)
OBAMA: Now at schools like P-TECH in Brooklyn, collaboration between New York public schools and City University of New York and IBM, students will graduate with a high school diploma and an associate's degree in computers or engineering. We need to give every American student opportunities like this.
(END VIDEO CLIP)
ROMANS: That was the State of the Union address. And actually we visited that school, P-TECH in Brooklyn that the president is talking about. He lauded in his address actually. It's the joint venture between the New York City public schools and City University of New York and IBM.
At the end of six years, kids will graduate with an associate's degree in technology or engineering and we'll be given a crack at IBM jobs.
We visited the school when it opened the doors last year. You know, this is an approach that's catching on. Several schools around the country have been created in the model of P-TECH.
This is about a focus on science and engineering, on math and really fostering this early in kids. These careers are the careers that are expected to grow more than 20 percent by the year 2018. But they're also careers that are not everyone. What about the kids that don't have a fashion for STEM field? Should kids today be thinking about their eventual job or thinking about what they love to do?
In 1990, "Sports Illustrated" dubbed Burt Grossman "big mouth" on its cover.
Today, the former big mouth is Mr. Grossman, an education who was named 2011 NFL Teacher of the Year. Pete Dominick is Sirius XM political show host, comedian and parent.
I specifically guys want both of you not only because you're parents, too, because you're funny, but because you are two people who followed your passions and made careers out of your passion.
Burt is a professional football player. Pete is a comedian. A lot of parents say, look, I hear all this talk about STEM, science, technology, engineering, math. I get it. I get it that eight out of top 10 highest paid jobs are heavy science and math job. I get it that most liberal arts major are paid a lot less than computer programming and other -- you know, and other kind of high tech jobs.
So, should you let your kids just pick what they want to do or do you need to be pushing into these careers that they're going to be able to build a middle class life on?
BURT GROSSMAN: Well, I think in technology, like anything else, kids have been counting that field. I mean, I love for someone to be, you know, professional golfer or professional tennis player. But the reality is it's probably not going to be. But I can push him all he wants, he can say he wants to do it, he might want to be a professional Super Mario player. But the fact is, if he can't do it and he's talented enough, it's hard to say go ahead and do it and sit there and you're not negligent as a parent.
ROMANS: Here's a thing, as a parent --
GROSSMAN: But I can say one thing -- go ahead.
ROMANS: Well, one thing, when I talk to kids a lot, I want to talk about this, Pete, look, it has to do what they love, what they're good at, and what someone will pay you for. And I talk to a lot of college kids, you know, they are just doing what they love to do and they don't have an idea that the economy is not rewarding you for having fun on your job anymore.
PETE DOMINICK, CNN CONTRIBUTOR: First of all, I couldn't disagree more with Burt. And if here were here I would -- I would take him down. I would kick his butt.
My dad is a real conservative guy. Paid for me to study acting. That's idiotic if you're thinking about the odds success and work as an actor. I know the stats and know we need to push kids into these STEM fields, absolutely.
But passion is important. It's all I've got, by the way, passion.
ROMANS: Let's certainly -- yes.
DOMINICK: And obviously beauty.
ROMANS: Beauty and passion and -- and a sharp tongue.
Look, let's look at -- STEM is where the jobs are. But not everyone loves science. And the study out last month found the gender gap widening. Almost 40 percent of male students express interest in STEM, only about 14.5 percent of female students.
So, how do we get kids, especially young girls, interested in these fields?
And, Burt, I got to tell you, I mean, even exposing them more to it because even if you're not working in those fields, those are the fields that are innovating and creating the jobs. You've got to know what's going on there.
GROSSMAN: Well, I don't know if you -- and Pete and I -- you know, Pete says he follows passion. If we're talking about the exception or the rule -- the exception is he's an exception, I'm an exception. And I don't we're the rule, I mean, we might 0.2 of 1 percent of people can actually make it doing standup comedy or make it doing sports.
But the reality is for the general public, that's not a reality. I don't -- I mean, I can't disagree any more, to be honest with you.
DOMINICK: But lots of people have passion. Like you said, couldn't be -- your son couldn't be a professional Super Mario player but could be a video game designer. There are so many things you can do.
I think it's really important to cultivate your child's passion and aspirations and aptitudes. My daughter -- you made a great point, Christine, about women. I know a girl who just graduated college, got an amazing job with Microsoft because she's, frankly, one of the only women out there that's got a mechanical engineering degree.
My daughter loves Lego's. She once said, "don't tell anybody, this is a boy thing." Absolutely not. I got her more Legos. I got her Lincoln logs. Maybe she'll be an architect. Maybe she'll be a designer.
But you have to find what your child loves and definitely exploit -- my daughter loves to read, I can't stop buying books for her. So, you have to cultivate their passion at a very young age, whatever that might be, maybe it's music, it could be anything. And there's something for everybody, I think.
ROMANS: All right, guys. The only thing I worry about is the economy is changing faster than did whether we were going through all of it. It's changing past. And the skills and education's being rewarded, it's changing quickly. I worry about looking at the world with the Gen-X mentality of just do it, you know --
DOMINICK: Well, the question is what we teach in the lower schools. Are we teaching these fields, et cetera?
ROMANS: It's true. Burt, Pete, nice to see you guys. Come back again.
DOMINICK: I would like it arm wrestle you if you're here, Burt.
ROMANS: All right. The new normal may be tougher for most of us, but what about the top 1 percent, the top 1 percent of dogs. We'll look at what it costs to be the top dog.
ROMANS: The Westminster Dog Show hit New York this week.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: What do you want? What do you want more than anything in the world? Do you want the big, blue ribbon? Aha, that's what you want.
You want red? No. You don't want red.
You want yellow? No, you don't want yellow. You want to go home with a blue.
What do you see in front of me? You see a big, blue ribbon. It's in front of you. You want it, you come and get it. You get it --
UNIDENTIFIED FEMALE: She's not listening to you. She's freaking out!
UNIDENTIFIED MALE: Well, get the busy bee.
(END VIDEO CLIP)
ROMANS: Well, that clip was from the movie -- remember the movie "Best in Show"? It's a parody. But the amount of money spent to win the real thing is no joke.
UNIDENTIFIED FEMALE: Thousands and thousands of dollars.
UNIDENTIFIED FEMALE: An expense that I don't discuss with my husband. He doesn't have a clue. If he did, he'd about have a fit.
UNIDENTIFIED MALE: Priceless really. I mean, it's hard to say. I couldn't put a dollar figure on that.
ROMANS (voice-over): From blowouts to crates fit for a king, show dogs get ready for show time. There's primping, pruning, trimming and toning. And there's campaigning in magazines like this.
SHARON ROBERTSO, SHOW DOG NUUKTOK'S OWNER: If you advertise on one of the covers of these magazines, it's probably about $4,000.
ROMANS: If you want to be a cover dog, fitness training is a must all year long.
NIKKIE KINZIGER, SHOW DOG REESE'S OWNER: They're like any other athlete. He's got a rigid routine at home. He works out on the treadmill. A little bit of a special diet. Vitamins.
ROMANS: Dog treadmills cost up to $2,000. And Reese's vitamins cost more than most people's.
KINZIGER: His vitamin particularly is about $100 a bag.
ROMANS: And, of course, you have to travel in style.
Kathleen Strunk is an owner from Chicago, also a teacher. She bought an R.V. for her dog, Journey, this American Eskimo.
KATHLEEN STRUNK, SHOW DOG JOURNEY'S OWNER: Kind of have to budget your time and your money and where you're going to travel. I still work so I teach school. And I continue to work. So I can pay for all of my expenses.
ROMANS: Those are some lucky dogs. But you have to wonder if it's worth it, right? Tell me what you think. I want to know your thoughts on bubbles, the minimum wage, and the future of education.
Find us on Facebook, find us on Twitter. Our handle is @CNNbottomline. My handle is @ChristineRomans.
OK. So, it's pushing the minimum wage what you do if you can't figure out how to create new good middle class jobs? I'll be back later today to debate with Ali Velshi on "YOUR MONEY" at 1:00 p.m. Eastern.
"CNN SATURDAY MORNING" continues now.