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Raising Minimum Wage Proposal Debated; Merits of Supply Side Economics Assessed; Interview with Newt Gingrich; Wall Street Culture Examined
Aired January 18, 2014 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINA ROMANS, CNN ANCHRO: A 21st century labor movement brewing with the support of President Obama and leading economists. I'm Christine Romans, this is "YOUR MONEY." These are the people who flip your burgers, stock shelves at your supermarket, and clean your offices, and they want a raise.
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ROMANS: Fast food workers aren't the only ones at the bottom of the economic ladder. And 1.6 million Americans live on the federal minimum wage of $7.25 an hour. That works out to just overs $15,000 a year, well below the poverty line for a family of three. Another 17 million Americans earn only slightly more.
SHENITA SIMON, FAST FOOD WORKER: We have to sacrifice. Either my husband eats today and I eat tomorrow, or -- you know, just to make sure my kids eat.
ROMANS: The president says those workers need raise.
BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: It's well past the time to raise a minimum wage in real terms. Right now is below where it was when Harry Truman was in office.
ROMANS: Democrats want to raise the minimum wage to $10.10 an hour within three years. Some Republicans call that a political solution, not an economic one.
SEN. MARCO RUBIO, (R) FLORIDA: Raising the minimum wage, having a job that pays $10 an hour not the American dream.
ROMANS: The U.S. CEO of America's largest employer, Wal-Mart, sees it this way.
BILL SIMON, PRESIDENT AND CEO, WAL-MART U.S.: The issue isn't where you start. It's where you go to once you've started.
ROMANS: But the options for those looking for good jobs that pay well are diminishing. Millions of middle class jobs lost during the recession are being replaced by low wage ones. One America, two economies, and a debate wage rages over who bears the responsibility for rewarding hard work with a livable wage.
ROMANS: This week, 75 economists signed a letter supporting a Democratic proposal to raise the minimum wage and tie it to inflation. They argue today's minimum wage buys less than it once did. The minimum wage was last raised in 2009 to $7.29 an hour. That's where it is now. Adjusted for inflation, the buying power of the minimum wage is down from 2009 and it's more $3.50 lower than in 1968.
But the other side says raising the minimum wage will kill jobs. The Employment Policies Institute says up to a million jobs could vanish if wages are hiked. Why? Businesses were cut back work hours, raise their prices. It will hurt the very people the increase is supposed to help. And, they say, businesses will suffer, especially those who rely on low-wage workers.
Michael Saltsman is one of those opponents. He's the research director at the Employment Policies Institute. Marc Morial is the president of the National Urban League and a former mayor of New Orleans. Gentleman, thanks to joining me today. Mark, these are entry-level jobs. I hear it from business owners. They say, Christine, these are jobs that re not worth more than $7.25 an hour. Why should we pay them more?
MARC MORIAL, PRESIDENT, NATIONAL URBAN LEAGUE: We should pay them more because these workers deserve more. Corporate profits and earnings have indeed increased. And because the idea in this country around fairness and economic justice is that we ought to reward work and provide for people I think a basic minimum wage so they can earn their way along. They can pay for the basic necessities of life. This is an issue of fairness. All of the arguments contrary to it I think are based on hocus-pocus economic theory.
ROMANS: You mentioned the big companies and all of their big -- they're big. Maybe a higher minimum wage for big companies, but what about smaller companies? Wait. What about the economic fairness for me? I'm not going to hire as many workers.
MORIAL: Most low wage worker work for major corporations. They work for companies that have more than 100 workers. And I think the fact of the matter is that workers who feel honored, who are respected are also much more productive workers. So this is really an issue of economic justice and fairness. And why shouldn't we create a basic minimum? I would challenge anyone to look into the eyes of a minimum wage worker and say you'll be worse off if we pay you more.
ROMANS: Yes. Look into their eyes and say the job you're doing is not worth more than it is right now because they would disagree. Michael, a poll found that 71 percent of Americans support, 71 percent support raising the minimum wage, with majorities of Democrats, Republicans, and independents all in favor of raising it. Are 75 economists and 71 percent of Americans wrong?
MICHAEL SALTSMAN, RESEARCH DIRECTOR, EMPLOYMENT POLICIES INSTITUTE: Well, I don't think Democrats really believe that poll numbers determine whether a policy is good. If they, they'd be, you know, throwing the Affordable Care Act overboard. This letter from economists I think was more of a political statement than an economic statement. You had a number of in-house researcher and labor unions on there.
But I think the broader point is, Mark is saying, we should look into the eyes of workers and talk to them about a minimum wage. What I would say look into the eyes of the small business owners, actually most minimum much wage workers with fewer than 100 employees. Look into their eyes and say we're going to raise costs by 40 percent and then we still want you to be able to hire and provide the same number of opportunities that do you right now.
As someone who represents the Urban League where a number of the cities in the country where teen unemployment over 30 percent, it surprises me we're talking about a policy like this that the evidence clearly shows is going to reduce opportunities specifically for those at the bottom rungs of the career ladder. I think this is the last thing that we need to be doing, and it's really an outmoded policy. There are better ways to raise poverty than raising the minimum wage.
ROMANS: Mark, I want to bring in something that the House speaker John Boehner said this week. He said the administration's focus on this is in the wrong place. Listen.
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REP. JOHN BOEHNER, (R) HOUSE SPEAKER: Instead of helping to create jobs, the president is focused on making it easier to live without one.
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ROMANS: Mark, shouldn't the message from the White House be more about creating good jobs that pay more and retraining efforts for people in these low-wage jobs so they can get the good jobs that are out there?
MORIAL: Speaker Boehner should do is act on the American Jobs Act. Quit stalling on job creation like the American Jobs Act, like reauthorization of the transportation bill, or increases in the minimum wage. I mean, when you look at the reality of what is in fact occurring, I think the president and the executive branch have proposed things that have stalled out in the Congress because of filibusters and obstructionism.
Here's what's important. What's important is that those economists included seven Nobel laureates. Those economists said, and I agree with them, that increases in the minimum wage have not historically created high unemployment. In fact, the opposite is true, because if people earn more money, they're going to spend that in the economy on the necessities of life, food, clothing, shelter, diapers, things they need for their children, and so many of these low-wage workers are in fact women who are raising children.
ROMANS: Last word to Michael Saltsman. SALTSMAN: There's another side of that equation, and that's what happens when you take money from employers and that they have to raise prices or reduce the number of opportunities. I mean, we're here in California where San Jose just went to a $10 minimum wage and we've seen the impact in San Jose where restaurants have had to cut back on opportunities. Some even had to close their doors. I think it's a case study for what we could see nationwide if we go to $10 in Congress.
ROMANS: All right, Michael Saltsman, Mark Morial, I think that we will be talking about this all year because this is a platform that won't go away.
MORIAL: Time for action is now.
ROMANS: Thank you, guys.
Coming up, an 80s flashback. In between the leg warmers, the power ballads, and the shoulder pads, there was Reaganomics. So what ever happened to trickle down? Why are record corporate profits not leading to good paying jobs? I go one-on-one with Newt Gingrich, next.
ROMANS: Remember the '80s? Remember big hair and stirrup pants and when video killed the radio star? You probably also remember the economic theory of the day. Conservatives calmed it supply side. Liberals called it trickle down. And Ferris Buehler's boring high school economics teacher quizzed the class about another term for it.
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BEN STEIN, ACTOR: Does anyone know what Vice President Bush called this in 1980? Anyone? Something d-o-o economics. Voodoo economics.
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ROMANS: Whatever you want to call it, the theory goes like this -- cutting taxes on the rich helps everyone else because the rich spend that money to create jobs, to invest, to buy things, in short, creating economic growth that lifts everyone up, an idea embraced by President Reagan lending it yet nor name, Reaganomics.
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RONALD REAGAN, FORMER U.S. PRESIDENT: Our aim is to increase our national wealth so all will have more, not just redistribute what we already have, which is just a sharing of scarcity.
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ROMANS: Three decades later some economists are asking whether the idea could make a comeback. After all, in this economy the rich are getting richer. Since 2009, 95 percent of the income gains have gone to the top one percent. And corporations are reeling in record profits. Just this week we heard from the banks that their bringing in billions. Could some of that wealth trickle down?
Newt Gingrich is the former Republican speaker of the House and co- host of CNN's "Crossfire." Newt, we're seeing a huge concentration of wealth. Some say the Obama economy has really favored the very top of the income, the growing income gap between the haves and have-nots. Leaving tax cuts aside, Newt, what has to happen for this wealth to trickle down?
NEWT GINGRICH, CNN HOST, "CROSSFIRE": Well, first of all, I don't think that in the Reagan area you had trickle down. I think the goal was to really cut taxes on small business. The rich take care of themselves. Obama's living proof. Here's a guy who runs around preaching inequality while the inequality keeps growing. And the reason is that when you get to be the size of Warren Buffett's fortune, you have so many smart lawyers and so many smart accountants you just manipulate whatever the government does.
The key is upper middle class and middle class workers, very often husband and wife both working, people who start businesses. Historically in America, we start about 500,000 small businesses a year. About 400,000 fail. So we have a net increase every year of 100,000 small businesses. That's been the driving force.
The real focus of Reagan was, and I was a part of this with Jack Kemp, the real focus was, less regulation, less red tape, more free time to grow jobs. Lower taxes on people who want to go out and be entrepreneurs, encourage small businesses, make people feel good about creating jobs. It's an objective fact. It worked twice. It worked with Reagan and it worked in the '90s with Clinton. In both cases, it did dramatic changes.
ROMANS: You have 2.3 million children in this country who are living with a parent who is long-term unemployed, Newt, 2.3 million kids. If Reaganomics works, why aren't soaring corporate profits helping everybody?
GINGRICH: Well, Reaganomics was not just about soaring corporate profits. This is frankly a left wing libel because they so completely misunderstand the nature of free enterprise. The Reagan approach included helping people find jobs. The welfare reform program that we passed in 1996 led to the largest increase in children leaving poverty in American history. The late '90s was the best period of moving children out of poverty into a much higher income status.
And nobody on the left wants to study it because it requires work. Frankly, on unemployment compensation, I would extend it, but I would attach a learning component, apprenticeships, online education tied to businesses, and I would try to say, if you can't find a job, we want to help you acquire the job skills to enable you to find a job.
In terms of poor children, I think school choice is absolutely central. We trap poor children in terrible schools in order to pay off the teachers' union. We ruin those children's lives, and then we wonder why in fact they have a hard time finding a job when they have been failed so totally by the public bureaucracy.
ROMANS: Newt, a conversation we keep having. Thanks so much, nice to see you, today.
GINGRICH: Thank you.
ROMANS: Coming up, a prediction from Facebook's founder.
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MARK ZUCKERBERG, FOUNDER, FACEBOOK: Commuter science or at least basic programming is going to be as important a skill as being able to do basic reading and writing.
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ROMANS: But girls aren't getting the training they need. How to fix it, next.
ROMANS: Parlez vous tech, the most important language you can learn to code. Programming jobs are growing at twice the national average, and tech companies are desperate for talent. But new numbers show only 20 percent of students who took the AP computer science exam last year were female. In Mississippi and Montana, no girls took the test at all, in the entire state.
The problem only gets worse in college. Women earn more than half of all bachelor's degrees but just 12 percent of computer science degrees. So where are the female tech leaders of the future going to come from? Randi Zuckerberg is the former marketing director for Facebook, the editor-in-chief for Dot Complicated, and of course she's the sister of Facebook founder Mark Zuckerberg. I asked what parents and schools need to do to get girls in to tech.
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RANDI ZUCKERBERG, FORMER MARKETING DIRECTOR, FACEBOOK: It's almost like a foreign language that's, it's not foreign to them, but a language that's going to be useful to them for the rest of their lives. Why wouldn't we start exposing children to it very young?
I think there's a lot of things going on here. I think it's not starting early enough in education so by the time that computer science is introduced that there's already the social stigma op kind of, oh, that's for boys, or I'm not good at that. I also think it's a lot to do with gaming. The types of games that children play early on, and there's been a lot of talk recently about things like "Goldilocks," other toys that disrupts the pink aisle in the toy store and encourage girls to get interested in engineering early on.
ROMANS: You grew up in a house with technology. And you and your brother, a very tech-focused household. What about those who don't have the role model or don't have the inquisitive household where you're pushed to do things that might not be the norm?
ZUCKERBERG: You're right. I was very, very lucky in that my dad was very entrepreneurial. He always had the latest gadgets and machines in his dental office and he really encouraged us. We were one of the first word processors, things like that.
We talk so much about getting our children off tech. But what about for the segment of the population where they don't even have -- maybe they're not getting enough? They're not getting the access to tech, and because of that they're, are they going to be behind, for their horse lives?
So I really think that schools, we have to do a better job of having at least shared access to these devices and making that part of the curriculum and education early on, and as parents, educating ourselves enough to have baseline conversations with our children.
ROMANS: Does it hurt some companies if there aren't more women working there?
ZUCKERBERG: I think it's something a lot of these companies are striving for. I know you talked almost any company in the valley, they desperately want to be hiring more women in technical roles. I think Pinterest was really a big wake-up call for the valley, because it wasn't the usually early adopters that are kind of the white men in Silicon Valley. It was women in the middle of the country that were adopting Pinterest in full force. And I think all of a sudden that made a lot of people sit up and think, oh, my gosh. We should be investing in women. We should be designing more technology for women. This is really a very, very powerful group. So I'm interested to see kind of what the next crop of big companies like that looks like.
ROMANS: Coming up, crumpled 100 dollar bill, wild parties and -- whatever that is. "The Wolf of Wall Street" was a blockbuster, but was it really like that? Fact-checking, that's next.
ROMANS: "The Wolf of Wall Street," the film takes legendary tales of Wall Street's excess to a whole new level. It's been nominated for five academy awards including best picture. Maggie Lake is host of CNNi World Business Today, and you know, Maggie, we were both raised on the Wall Street reporting gig. How much of this debauchery, obviously before our time, how much is true?
MAGGIE LAKE, CNNI BUSINESS CORRESPONDENT: Obviously before our time. I have to say, Chris, not all of it is fiction, but I went down to the New York Stock Exchange to ask the veterans down there the real deal, and this is what they had to say.
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UNIDENTIFIED MALE: This is the greatest company in the world!
LAKE: It has sex -- drugs -- rock 'n' roll -- and money, lots and lots of money. "The Wolf of Wall Street" takes place in the go-go '90s when dollars flowed bike champagne and life was a lot less P.C.
UNIDENTIFIED MALE: Stop. LAKE: Despite Leonardo DiCaprio's big win at the Golden Globes, critics say this three-hour exercise in excess glamorizes the worst of Wall Street, and long-time traders insist it is highly exaggerated.
UNIDENTIFIED MALE: Over the top, totally over the top.
UNIDENTIFIED MALE: It's a world certainly I have never lived, and it's a world that most of my peers have never lived in.
LAKE: The film is loosely based on the story of stockbroker Jordan Belfort who spent nearly two years in prison for swindling investors out of some $200 million dollars. In a 2008 interview, Belfort, who has yet to repay many of his victims, said he was caught up in the get-rich-quick culture of the time.
JORDAN BELFORT, FORMER STOCKBROKER: The $1,000 suits and the gold watches and the drinking at lunch and the cocaine at the end of the day was almost like adult Disneyland for dysfunctional people.
LAKE: Wolves like Belfort are howling no longer. There's no doubt about it, millions of dollars still flow through Wall Street. But the era of conspicuous consumption is over. Here at the arena where they filmed scenes from "Wolf of Wall Street" it's rare all of these yachts slips are filled. And these days bankers are much more likely to be pinching their pennies and that throwing their dollars away.
Today instead of three martini lunches, traders belly up to the bar at their very own Starbucks.
BEN WILLIS: I remember down here when the straws in people's pockets were loaded with things other than coffee.
ALAN VALDES, DME SECURITIES LLC: There's still drugs around but now they're vitamins and probably Viagra. There's still a lot of coke around, but it's either diet-free or caffeine-free.
LAKE: Make no mistake, cash is still king on Wall Street and these are still hard charging, no nonsense traders. But lean times have taught many of them it's not just about making a quick buck.
TED WEISBERG, SEAPORT SECURITIES: There were bad times, there were good times, but on balance they were great times. Not great from a monetary point of view, but great because what a wonderful community have been exposed to and to work in.
LAKE: They may not be the wolves of Wall Street. Some of today's traders are just happy to be bulls and bears.
LAKE: Oh, how times have changed. They all pointed out the fact of so many less people. At the height, 5,000, 6,000 people on the floor, all around Wall Street. Now that number has shrunk dramatically and it's all computers. As one of them put it to me, computers don't party. ROMANS: And we should point out, those are the pump-and-dump scams. Jordan Belfort, was a pump-and-dump scam, not legitimate traders of the New York Stock Exchange. Why aren't more women on Wall Street? We would have been coming out of college right at the peak of that. Thanks so much, Maggie.
And thanks for joining us this week on "YOUR MONEY." Come join John Berman and me every weekday morning on "EARLY START." Until then, have a great weekend.