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Will higher wages hurt the economy?

Higher wages for fast food and retail workers could hurt the economy, according to an analysis by the Chicago Tribune.

The analysis includes comments from the Workers Organizing Committee, which led hundreds of workers from national chains, from Wendy’s to Potbelly and from Sears to Victoria’s Secret, in strike actions here last week.  They’re not looking to double wages to $15 an hour overnight; they’re trying to organize a union and address a range of issues.

It also includes a Whole Foods employee who works two additional jobs and still qualifies for food stamps, and a labor economist who is quoted to the effect that high unemployment helps lower wages.

But its major thrust is whether consumers can stand to pay the higher prices that they say higher wages would require.  The economists they ask about this specialize in consumer psychology and marketing behavior.

One crucial piece of information is omitted, curiously:  how big of a price increase are we talking here?

In a column reviewing “the boilerplate argument against higher wages” — which is precisely that it would hurt consumers with “enormous” prices increases — David Sirota fills us in.

Raising the minimum wage to $10.50 would add 5 cents to the price of a Big Mac, according to one analysis.  Another study found that raising McDonalds workers’ hourly rate to $15 would drive the price of a Big Mac up by 22 cents.

Run that by your consumer psychologist.

A recent study by Action Now and Stand Up Chicago found that  raising Chicago retail and restaurant workers’ wages to $15 an hour would cost about $100 million for a sector with $14.2 billion in yearly revenues in the city.  That’s about 2.6 percent of revenue.

“Downtown employers can afford a very significant increase in wages,” they argue.

It’s an important reality check to vague scare talk about higher prices.  That line of arguent works because it involves a “populist insinuation that higher wages would hurt the Average Joe,” according to Sirota.

Here’s another hard economic fact that deserves more attention, courtesy of the Center for Tax and Budget Accountability:  the largest, most profitable retailers in Illinois pay the lowest wages.

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Medicaid privatization deal called expensive, inefficient

The debate over privatization is currently playing out in a dispute over a contract with a private firm to “scrub” the state’s Medicaid rolls.

In fact, contrary to the privatizers’ claims, it looks like the deal is a huge waste of money.

Last month an arbitrator ordered a $76 million, two-year contract with Maximus Inc. cancelled by the end of the year, finding that it violated subcontracting provisions in state welfare workers’ union contract.  Maximus uses data-mining technology to identify ineligible Medicaid recipients.

Last week, the Alliance for Community Services called on the state to immediately cancel the contract, arguing it has resulted in unjustified disqualification of Medicaid recipients.

The editorial board of the Chicago Tribune, meanwhile, has called on Governor Quinn to appeal the arbitratrator’s ruling — or for the General Assembly to enact a legislative fix — saying the privatization deal is the best way to cut Medicaid costs.

But is it?

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In a June 20 ruling, arbitrator Edwin A. Benn found that the Maximus deal violated provisions in the state’s contract with AFSCME restricting the contracting out of bargaining unit work unless there’s a clear advantage in terms of economy and efficiency.  The state hadn’t demonstrated that, he said.

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Charter waiting list inflation

The Chicago Tribune isn’t going to admit error with their claim that 19,000 students are languishing on charter school waiting lists, “yearning” to be free of CPS. But they may not throw the number around with the same panache after WBEZ’s expose.

As Becky Vevea showed, the 19,000 number counts applications, not students — and students typically apply for multiple schools — and it also includes over 3,0000 students who’ve dropped out and are seeking admission to alternative schools.

The Tribune now cites Andrew Broy of the Illinois Charter Schools for the “estimate” (though as Michael Miner points out, they claimed the number as fact in their editorials) , and Broy has regrouped quite nicely.

Wednesday he was saying the real number was probably “around 65 percent” of 19,000, based on his own “spot checks.” Thursday he insisted that 19,000 is a “conservative estimate” — the real number probably higher than that, he now says — since it excludes non-reporting charters and new charters that are just ramping up.

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Teachers demand respect

Entirely aside from what the school strike has revealed about Mayor Emanuel’s executive incompetence – or how he intends to spin the eventual outcome – and far more important, there are several layers of historic significance to the teachers’ fight.

Here are three:  it’s marshalled broad popular support in a period when public-sector unions are under assault on many fronts; it’s dramatized and exposed the costs and compromises of the corporate school reform agenda; and – particularly going forward, as the outcome unfolds – it represents a signal battle in the fight against the austerity agenda of the world’s elites.

They’re also teaching us about an old-fashioned value that we may hope is not yet out of date: respect.

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The Chicago Tribune and CPS’s Big Lie

Judging from the Tribune’s attack on its co-chair, the Chicago Educational Facilities Task Force must really be raising some hackles among the editorial board’s friends at the Board of Education, in the mayor’s office, and among the coterie of rich folks who are pushing what’s come to be called “school reform.”

Though the task force passed a resolution calling for a moratorium on school closings and other actions, the Trib focuses on Rep. Cynthia Soto.  In their zeal to lash out, the editorialists get a lot wrong.

First of all, of course, it was the task force that issued the call for a moratorium, after a public hearing where – as happens every year – parents and teachers complained about a CPS decision-making process that ignores their input.

Second, the Trib declares that legislators shouldn’t meddle in school closing decisions.  But the task force is mandated by the legislature to monitor compliance with the new school facilities planning requirements, which the legislature passed in 2009.

It includes legislators along with representatives of CPS, teachers, principals, and community groups, and it represents a first step at giving the public a real voice in the process.

Prior to the task force, there was virtually no accountability for CPS decisions — not since mayoral control was established in 1995.  Clearly, some people want to keep it that way.

‘Not in compliance’

“CPS’s historic and continuing lack of transparency and evidence-based criteria for decisions resulted in the pervasive climate of public suspicion about what drives CPS to take school actions and allocate resources, often in ways perceived to be highly inequitable,” as the task force noted in a recent resolution.

The Tribune argues that school closing decisions should be made locally.  Sure they should.  But does that mean they should be made by downtown administrators with no input from the schools and their communities?  The Trib thinks so.  The task force says no.

The Tribune’s argument hinges on ignoring the real reason for the moratorium call.  The editorial cites a quote from Soto about the new administration needing time to get to know communities better.  It ignores the task force resolution, passed this month with only the dissent of the CPS representative, that the school district is “not in compliance” with the requirements of transparency and open process mandated by the law.

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On Whittier, the Tribune is duped

The Chicago Tribune wants to hold Whittier parents to account for the costs of delaying a new library at the Pilsen elementary school.

There’s another way of looking at it.  You could also hold CPS leadership to account for commencing the project in a manner that seemed designed to foment a confrontation.

You might even ask about contracts being let before the Board of Education approved the project.

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Fact check: Emanuel, Brizard, Pritzker

UPDATED – “We will have to come together as one” to solve Chicago’s school problems, said mayor-to-be Rahm Emanuel.

Then he announced the selection of a new schools chief who got a 95 percent disapproval vote from teachers at his current post. Catalyst cites sources in Rochester who say schools chief Jean Claude Brizard talks about collaboration but operates as an autocrat.

The rhetoric continues to outpace the reality: Emanuel praised Brizard for raising the graduation rate in Rochester schools. In fact, though, the 12 percent increase claimed by Brizard occurred before he took his post, according to his predecessor.

Chicago News Cooperative reports that Rochester’s graduation rate has actually declined over four years. A Rochester reporter notes that Brizard seems to confuse graduation rates with absolute numbers – not a good sign in a top executive, whether he’s spinning or not. (PURE points out the Tribune seems to have the same problem.)

On Emanuel’s part, his false claim continues a reign of error, with repeated misstatements regarding performance and graduation rates at charter schools.

Brizard is a product of the Broad Foundation’s superintendent training program, which has recently placed trainees at the top of schools systems in Los Angeles, New Orleans, and Denver.  (Eli Broad donated $25,000 to Emanuel’s campaign, Ramsin Canon points out.) Broad trainees have also been run out of several towns, according to a new guide from Parents Across America:

“A hallmark of the Broad-style leadership is closing existing schools rather than attempting to improve them, increasing class size, opening charter schools, imposing high-stakes test-based accountability systems on teachers and students, and implementing of pay-for-performance schemes. The brusque and often punitive management style of Broad-trained leaders has frequently alienated parents and teachers and sparked protests.”

[Eric Zorn offers corroboration from several Rochester parents, who say Brizard “lacks people skills,” “didn’t listen to parents and doesn’t like being challenged,” is “arrogant and autocratic.”]

“Parents Across America considers Broad’s influence to be inherently undemocratic, as it disenfranchises parents and other stakeholders in an effort to privatize our public schools and imposes corporate-style policies without our consent.”

Broad has published a guide to closing schools; Brizard closed half the city’s high schools without consulting communities. Broad came up with the idea of the “parent trigger,” which Emanuel has praised.  Its philosophy of management is to “invest in disruption,” to promote instability in a system in order to generate “innovation.”

Exciting times ahead.

Brizard clashed not only with teachers and parents but with Rochester’s board of education, which unfortunately for him was elected by Rochester voters. He won’t have that problem in Chicago.

Perhaps Emanuel’s most noteworthy appointment to the board of education is Penny Pritzker, scion of the Hyatt hotel family that’s currently under pressure from religious and community leaders for mistreating its workers.

It’s worth recalling Pritzker’s recent notoriety as a subprime lender, which was probably a factor in her withdrawal from consideration as President Obama’s commerce secretary, after chairing his campaign’s finance committee. After the Pritzkers took over Superior Bank, she headed the board as they plunged into the subprime mortgage market, which eventually swamped the bank.  And under her lead, the bank played signal role in developing the mortage-backed securitization instruments which eventually swamped the nation’s economy.

These securities were call “innovations” at the time.

David Moberg’s 2002 piece has the best overview of Superior’s collapse, which he says was “tainted with all the hallmarks of a mini-Enron scandal.” Accounting tricks were used to turn growing losses into steady profits, allowing dividends to continue to flow to the banks owners.  Maybe Pritzker can help “fix” the CPS budget.

When she was getting bad press a couple years ago, her lawyer said the bank did subprime lending but not the “predatory” kind. According to Moberg, the National Community Reinvestment Coalition accused the bank of “engaging in a variety of predatory practices.”

It’s particularly worth recalling because, as the Tribune recently reported (thanks to PURE for the link), Penny Pritzker is now founding a private equity firm that will focus on buying distressed property.

It’s nice to have money.

In other management feats, Pritzker chaired the Olympic Village subcommittee in the city’s ill-fated bid for the 2016 games.  She bears some responsibility for the $100 million debt incurred in that disaster, which Emanuel is going to have to start paying off in a couple of years.

Pritzker is a major backer of Stand For Children, which pushed union-busting legislation in Springfield. While serving on Obama’s Economic Recovery Advisory Board, she split from the president by opposing card-check labor reform he backed. Add Hyatt to the mix and her anti-union record is complete.

It’s highly unlikely that these people will “bring us together as one.”

Media metrics at the Tribune

The new owners of the Chicago Tribune have revived a media analysis tool pioneered by the paper (and satirized by A.J. Liebling, as noted here) 60 years ago — counting pages and column inches to measure efficiency.

But there’s a more traditional metric that they are violating, as Alan D. Mutter recently pointed out on his blog Reflections of a Newsosaur.  “The unwritten but widely honored rule of thumb in the industry has always been that a newspaper should employ one journalist for every 1,000 in daily circulation.”

The Trib’s layoff of 80 journalists — reducing the staff by 25 percent below 2005 levels — will drop the ratio to 0.88 per thousand.

Eric Alterman takes note of this at the Nation, where he writes of Sam Zell:

“Leaving aside his penchant for potty-mouth rejoinders for those who question his judgment, Zell has done nothing to slow the slide in the company’s fortunes and much to accelerate it.

“Scrambling like mad for cash to service the company’s debt, Zell sold off the profitable Newsday and borrowed $300 million against future earnings, a clear sign of panic.

“To advise him on long-term strategy, he has appointed as ‘chief innovation officer’ Lee Abrams, a man who was apparently surprised to learn that reports datelined ‘Baghdad’ are actually produced by reporters in Baghdad. His suggestion: ‘photos of the reporter with Iraqi kids’ to advertise this fact.”

Mutter has since posted about the Tribune owners’  desperate, costly and “self-defeating” “pay-day loan,” borrowing against future ad revenues; and earlier this summer he wrote a devastating post about Sam Zell’s lack of a plan to revive the Tribune (in sharp contrast to Rupert Murdoch at the Wall Street Journal):

“Mr. Zell has failed to articulate, let alone implement, anything approaching a strategy for growing the company he loaded with debt at the time its primary business, newspaper publishing, has been deteriorating at an unprecedented, incalculable and so far intractable pace. Diversified as Tribune may be in broadcasting and a likely-to-be-sold baseball team, nearly three-quarters of its sales are produced by its newspapers.

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