DC Dilemma: Fair Votes and Fair Pay versus Tip Subsidies for Owners

New Orleans  New Orleans is a service worker, hospitality industry city, as are an increasing number of other areas in the United States.  Tips are always an issue when so much of the workers’ income depends on them, especially when employers pay the federal minimum wage for tipped workers of $2.13 per hour versus the federal minimum for other workers of $7.25 per hour, which has been frozen for what seems like most of this century.  In some states and cities, like San Francisco, Seattle, and, most recently, Flagstaff, Arizona, voters and public officials have taken steps to try to deal with this issue.

Washington, DC put this issue on the ballot as well.  The voters passed the measure overwhelmingly to stairstep up the level for tipped workers to the full minimum wage in the city which is on its way to $15/hour.  In a democracy most of us, for or against, would have thought that settled the matter, the voters have spoken.  In Washington though somehow the National Restaurant Association, always on record against the measure before and after the vote, has joined with some of the restaurants in the capitol city and convinced the DC city council to review the measure and potentially overturn the vote of the people.

How could this be possible?  All of us know Washington has become crazytown, but we thought that was just on the federal level.  We didn’t realize that the new autocracy had leeched down to the city level as well.

On Wade’s World, I talked to David Cooper, a Senior Economic Analyst for the well-regarded Economic Policy Institute (EPI) and the deputy director of EARN, the Economic Analysis Research Network, about a study he authored in the middle of this mess to remind the city council that in fact the evidence thus far is that workers do better financially in “one wage” cities than in tipped cities.  In DC, the numbers also matter because the data Cooper has marshaled also remind anyone interested that in a majority African-American city, blacks do worse by a more than 20% margin than white workers on tips, and black women do the worst of all, so they stand to benefit critically from a “one wage” program.

Cooper’s report reminds workers and the public of a key fact about the “tipped” wage that the restaurant folks like to sluff over as they pretend to be concerned about their workers income.  The level between the tipped minimum whether $2.13 federally or over $3.00 in DC is a direct subsidy from the worker’s tips provided by the customers for their excellent service which is then effectively passed over to the employer until the DC minimum or elsewhere the federal minimum is reached, and that’s nearly $10 an hour.  What is left after the worker de facto pays their employer for their space on the floor or behind the bar is all that is gratis.   So even ignoring the basic democratic facts that the voters have spoken, how could this ever be fair?

I’m reminded of an organizing committee meeting of a bunch of carriage drivers in the French Quarter that we organized years ago.  At one union meeting an argument broke out when the members started debating whether their work was  “a job or a hustle.”  That says it all.  These are jobs.  They need to be paid with the respect, dignity, and wages that the workers deserve.  The rest is lagniappe.

***

Please enjoy Rosanne Cash & Sam Phillips’ She Remembers Everything.

Guiding Light by Mumford & Sons 

Carl Broemel’s Starting from Scratch.

Thanks to KABF.

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Sketchy Financing for Apartments and Private Markets Seems Like Deja Vu

Sonoma     Ten years on from the Great Recession of 2008, you wonder what we learned from that crisis, and who really learned it.  I mean really learned it!

Here’s a couple of scary examples that I’ll share in the “misery loves company” vein:

In the “who’s on first, what’s on second” vein, get this.  The major money center banks JP Morgan Chase, Citigroup. Bank of America, Wells Fargo and six others reportedly met with representatives of the Federal Reserve to lobby against Congressional meddling and regulatory backtracking on the Volcker rules, arguing that they wanted to keep them and they had worked so why the mucking around.  When the foxes are saying that the chickens are interring with them, you know the world of finance – and government — is upside down.

That doesn’t scare you?  How about this?  A Wall Street Journal item on the back pages in the “Heard on the Street” column pointed out that banks have been increasing their loans and exposure in financing private equity and private credit lines for business “in indirect ways that are hard to track.”  Whoa, Nelly!  That’s not good.  Going farther, they note that “loans to nonbank financial companies have been the fastest-growing element in global cross-border lending for the past two years.”  There are some $6 trillion of such loans. Nonbank financial companies already define a black hole of largely invisible and virtually unregulated activities with folks like KKR Capital Markets and Jeffries Financial Group.  Add to that the fact that many of these loans are also offshore.  When you wake up screaming in the middle of the night, write those names down and worry about these problems until you pass out again and pretend along with lawmakers that this is “no problem.”

But of course, there’s not just meddling and shadow financing, there’s outright fraud like we saw from mortgage brokers last time around.  The biggest investigation of mortgage fraud since 2008 involving the FBI, the US attorney, and the Inspector General for the Federal Housing Financing Agency which is supposed to oversee Fannie Mae and Freddie Mac is looking at a potential heist in multifamily housing that was curiously exempted in the Dodd-Frank rules after 2008.  Essentially, Fannie and Freddie have been allowing almost a self-certification system by borrowers of their own balance sheets.  One outfit being investigated was claiming cashflow from rented apartments that Freddie didn’t inspect rigorously before guaranteeing the loan and getting away with it by putting radios in vacant apartments and other shenanigans to inflate the rental cashflow statistics.  Once they get the loan it can be “take the money and run time” because, get this, again hidden in a Wall Street Journal article, “Mortgages with full or partial interest-only repayment periods made up 75% of multifamily loans bought by Fannie Mae and Freddie Mac” in 2017.

So sure, this is complicated and way trickier than balancing our home checkbooks but with the Developer-in-Chief in Washington ignoring all of the fine print of government, especially among his developer tribe, if we’re not worried, it may be because we’re not paying enough attention.

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