The Only Republican in San Francisco

A simple way to raise the median wage

A number of people have been talking about the apparent contradiction in economic attitudes and economic facts. Many of these key on a particular figure, the (real) median wage, which is not increasing the way the some would like.

If we consider this the main measure of economic well-being, allow me to offer a modest proposal for bringing that figure up. Consider five workers earning the following:

Tom	$25K
Tanya	$50K
Dick	$75K
Jane	$100K
Harriet	$150K

A quick glance will show that their median wage is $75K. Let's imagine someone -- say, a Paul Krugman -- thinks this number should be higher. Easy. Fire Tom and Tanya.

Tom	$25K
Tanya	$50K
Dick	$75K
Jane	$100K
Harriet	$150K

The new median wage? $100K. That's 33% higher than it was before. Certainly, that's a good sign, and should be expected in a strong economy.

The question is, has anyone's economic well-being improved? Hmm.

OK, I must be doing something wrong. Let's start over. Tom and Tanya keep their jobs. Median wage back at $75K.

Tom	$25K
Tanya	$50K
Dick	$75K
Jane	$100K
Harriet	$150K

Now Harriet's business is doing really well. She needs some project managers. Starting wage: $50K. Wow! She needs three of them, right away.

Tom	$25K
Tanya	$50K
Sandy	$50K
Roger	$50K
Jim	$50K
Dick	$75K
Jane	$100K
Harriet	$150K

Sounds like Sandy, Roger and Jim's economic outlooks have improved considerably. That's $150K of new wealth every year that they keep working. Great for them and for the economy, no doubt.

But what's the new median wage? $50K. That's a drop of 33% from the median wage before these people got new jobs. Is it fair to conclude that things are getting worse?

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Of course I am offering this as reductio ad absurdum. Economic well-being can improve for millions of people, generating billions in new wealth (and tax revenues), and yet the median wage may stagnate or even go down.

In fact, that sounds a lot like our current economy. The US has created over 5 million new jobs in the last five years.

If the median wage has been steady during all this job creation, we might assume these new jobs are very close to the median. Last I read, it's around $15.60/hour which equates to around $31K/year.

So, 5 million people's income has increased from $0 to somewhere around $31K in the last five years. That sounds like economic progress to me, to the tune of $150 billion in new wages per year. All with a stagnant median wage.

A modest proposal on taxi pricing (first draft)

In light of the current NYC transit strike, and my many years of experience with various forms of public transit here in San Francisco, I’d like to put forward the following idea for making taxis a more vital part of the public transit ecosystem.

How may times have you had trouble finding a cab? How many times have you waited 30 minutes for a cab to not show up? How can a service industry get away with this?

Because, in many cases, it is not worthwhile for the driver to do the work. They do not get paid more for providing better service. They do not get rewarded for driving 15 unpaid minutes to the Outer Richmond (an SF neighborhood). And I don’t blame them.

Have you ever wondered exactly what sort of organisms are sitting with you on that back seat? And what is that smell exactly?

As above, taxi drivers and companies do not get paid more for keeping a nicer environment in the cab.

And what happens when the price of gas varies? Did your taxi get more expensive? No -- it just became less profitable for the poor cabbie. The result is that fewer drivers believe it is worth their time to drive a shift, and rightly so.

Now, I deal with many very considerate, courteous taxi drivers...this is not about making a generalization about people based on their occupation. It is, however, about the incentives that drive every other type of service business to do better.

We need to give taxi drivers more freedom to charge different rates, to provide a better incentive, and more variety of service. They should be able to charge more when the demand is high, or when gas goes up. They should be rewarded for going the extra mile, so to speak. And they should be able to reduce their prices to increase ridership...

With the ability to charge differing prices, taxi companies have an incentive to differentiate themselves. Maybe Yellow Cab will decide to go premium. They improve the ride, they improve the customer experience, and they get rewarded for it. Banana Republic.

Maybe City Cab decides that it will charge less, keeping the fun but reducing the frills along with the prices. Old Navy and JetBlue have done this quite profitably.

And maybe Desoto decides that it will provide solid service to the broad middle market. The Gap.

Nobody thinks of cabs like this. But we expect exactly this range of options in restaurants, hotels, and retail shops. The result of such variety is that the customer is better served and the industry grows. And imagine the innovations -- loyalty programs, anyone?

OK smart guy, how do we phase this in? I propose that San Francisco embark on a three-tiered pricing system, call it A, B and C. Cabs can charge any of these predetermined rates as they wish, whenever they wish, so long as the big lighted sign on the roof advertises it clearly.

Further, we remove any limits on the number of medallions that the city makes available. Instead, the city (or a private clearinghouse) enforces a test of skill and competency to all drivers. Safety standards, yes, quotas, no.

From a perspective of economics, this would make automobile utilization much higher -- which is to say, a smaller number of cars spending more time on the road. Much more efficient than individuals maintaining and parking cars that they use only occasionally, assuming that taxi service becomes the better option.

What do you think?