Thursday, February 20, 2014
In response to “Zerophobia and minimum wages”, Lynn Thompson, the Seattle Times reporter who wrote the story I was commenting on, replied with an e-mail that made a good point:
“Other readers also suggested that I put the amount in the context of the city budget. $1 billion is actually the amount of the general fund from which any $15 an hour pay increase will come. The other $3.4 billion is in City Light and SPU [Seattle Public Utilities] revenues—utilities that get their money from rate payers and are operated as independent business lines.”
In broader terms, when you’re calculating a fraction it’s important to get the denominator right. This is another major piece of making budget figures meaningful.
With an estimated $1 million price tag for the minimum wage increase, or $1.5 million if summer youth programs are included, that still makes the proportion of the available budget 0.1 percent, or 0.15 percent with the youth programs. This does not include any effects of bumping up pay levels that were close to the new minimum wage. On the other hand, neither does it include potential increases in city revenues from the multiplier effects of the wage increases.
In any case, it still appears overall that the raises will have a very small impact on the city budget.
Saturday, February 15, 2014
Well, OK, let’s not blame the numbers themselves. Let’s not even assume that the intent of those who deploy them is to deceive.
We’re still facing a pervasive problem: numbers and especially dollar figures without context – the fraction of the larger numbers of which they are a part, and the time period over which they apply – leave most consumers of economic reporting without points of reference in understanding what these numbers mean.
In that weakened condition, zerophobia, which often manifests as an involuntary rapid intake of breath sometimes followed by expletives inspired by large numbers of zeroes following a dollar sign, can lead stricken citizens to misunderstand the import of quantities central to economic issues.
Quick, how big is the total budget of the City of Seattle? I doubt many of the Seattle Times’ readers can answer that off the cuff. But the otherwise informative story it published January 28, “$1M price tag tied to paying Seattle city workers $15/hr”, seems to assume that most readers know that figure. Otherwise, how would they have any idea whether $1 million is a lot or a little relative to city expenditures? They need a fraction or percentage to put it in some larger context.
For the record, the total 2014 budget of the City of Seattle is $4.4 billion. That makes the cost of the minimum wage increase 1/4,400, or 0.023 percent, of the budget. As the piece reports, the city believes it can cover that mostly from increases in general fund revenues due to the growing economy.
Another way to report this sort of figure would be the cost per capita to Seattleites. For an estimated 2013 population of 626,600, the $1 million dollars compute out to $1.60 per person per year.
In evaluating Mayor Ed Murray’s proposal to pay all city employees at least a $15 minimum wage, it would also be nice to know a related economic effect: the multiplier created by the increase. How much further economic activity and tax revenue will be generated by city employees spending their wage increases?
Of course this is not just a local Seattle problem. Economist Dean Baker of the Center for Economic and Policy Research has raised the profile of this issue nationally and internationally. CEPR offers a budget calculator that can help put numbers in the context of the total Federal budget. In response to him and other critics, Margaret Sullivan, the New York Times Public Editor, has acknowledged the need to make the economic figures it reports clearer and more meaningful.
Zerophobia can be cured. It need not condemn sufferers to a lifetime of economic cluelessness. With the caring support of fellow sources, journalists, editors and readers, afflicted citizens can recover and make valuable contributions to public discourse once again.
Dean Baker. “Mindless Budget Reporting: Fooling Some of the People All of the Time”. Washington, DC: CEPR, August 14, 2013. http://www.cepr.net/index.php/blogs/cepr-blog/mindless-budget-reporting-fooling-some-of-the-people-all-of-the-time
Dean Baker with Paul Solman. “Mindless Budget Reporting: Fooling Some of the People All of the Time”. Washington, DC: PBS Newshour, August 14, 2013. http://www.pbs.org/newshour/making-sense/mindless-budget-reporting-fool/
Center for Economic and Policy Research. “The CEPR Budget Calculator”. Washington, DC. Accessed Feb. 14, 2014. http://www.cepr.net/calculators/calc_budget.html
Center for Economic and Policy Research. “Responsible Budget Reporting”. Washington, DC. Accessed Feb. 14, 2014. http://www.cepr.net/index.php/responsible-budget-reporting
City of Seattle – 2014 Proposed Budget Executive Summary. Accessed Feb. 14, 2014. http://www.seattle.gov/financedepartment/14proposedbudget/documents/OVERVIEW.pdf
City of Seattle – Population & Demographics (web site). Accessed Feb. 14, 2014. http://www.seattle.gov/dpd/cityplanning/populationdemographics/default.htm
Margaret Sullivan. “The Times Is Working on Ways to Make Numbers-Based Stories Clearer for Readers”. New York Times, Public Editor’s Journal, October 18, 2013. http://publiceditor.blogs.nytimes.com/2013/10/18/the-times-is-working-on-ways-to-make-numbers-based-stories-clearer-for-readers/?ref=thepubliceditor
Lynn Thompson. “$1M price tag tied to paying Seattle city workers $15/hr”. Seattle Times, January 28, 2014. http://seattletimes.com/html/localnews/2022771198_15cityemployeesxml.html