Listener voicemails! (with Nick and Goldy)

Summary

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Pitchfork Economics with Nick Hanauer

Episode: Listener Voicemails! (with Nick and Goldy)

Date: November 15, 2019
Host: Civic Ventures
Guests: Nick Hanauer, David "Goldy" Goldstein

Episode Overview

In this interactive episode, Nick Hanauer and David Goldstein ("Goldy") answer listener voicemails, tackling big questions on economic representation in Congress, the true impact of minimum wage hikes on prices, and the nature of corporate growth in capitalism. The hosts blend empirical research, accessible explanations, and their signature irreverence to clarify complex economic debates for their audience.

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Key Discussion Points & Insights

1. Congressional Self-Interest vs. Public Good

Listener Question by Brad from Toledo (00:48)

• Congress Is Not Representative
  • Statistics: About 35% of Congress members are millionaires, compared to less than 6% of the general US population.

    "So six times as many people in Congress are millionaires as the general population." — Nick Hanauer (01:39)

  • Implication: This wealth gap means Congress may not relate to or prioritize middle-class needs.

    "It tells you that our representatives are not very representative." — Goldy (01:48)

• Disconnect vs. Self-Interest
  • Congress' lack of action on middle-class economic interests is attributed more to a disconnect than explicit self-interest.

    "You can't say whether it's naked self interest or just simply a total disconnect from the reality that faces most Americans." — Goldy (02:05)

• Missed Opportunities
  • Obama-era Democrats held super-majorities but failed to enact significant measures like a minimum wage hike.

    "They could have chosen to raise the minimum wage, but they didn't." — Nick Hanauer (02:47)

• Civic Responsibility
  • The public is partly culpable for not holding elected officials accountable.

    "We have not collectively held them to account in the way that we should." — Nick Hanauer (04:03)

• Potential Reforms
  • Suggests public financing of campaigns as a way to increase diversity and representation, though cautions that even "average" legislators can be co-opted by business interests.

    "One solution might be to elect a more representative Congress...through public financing of congressional campaigns." — Goldy (04:27) "There's no guarantee that you'd get a better government that way." — Goldy (05:15)

Memorable Moment (Summed Up):
The frustration that, despite being a democracy, Americans have not done enough to demand or secure economic reform from their representatives.

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2. Minimum Wage Hikes and Price Inflation

Listener Question by Heidi from Denver (05:17)

• Empirical Research Overwhelmingly Refutes Job Loss Claim
  • Decades of studies, including prominent ones by Ben Zipperer and Arin Dube, show no meaningful job loss from higher minimum wages.

    "...basically there are no instances where raising the minimum wage creates any negative effect on jobs." — Nick Hanauer (05:54)

• Do Prices Go Up?
  • Wages are a small part of business costs—e.g., only 10% of Walmart’s costs.

    "Out of a dollar that you pay Walmart, wages comprise only about 10% of that price." — Nick Hanauer (06:11)

  • Even significant wage increases barely impact retail prices—“pennies on the dollar.”
• Direct Study Evidence
  • University of Washington found no increase in supermarket prices after Seattle’s minimum wage hike:

    "There were no overall market basket price changes attributable to Seattle's minimum wage policy...low income workers may be able to afford higher quality diets if wages increase, yet supermarket prices stay the same. Yes, that seems like a win, win, win, right?" — Goldy (07:10)

• Profits vs. Prices
  • Companies’ profits have doubled as a share of GDP; higher wages could be paid by reducing excess profits instead of increasing prices.

    "Over the last 40 years, profits have effectively doubled as a percent of GDP. So one of the ways that you can drive wages up, but not prices, is by collapsing the amount of profit that companies take on each transaction back to normalized levels." — Nick Hanauer (08:45)

• Bottom Line
  • Raising the minimum wage often comes out of corporate profits, not higher consumer prices.

    "Even if raising the minimum wage increase costs, that doesn't necessarily mean it will increase prices to consumers...Because there's plenty of margin left." — Goldy (09:37)

Notable Exchange (08:38–09:58):
Goldy and Nick jointly debunk the myth that higher minimum wages drive up prices, stressing that companies can absorb costs with their abundant profits.

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3. Corporate Growth and Capitalist Demands

Listener Question about Growth Pressure (10:01)

• Firm vs. Market Dynamics
  • Individual companies face relentless pressure for quarterly growth, but what’s good for the market overall isn’t always good for a single business.

    "There's often this disconnect between the market as a whole and the individuals and firms that are competing against each other within the market." — Goldy (10:33)

• Growth Without Extra Resource Use
  • Economic growth can happen via innovation and dematerialization (more value from knowledge, not more consumption of resources).

    "We can dematerialize a lot of growth so that you can continue to have economic growth without continuing exponentially to consume resources..." — Goldy (11:06)

• Adaptation is Essential
  • Using Verizon as an example, the hosts illustrate how companies must innovate to survive—Verizon pivoted from landlines to wireless and broadband.

    "So Verizon adapted to the changing technologies and the changing market and it's done great." — Goldy (12:40)

• Possibility of Better Systems
  • Market-based systems will always carry growth pressures, but policy and public accountability can steer outcomes toward broader welfare.

    "...we can certainly rearrange the system in a way which makes the outcome of that competition both consistent with increasing the welfare of workers and increasing the welfare of the planet, ideally." — Nick Hanauer (12:05)

Memorable Quote:
"Verizon innovated, adapted and grew. So there are opportunities even for companies who are seeing their monopolies being destroyed." — Goldy (12:46)

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Notable Quotes & Moments

• On Representation:
  "It tells you that our representatives are not very representative." — Goldy (01:48)
• On Minimum Wage Myths:
  "There were no overall market basket price changes attributable to Seattle's minimum wage policy." — Goldy (07:10)
• On Demanding More:
  "...we have not collectively held them to account in the way that we should." — Nick Hanauer (04:03)
• On Corporate Adaptation:
  "Verizon innovated, adapted and grew..." — Goldy (12:46)

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Timestamps for Important Segments

• 00:48 — Congressional self-interest and representation
• 05:17 — Impact of minimum wage on jobs and prices
• 10:01 — Corporate growth pressure under capitalism

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Tone and Style

The episode is conversational, witty, and sharply critical of neoliberal assumptions, maintaining warmth and approachability for a general audience. The hosts frequently use humor and plain language to discuss complex economic issues and are unafraid to challenge prevailing myths with both data and common sense.

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Summary

This listener Q&A episode of Pitchfork Economics tackles foundational economic debates using plain language, real-world research, and characteristic irreverence. Hanauer and Goldy take on the lack of representation in Congress, dismantle fears of price spikes from raising the minimum wage, and clarify growth pressures in a capitalist system—arguing for policy reforms and more engaged civic action at every turn. For listeners, it’s a fast-paced, myth-busting session with evidence and heart.

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Transcript

[A]

I'm Nick Hanauer, founder of Civic Ventures.

[B]

I'm David Goldstein, senior fellow at Civic Ventures.

[A]

It just has to be the case that we're a little confusing sometimes because we're always talking about complicated things.

[B]

Yeah, we're confusing sometimes.

[A]

And because of that, we love, love, love to take questions from our listeners at the magic number 731-388-9334, which gives us an opportunity to clarify our talking and our thinking. And with that, we're now going to answer one of our listeners questions.

[B]

Okay.

[C]

Hello, this is Brad Mawson in Toledo, Ohio. I am calling to see what your thoughts are on our Congress's self interest. Since the vast majority of them are classified as wealthy, how do they balance their self interest with the public good? Thank you. Doing a great job.

[A]

Hey, Brad from Toledo. That's a really interesting question about Congress's self interest relative to economic policy. I think it's an important question. You know, our research shows that. What is it, Goldie? About 35% of all members of Congress.

[B]

Right. House and Senate, about 35% are millionaires. They have wealth of over a million dollars a year that they, that they report compared to less than 6% of the general population.

[A]

Oh, interesting. So six times as many people in Congress are millionaires as the general population. Let's just tell you something interesting about.

[B]

It, tells you that our representatives are not very representative.

[A]

And you know, it is just unambiguously true that over the last 40 years Congress has refused to act in, in the economic interests of the middle class.

[B]

And how much of that is out of self interest. You can't say whether it's naked self interest or just simply a total disconnect from the reality that faces most Americans. And I can tell you in your circles, and even in my modest circles, we are disconnected. We don't know how the median American family is getting by.

[A]

Right. And when the Obama administration in their first two years had super majoritarian control of both the House and the Senate.

[B]

Right. Close to it.

[A]

Well, they did for a little while. Right.

[B]

They had majorities in both houses and they had 60.

[A]

They could have chosen to raise the minimum wage, but they didn't.

[B]

They could have chosen to raise the overtime threshold, but they didn't. They didn't. They could have chosen. They could have chosen to do a lot of things and they didn't because, you know, it sounds they're disconnected from the American public.

[A]

Yeah.

[B]

So I think again, you say self interest. Yeah. I'm sure there are some people that do it out of self interest, Trump mostly disinterest.

[A]

Disinterest, not so much self interest.

[B]

Right. There's clearly politicians who act out of naked self interest, out of animosity to working people. But for the most part, what you do know is that, you know, there's this huge disconnect between the elite that represents us and the people they're supposed they're elected to represent.

[A]

Yep. And that's probably it. But, you know, again, part of the reason we do the podcast is to get people to understand these issues more clearly and to make more specific demands of the people who represent them. Because, you know, another part of the problem is, you know, you live in a democracy. You elected these people. We collectively elected these people, and we have not collectively held them to account in the way that we should. And, you know, I guarantee you that not enough Americans are calling their elected representatives and demanding the economic policies that are required to get the country back on track. And that is as big a problem as the people who are in Congress themselves.

[B]

Of course, one solution might be to elect a more representative Congress. And I think one way you might do that is through public financing of congressional campaigns. We are experimenting with that in city council elections here in Seattle, and we're getting a much more diverse crop of candidates running. So that might be something to play with. At the national level, though, you know, as we've seen in the legislature, even ordinary people, you're a common man. Your average median household income representing state legislator is often captured by business interests. So there's no guarantee that you'd get a better government that way.

[A]

Yep.

[D]

Hi, Nick, this is Heidi from Denver, Colorado. I listen pretty regularly and had a question about your September 3 episode around the raise minimum wage, not killing jobs. I find Ben Zippera's research very compelling. However, I was wondering if there was academic research done around the argument that if the minimum wage were raised that prices and costs would go up with it, thus negating its effects. So we'd love to be able to debunk this myth. Thanks so much. Love the show.

[A]

Okay, so Heidi from Denver, thank you for your question about the minimum wage and indeed the employment effects across a ton of studies, not just spins, but R. Dubay and a hundred others have shown that basically there are no instances where raising the minimum wage creates any negative effect on jobs. But. But the question of what happens to prices is another really good one. Now, I just want to frame it up by reminding people that when wages go up, that wages turn out to be almost always a de minimis Part of the costs of whatever it is that you're talking about. As I recall, for instance, out of a dollar that you pay Walmart, wages comprise only about 10% of that price. And if 20% of their workers get a 30% raise, that turns out to be a very, very small pennies on the dollar. Pennies on the dollar. And of course, if you're one of those workers whose wages went up by a third, it's a great trade. But there is increasing evidence, yeah, it.

[B]

So happens, Heidi, that I have right here in my hand an actual study on this very issue. And in fact, this is from the University of Washington's minimum wage study team. This is the same a study a couple years ago that suggested there might be a negative disemployment effect. And that's the one that all the critics of minimum wage cite and then followed a couple years ago saying, yeah, probably wasn't a disemployment effect, but they have been studying. This is called the impact of city level minimum wage policy on supermarket food prices. And I will read to you from their abstract results. There were no overall market basket price changes attributable to Seattle's minimum wage policy. Moreover, no minimum wage effect was detected by USDA food group food processing or nutrient density categories. Then they conclude local area supermarket food prices were not impacted by Seattle's minimum wage policy. Two years into policy implementation and after the first increase to $15 an hour overall, finally, low income workers may be able to afford higher quality diets if wages increase, yet supermarket prices stay the same. Yes, that seems like a win, win, win, right?

[A]

It absolutely does. Accept that.

[B]

You know, just accept, don't qualify it. It's a win, win, win.

[A]

Point out one last thing because it's a really important question. It is obviously mathematically, unambiguously true that if you increase wages for lots and lots of people, prices to make stuff will go up. But with this, but with this caveat. Oh, I'm sorry, I take it back. The costs to make things will go up.

[B]

Not necessarily increases productivity, reduces turnover, reduces absenteeism, lowers your job training costs.

[A]

But here's the thing, here's the point I want to make, is that over the last 40 years, profits have effectively doubled as a percent of GDP. So one of the ways that you can drive wages up, but not prices is by collapsing the amount of profit that companies take on each transaction back to normalized levels. And for perspective, American corporations are earning today approximately a trillion dollars more than they used to. And that came directly out of wages. By rights, American workers should be able to raise their wages about a trillion dollars. American companies may have to lower their profits by about a trillion dollars, but American consumers would pay exactly the same amount.

[B]

Okay, so.

[A]

And the world would be a better place, but rich people would be less rich.

[B]

So Schwarter. Nick, even if raising the minimum wage increase costs, that doesn't necessarily mean it will increase prices to consumers.

[A]

Correct.

[B]

Because there's plenty of margin left.

[A]

Correct.

[B]

To reduce corporate profits, despite what the friends at the Chamber of Commerce shorter UW study. No, the minimum wage should not increase prices at local supermarkets.

[A]

There you have it.

[C]

Hey, Nick and Goldie. Your last answer to a question about growth and capitalism was pretty unsatisfying. It totally failed to address the fact that every quarter, every CEO of every public company has to stand in a room full of shareholders and board members and show a picture that indicates positive growth in real dollars. At least if they want to keep their job. The CEO of Verizon can't say, look, everybody has switched from our landlines to Skype to make phone calls. Isn't it great? What do you say to that? Thanks.

[B]

I think that when people talk about economics and markets, there's often this disconnect between the market as a whole and the individuals and firms that are competing against each other within the market. Just because something might be good for the market does not mean it's good for an individual firm. Obviously when we talked about growth earlier, Nick, we were saying that in our modern technological economy, our knowledge based economy, we can dematerialize a lot of growth so that you can continue to have economic growth without economic progress. Well, progress economic growth without continuing exponentially to consume resources that the resource we're consuming is knowledge and know how, not necessarily fossil fuels, land, minerals, natural materials, etc. And there will be winners and losers.

[A]

And, but, and to Mark's point, the people who lead firms will be under pressure from the market and their shareholders to both provide better and better quality products to their customers and reasonable return to the shareholders. And that, you know, in a market based system that won't go away, but we can certainly rearrange the system in a way which makes the outcome of that competition both consistent with increasing the welfare of workers and increasing the welfare of the planet, ideally.

[B]

Right. And let's be clear, you used the example of Verizon, Mark. And for those who don't know, Verizon was one of the baby bells after AT&T was broken up. It was the regional Bell operating company in Pennsylvania and the Mid Atlantic. And its business was primarily landlines, local landlines. Well, what is Verizon now? Verizon is a cell phone company and a cable TV and broadband company. It's not landlines that feed its profits anymore, it's cell phones and broadband. So Verizon adapted to the changing technologies and the changing market and it's done great. So it has shown those growth even as Skype took away the long distance service, even as the cell phone industry took away the landline business. Verizon innovated, adapted and grew. So there are opportunities even for companies who are seeing their monopolies being destroyed.

[A]

Yep.

[B]

If you have a question for Nick on any economic issue, please give us a call and leave us a message at 731-388-9334.

[E]

Pitchfork Economics is produced by Civic Ventures. The Magic Happens in Seattle in partnership with the Young Turks Network. If you like the show, make sure to subscribe, rate and review us. Wherever you get your podcasts, find us on Twitter and Facebook @civicaction and Nick Hanauer. Follow our writing on Medium, Vic Skunkworks and peek behind the podcast scenes on Instagram. Itchfork Economics as always from our team at Civic Ventures, thanks for listening. See you next week.