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Roger Babson
  • Roger Babson
Notes on reading the Monday Tribune:

The editorial page isn't happy with the minimum wage, which a Democratic Congress (note to Tribune: and a Republican president) in 2007 raised from $5.15 to $7.25 an hour. "For the vast majority of adults...the change was irrelevant. The greater impact was among adolescents. About a quarter of those working make no more than the minimum. So it was not entirely surprising to see the unemployment rate of those 16 to 19 years old went from 14.8 in early 2007 to 27.1 percent in October 2009 — shortly after the final stage of the raise took effect. Today, it's 24.2 percent." Conceding that the economy must be partially, and perhaps even primarily, to blame, the Tribune insisted that the higher minimum wage must have played a role.

"Why? Because young workers are usually worth less to a business than older ones because they have fewer skills. The only way an employer can afford to hire them is by paying them a wage that matches their value. A youngster who provides a return of $6 an hour was a profitable hire in 2007, when wages could be set at that level or lower. But not today, when the company must pay at least $7.25."

This makes sense. But I'm left wondering: What happened to the work the kids used to be doing when there were a lot more of them in the workplace? How much of it is not getting done? And how much is being done by older workers getting paid the higher minimum wage and needing every penny of it because they have families to support? If the only reason to hire a kid was because he'd work for a wage an older and better employee couldn't live on, and that low wage becomes illegal, well, then why not go with the more competent employee?

How many jobs have kids lost to that line of thinking? I don't know. I'm just saying I have an inkling the Tribune has made the effects of the minimum wage sound simpler than they are.

And on the commentary page, there's a piece by Jeff Korzenik, a senior vice president at Fifth Third Bank, that's as odd as the name of his bank. The headline is "America's 15th financial panic," and Korzenik points out that our present financial troubles are actually "the 15th panic in U.S. history [and] the good news, of course, is that we have survived 14 prior episodes." Korzenik quotes from an 1857 Tribune editorial on what, by his count, was the sixth panic, and he says the "rallying cry" with which that editorial ended should be the nation's watchwords now:


But Korzenik's more important source is Roger Babson, a statistician and educator who on Christmas Day 1910 began a series of articles in the New York Times asserting that America up to that date had had 13 panics in all, and taking a look at them. The most recent had been in 1907.

Korzenik added to Babson's list. But his readers can be forgiven for thinking there might be something a little spurious about his exercise. For instance, back in the day, a new panic could be counted on to arrive every decade. There was one in 1813-14, another in 1826, and on they went in 1837, 1848, 1857, 1864, 1873, 1884, and 1893.

(A Tribune typo put the 1884 panic in 1894.)

In the Gay 90s the panic of '96 came right on the heels of the panic of '93 (it's generally remembered as one long depression), and a decade later the panic of 1903 was followed by the one that prompted Babson's article, the panic of '07.

But here's the thing: the 14th item on Korzenik's list was the "panic" of 1930-1933 (aka the Great Depression), and the 15th was the "panic" of 2008.

At this point less credulous readers might be asking themselves: If these "panics" used to come along like clockwork and now they smite us once every several decades, could Korzenik possibly be comparing apples and oranges?

And the answer is yes. Babson admitted it. "Some of these panics," he allowed in 1910, "were very largely stock market affairs and did not seriously affect general business conditions." Of his list of 13, he said there were just four "great business panics," those of 1837, 1857, 1873, and 1893.

And now the reader might wonder, why do we call these episodes panics? We were all around in 2008. I don't remember the problem being that the public became hysterical and started screaming, setting off a stampede for the exits. My impression was that exotic bundles of mortgages that weren't worth the paper they were printed on could no longer support a banking industry out of control and it collapsed. I had a neighbor who sold his house to get his equity while it was still there to get. He could have waited another couple of years but he didn't want to take the chance. I've always thought he was farsighted, but maybe he just lost his head.

And before we knew it, millions of Americans were out of work. "COURAGE!! ONWARD!!" I wish I'd told him. That would have set him straight.

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