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11/26/2006

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Jack

A letter signed by 650 U.S. economists, including five past presidents of the American Economics Association and six Nobel laureates, argued that increases in the minimum wage have had little or no effect on employment, and that boosting the minimum wage would actually have a positive effect not just on workers and the labor market but on the overall economy.

And...... for those professing to believe in capitalist principles if the employer does not pay something roughly akin to a living wage.... WHO should make up the difference?? Today.... it's Voila!! you and me..... taxpayers! In the form of EITC, food stamps, low income housing subsidies, and having NO help from them in paying for schools, police, or bombs.

In order for capitalism to work and direct scarce resources to those most efficient users and producers it is THEY who must pay the operational costs of not only their delivery vehicles and plant but the human capital employed.

Both Posner and Becker's essays are nothing but right wing corporate ideology and foggy mutterings indicating they've never opened an econ text. Jack

Jack

A letter signed by 650 U.S. economists, including five past presidents of the American Economics Association and six Nobel laureates, argued that increases in the minimum wage have had little or no effect on employment, and that boosting the minimum wage would actually have a positive effect not just on workers and the labor market but on the overall economy.

And...... for those professing to believe in capitalist principles if the employer does not pay something roughly akin to a living wage.... WHO should make up the difference?? Today.... it's Voila!! you and me..... taxpayers! In the form of EITC, food stamps, low income housing subsidies, and having NO help from them in paying for schools, police, or bombs.

In order for capitalism to work and direct scarce resources to those most efficient users and producers it is THEY who must pay the operational costs of not only their delivery vehicles and plant but the human capital employed.

Both Posner and Becker's essays are nothing but right wing corporate ideology and foggy mutterings indicating they've never opened an econ text. Jack

Jack

"A letter signed by 650 U.S. economists, including five past presidents of the American Economics Association and six Nobel laureates, argued that increases in the minimum wage have had little or no effect on employment, and that boosting the minimum wage would actually have a positive effect not just on workers and the labor market but on the overall economy."

And...... for those professing to believe in capitalist principles if the employer does not pay something roughly akin to a living wage.... WHO should make up the difference?? Today.... it's Voila!! you and me..... taxpayers! In the form of EITC, food stamps, low income housing subsidies, and having NO help from them in paying for schools, police, or bombs.

In order for capitalism to work and direct scarce resources to those most efficient users and producers it is THEY who must pay the operational costs of not only their delivery vehicles and plant but the human capital employed.

Both Posner and Becker's essays are nothing but right wing corporate ideology and foggy mutterings indicating they've never opened an econ text. Jack

Jack

" A let ter signed by 650 U.S. economists, including five past presidents of the American Eco nomics Association and six Nobel laureates, argued that increases in the minimum wage have had little or no effect on employment, and that boosting the minimum wage would actually have a positive effect not just on workers and the labor market but on the overall economy."

And...... for those professing to believe in capitalist principles if the employer does not pay something roughly akin to a living wage.... WHO should make up the difference?? Today.... it's Voila!! you and me..... taxpayers! In the form of EITC, food stamps, low income housing subsidies, and having NO help from them in paying for schools, police, or bombs.

In order for capitalism to work and direct scarce resources to those most efficient users and producers it is THEY who must pay the operational costs of not only their delivery vehicles and plant but the human capital employed.

Both Posner and Becker's essays are nothing but right wing corporate ideology and foggy mutterings indicating they've never opened an econ text. Jack

Ned Ilincic

Bravo for Jack posting above! He hits it on the head again: Becker's problem is that he 'never opened an econ. text(book)'!

As for 'foggy mutterings', the prime examples are Jack's copious postings, with apalling material and logical errors too numerous to go into.

Thanks Jack!

Ned

Peter

First, I'm surprised that there has been little discussion of the elasticity of the demand for low-wage labor. The evidence suggests that a 40 percent increase in the min wage would reduce employment by about 10 percent. The 90 percent who remain employed are better off and as a group, min wage workers total income increases.


Of course, it could be argued that the 10 percent of workers who lose their jobs are much worse off, long-run, becuase they are priced out of the system and have no means for working their way up the economic ladder. But I think it overstates the opposition to the MW by claiming it makes low-wage workers (as a group) worse off.


Second, how much of a total economic cost are we talking about. At $7.25/hour, the min wage will have about the same real value as it did when it was raised to $5.15/hour in 1997. Obviously the economy didn't collapse back then. If as Dr. Posner says, 10 percent of the workforce could be affected, we're talking 15 million workers, each being paid an average of about $2,000 more each year (the average wage of these workers is between the current and new minimums). That's $30 billion of additional cost out of a $13,000 billion economy. And it's not all lost; most of it is just transferred from employers and consumers (and disemployed workers) to min-wage workers. The dead-weight loss triangle is tiny. From a macro perpective, you probably couldn't even see it. I can think of a lot worse public policies that have far less public support (sugar quotas, anyone?) than raising the min wage.


Stepping away from the economics, my feeling is that the purpose of a min wage is to tell people what a lousy job pays so they can go out and get a better one. I know we don't like to assume ignorance, but we live in a society where people won't buy something for $100 until you tell them that it's marked down from $150. Then they think they're getting a bargain. People often make decisions about prices or wages based on a comparision to some completely arbitrary standard such as "full retail price" or what they are paying over at McDonalds.

Jack

Peter makes several interesting observations: First I wonder where he got a formula for the elasticity of demand for cheap labor at the lowest echelons of income? And is it reliable at those levels? If the business is a small one of some success the tax deductible cost of $41 going to $58 is about $10/day at 40% in fed and state taxes.

And the system is not static: If, contrary to the conclusions of the 650 economist's letter (posted here) there is a 10% reduction in employment, the productivity of the remaining 90% is increased by definition and perhaps further by investment in more productive equipment purchased from companies who may need to do some hiring.

Assuming that lackluster growth and poor job creation don't soon soak up the other 10% (a very real concern over the last 5 years!) they go on the unemployment rolls where they act as a clumsy signal to the Fed Chairman that it's high time to take his lead foot off the brakes. Ain't America great?

I especially liked Peter's reminder that all the "sky might fall" hoopla is about what should have been the gradual increases to compensate for the declining value of our DEBT backed dollar having been ignored by the Congressional majority for the past decade apparently on cue from their corporate masters? or to maximise the growing wage gap as much as possible while they have the gavel?

Thanks to Ned too, but in the spirit of the board I'd be happy if he pointed out even ONE of the "with apalling material and logical errors too numerous to go into." of my "copious" posts!

Sorry for "over posting" but I couldn't resist; there's quite a trove of hrsht here and even so left more than enough to replenish the soil. Jack

Yevgeny Vilensky

Two points to make here, which I will preface by saying that on balance, I am opposed to increasing the minimum wage and largely agree with Profs. Becker and Posner:

First is a question. The two posts make the point that unions favor a rise in the minimum wage because it decreases competition union workers have from those who get paid below the proposed floor. If that's the case, then the minimum wage would seem to raise union workers' pay as well. So, it would seem to me that that needs to be taken into account as a benefit to raising the minimum wage. In other words, it's not just teenagers who will benefit from a rise in the wage, but lower-middle class and middle class union workers as well. I was just wondering if this actually happens or not.

The second point I wanted to make is regarding the inflation argument and the letter by the 650 economists. First, the letter favored a "phased-in" increase, which is different from some of the Democratic proposals being banted about. The typical inflation argument is that the minimum wage has not kept up with rises in inflation. If that's the case, then what these esteemend economists who signed the letter are favoring, would be useless to stem the tide of inflation. By the time the last phase of the increase is enacted, we are again already behind the inflation curve. So in some sense, the organizers of the letter were disingenuous because I doubt many of those economists would have signed up for an overnight increase to 7.25 or for min wage increases from here to perpetuity.

In some sense the inflation argument is self-defeating. Yes, adjusting for inflation, 7.25 or whatever the proposal is, is the correct number. But remember that inflation, which is computed on CPI data, would be higher had the minimum wage been rising a steady 3 or 4% per year. So, in other words, we'd constantly be behind. Imagine, we base min wage increases on CPI levels, which then cause CPI levels to rise more, which causes another increase, so on, and so forth.

Terry Bennett

Why does someone become an economist? The answer is the same as for journalists, lawyers, politicians, and the other professions which weigh on public policy. Very few of them approach their education or their work as true scientists, seeking the truth; rather, they seek arguments to support what they already believe.

Sweden, I believe, has a discernible opinion on the capitalism-communism question. Thus I wouldn't put too much stock in a Nobel award. Undoubtedly, the laureates are all exceedingly accomplished, but it may also help if you bat for the home team.

Let's assume for the moment the best in people. If I want to make a deal with another man for a price in exchange for his cutting my lawn, and he agrees by his acceptance that what he is getting is, to him, worth what he is giving, then who are you, who is anybody, to second-guess our respective free choices? I see no argument, scientific, economic, or moral, senior to this one.

Monte

Yevgeny deserves a standing ovation. What he's describing is utility, which is what anything is worth to anybody at anytime.

'Nuff said!

Monte

Correction. Standing ovation to Terry Bennett. Round of applause to Yevgeny.

Jack

Yevgeny and Terry: If Demos are forced to settle for a phase-in for catching the min wage up to current levels of inflation, the purpose for the compromise would be that of not "shocking" those who've been benefiting nicely by it falling so far
behind. The phase-in would be substantially shorter than the 9 years in which the former Majority has blocked the less disruptive periodic adjustments.


Yev sez:
But remember that inflation, which is computed on CPI data, would be higher had the minimum wage been rising a steady 3 or 4% per year. So, in other words, we'd constantly be behind. Imagine, we base min wage increases on CPI levels, which then cause CPI levels to rise more, which causes another increase, so on, and so forth.

........ Probably not. It's unlikely that such small increases at the lowest income levels would result in any effect on inflation even if it did tend to push upwards wages of those a tad above the min wage as the increase simply is not enough to move the whole economy of some $13 trillion. I suppose one way to get an estimate of how small a macro issue a $2 raise in the min wage amounts to would be to take a guess at how many would be affected and compare it to, say, the $300 Billion EXTRA we've been paying for just oil alone since our M/E adventurism began, along with the extra for NG, coal and other energy costs.

BTW...... as CEO and upper exec compensation has been soaring at multiples of the inflation rate, I wonder how much longer I'll have to wait to see my first lament as to that being inflationary? Do you happen to know what sort of genius work the CEO of a medical insurance company performed last year to make his contributions worth $150,000,000 or $50,000 per hour?

~~~~~~~~~~~~~~~~~~~~~~~~~~~

Terry sez:
If I want to make a deal with another man for a price in exchange for his cutting my lawn, and he agrees by his acceptance that what he is getting is, to him, worth what he is giving, then who are you, who is anybody, to second-guess our respective free choices?

...... well I suppose that if a guy is a bit down on his luck and can con the neighbor kid into doing his lawn for $5.15.... or? less?? that not much harm is done as perhaps his parents are still feeding and housing him. But, if the kid shows up looking a bit ragged and you think he might be one of the one third of high schools students who work these days, not for fashion sneakers or their first car, but to help their family make ends meet, perhaps it would be sporting of you to skip the latte one day and settle for an Americano with the free cream and loosen up an extra Two bucks for the kid. After all, Starbucks and Panera are doing pretty well and both pay their employees well above the min wage, arguably, perhaps something close to a living wage.

Jack

Jack

Yevgeny and Terry: If Demos are forced to settle for a phase-in for catching the min wage up to current levels of inflation, the purpose for the compromise would be that of not "shocking" those who've been benefiting nicely by it falling so far
behind. The phase-in would be substantially shorter than the 9 years in which the former Majority has blocked the less disruptive periodic adjustments.


Yev sez:
But remember that inflation, which is computed on CPI data, would be higher had the minimum wage been rising a steady 3 or 4% per year. So, in other words, we'd constantly be behind. Imagine, we base min wage increases on CPI levels, which then cause CPI levels to rise more, which causes another increase, so on, and so forth.

........ Probably not. It's unlikely that such small increases at the lowest income levels would result in any effect on inflation even if it did tend to push upwards wages of those a tad above the min wage as the increase simply is not enough to move the whole economy of some $13 trillion. I suppose one way to get an estimate of how small a macro issue a $2 raise in the min wage amounts to would be to take a guess at how many would be affected and compare it to, say, the $300 Billion EXTRA we've been paying for just oil alone since our M/E adventurism began, along with the extra for NG, coal and other energy costs.

BTW...... as CEO and upper exec compensation has been soaring at multiples of the inflation rate, I wonder how much longer I'll have to wait to see my first lament as to that being inflationary? Do you happen to know what sort of genius work the CEO of a medical insurance company performed last year to make his contributions worth $150,000,000 or $50,000 per hour?

~~~~~~~~~~~~~~~~~~~~~~~~~~~

Terry sez:
If I want to make a deal with another man for a price in exchange for his cutting my lawn, and he agrees by his acceptance that what he is getting is, to him, worth what he is giving, then who are you, who is anybody, to second-guess our respective free choices?

...... well I suppose that if a guy is a bit down on his luck and can con the neighbor kid into doing his lawn for $5.15.... or? less?? that not much harm is done as perhaps his parents are still feeding and housing him. But, if the kid shows up looking a bit ragged and you think he might be one of the one third of high schools students who work these days, not for fashion sneakers or their first car, but to help their family make ends meet, perhaps it would be sporting of you to skip the latte one day and settle for an Americano with the free cream and loosen up an extra Two bucks for the kid. After all, Starbucks and Panera are doing pretty well and both pay their employees well above the min wage, arguably, perhaps something close to a living wage.

Jack

ben

Terry

Agree completely with the second part of your post. (I suspect most economists would) The first, however...

Why does someone become an economist? ...they seek arguments to support what they already believe.

I don't think this point is relevant, or correct. Even if you're right, then you should be able to demonstrate the faulty reasoning - so why not just post on that?

But I suspect you're wrong. I believe a good number of economists start out left-leaning but, upon understanding that incentives matter, abandon the socialist model because it operates in defiance of those incentives. Well, that's how it was for me and a couple of others I am aware of.

Robin Hanson

Does anyone know of a single economist who says that our best (point, long-term, all else equal) estimate of the effect of a higher minimum wage is to raise employment?

Jack

Robin asks: Does anyone know of a single economist who says that our best (point, long-term, all else equal) estimate of the effect of a higher minimum wage is to raise employment?

...... No, about the best we have, and posted here is a suspicion within the margin of errors that raising the min wage 10% results in a 1% - 3% increase of unemployment. And that is most likely a short run or static snapshot rather than a long term effect. Were we to have raised the min wage in by 3% steps the effect, if true, would be .03 - 1.0 And making the assumption that the work would get done anyway, there'd be a similarly negligible increase in the productivity. But, if t some small amount of unemployment would that effect be the compelling "end of the debate?

I'd think not, and would again try to point out the distortion effect of employer's using human labor at but one third of the cost of maintaining life. And, ask any remaining, principled capitalists who they think should pick up the costs not paid by the employer? Or why it should be a taxpayer/insurance premium payer's job to pitch in what the employer and direct beneficiary of the employees labor does not pay?

Econ does not exist in a sterile laboratory environment but in a community and in concert with a democracy. Where the theory breaks down and leaves people who do a job necessary to the community we're not likely to let them starve in the streets, so we've a question, only as to whether the employee should cover those costs or whether by skill or lobbying in Congress he should get away with foisting these costs off to others of our community. Are there many here who lean toward socialism for the benefit of corporations which I think is called is called national socialism or facism. Jack

David C

I have studied all the arguments carefully and conclude that a min wage increase WILL help the poor. Why?

Well, a higher min wage will make it harder for the US to compete overseas, widen the account deficit, force a run on the dollar as a world reserve currency, cause an economic collapse, kill 95% of government programs, and force a return to the gold standard.

Yes, I never thought I would be a fan of higher taxes and a higher minum wage, and more social security, and medicare, but IMHO we have reached a tipping point. The sooner we crash the whole freaking economy into the dirt, the sooner the younger generation and poor will be able to enjoy real economic liberty, opportunity, and success.

Jack

David: It's likely social training rather than a clear view of reality that would have you "believing" that a couple buck increase of the min wage would have ANY effect on the admitted lack of our ability to compete in the global village we helped to design:

David Sez:
Well, a higher min wage will make it harder for the US to compete overseas, widen the account deficit, force a run on the dollar as a world reserve currency, cause an economic collapse, kill 95% of government programs, and force a return to the gold standard.

Income
Top 1 percent Next 19 percent Bottom 80 percent
1982 12.8% 39.1% 48.1%
1988 16.6% 38.9% 44.5%
1991 15.7% 40.7% 43.7%
1994 14.4% 40.8% 44.9%
1997 16.6% 39.6% 43.8%
2000 20.0% 38.7% 41.4%

Note that it's the top ONE percent who makes 20% of all the income and that the top 20% take 49% of all the income? While the bottom 80% share in the remaining 41% And dare we mention CEO pay having soared by 300% since 1990? For now I'll leave it to others to provide the share earned by those at or near the min wage or what $2 at the lowest 10% would amount to.

BTW since the top 20% own 85% of the wealth of the nation if we do continue to "blow it" than do the other 80% with their token holdings of the other 15% so if they're in positions of power it would be wise of them to try to return us to something of a sustainable plan.

Perusing these charts could quickly give you a better handle on what is happening.

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

Jack

ben

Why does CEO pay keep getting raised Jack? It has nothing to do with minimum wage. Nothing.

ben

Let me re-phrase: Why do you keep bringing CEO pay into the discussion?

Jack

Ben: CEO pay is related to a discussion of our min wage having been "bid down" 40% lower than it was a decade ago for these reasons:

I've brought to the board the generally known economic fact of "the market" being greatly flawed in the case of setting prices for: A. generic or low skilled labor B. undifferentiated commodities.

CEO pay has risen at such an enormous rate that it should be obvious that the massive run-up is due to "SOMETHING" other than working "market forces". At least for those who DOUBT that CEO skills have become 300% more scarce? or they've learned to be 300% more productive since 1990?? Would you want to make a case for this being an example of the "efficient" functioning of "the market?"

Also, I mention CEO compensation and the similarly high rates of pay increases of upper management for the benefit of those posters here who've been been trained to "feel" that even a miserly $2 increase in the min wage, much less paying a living wage at the bottom, would result in inflation and/or, ha-ha-ha "further erosion of our ability to compete" in the global village that we incompetently designed and refuse to address. (The $750 Billion of trade deficit is QUITE a hole to fill!)

And, that, for ALL who are in the lower half of the income scale, whether it is Reagan, Bush Sr, or Jr the "trickle down" of income growth seems to dry up somewhere in the range of $75,000 plus and all that does trickle down to even the middle class wage earner/taxpayer it the D E B T and interest payments.

For those of us who recall the first page of most econ texts; "study of what will be produced by whom, and for whom, at what price" along with the precepts of our nation and nearly every state "that our resources will be developed for the benefit of our people" and have not yet chucked the concept that a working economic system benefitting all the citizens of our community in favor of some amoral construct that pretends that capitalism is some sacred, god-designed machine of perfection when it is obvious to all that it falls far short of any such devine perfection.

I'll leave you with a real world case to mull:

Currently tomato pickers are trying to organize collective bargaining to improve their wage from $60/day to $100/day. (A day being 10 hours of being paid by the crate under a scorching sun.)

A. Why do you suppose they'd individually agreed to work for less than a living wage? Or the converse? Why does the grower "feel" his is entitled to hire a man for less than it cost to feed and house him?

B. Why should they have to resort to organizing?

C. If Taco Bell is "able to pass on the cost increase to THE market" the proposed raise will increase the price of a taco by three cents. Is this increase likely to disrupt markets and cause many to make their tacos at home?

D. Is there some means you have of determining that picking several TONS of tomatoes per day represents precisely $60 worth of "productivity?" (Please do not use the canard of "the market" or we'll have to review the real world issues of: A. the market not working at this level. B. Bernanke standing on the monetary brakes with both feet to ensure a labor surplus.)

E. Amd lastly IF your devine economic model continues to increase the numbers of our neighbors who are making but a fraction of a living wage is it wise of us to keep praying to the false god of "market perfection" and while waiting for them to hear our prayers, passing the collection box to cover the living costs of those at the bottom while pretending not to notice having our pockets vigorously picked from above? Jack

Anonymous

Ben: CEO pay is related to a discussion of our min wage having been "bid down" 40% lower than it was a decade ago for these reasons:

I've brought to the board the generally known economic fact of "the market" being greatly flawed in the case of setting prices for: A. generic or low skilled labor B. undifferentiated commodities.

CEO pay has risen at such an enormous rate that it should be obvious that the massive run-up is due to "SOMETHING" other than working "market forces". At least for those who DOUBT that CEO skills have become 300% more scarce? or they've learned to be 300% more productive since 1990?? Would you want to make a case for this being an example of the "efficient" functioning of "the market?"

Also, I mention CEO compensation and the similarly high rates of pay increases of upper management for the benefit of those posters here who've been been trained to "feel" that even a miserly $2 increase in the min wage, much less paying a living wage at the bottom, would result in inflation and/or, ha-ha-ha "further erosion of our ability to compete" in the global village that we incompetently designed and refuse to address. (The $750 Billion of trade deficit is QUITE a hole to fill!)

And, that, for ALL who are in the lower half of the income scale, whether it is Reagan, Bush Sr, or Jr the "trickle down" of income growth seems to dry up somewhere in the range of $75,000 plus and all that does trickle down to even the middle class wage earner/taxpayer it the D E B T and interest payments.

For those of us who recall the first page of most econ texts; "study of what will be produced by whom, and for whom, at what price" along with the precepts of our nation and nearly every state "that our resources will be developed for the benefit of our people" and have not yet chucked the concept that a working economic system benefitting all the citizens of our community in favor of some amoral construct that pretends that capitalism is some sacred, god-designed machine of perfection when it is obvious to all that it falls far short of any such devine perfection.

I'll leave you with a real world case to mull:

Currently tomato pickers are trying to organize collective bargaining to improve their wage from $60/day to $100/day. (A day being 10 hours of being paid by the crate under a scorching sun.)

A. Why do you suppose they'd individually agreed to work for less than a living wage? Or the converse? Why does the grower "feel" his is entitled to hire a man for less than it cost to feed and house him?

B. Why should they have to resort to organizing?

C. If Taco Bell is "able to pass on the cost increase to THE market" the proposed raise will increase the price of a taco by three cents. Is this increase likely to disrupt markets and cause many to make their tacos at home?

D. Is there some means you have of determining that picking several TONS of tomatoes per day represents precisely $60 worth of "productivity?" (Please do not use the canard of "the market" or we'll have to review the real world issues of: A. the market not working at this level. B. Bernanke standing on the monetary brakes with both feet to ensure a labor surplus.)

E. Amd lastly IF your devine economic model continues to increase the numbers of our neighbors who are making but a fraction of a living wage is it wise of us to keep praying to the false god of "market perfection" and while waiting for them to hear our prayers, passing the collection box to cover the living costs of those at the bottom while pretending not to notice having our pockets vigorously picked from above? Jack

Anonymous

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Anonymous

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tiffany

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