The Incredible Vanishing Takeaway from the CBO Report on Minimum Wage
I’m surprised that nobody highlights what for me is the key takeaway from that report.
They predict, with a $10.10/indexed increase:
Low-end incomes increase $19 billion.
High-end incomes decline $17 billion.
For a net GDI increase of $2 billion.
Table 1, page 2:
Pie gets bigger, all that rot.
The increase is presumably explained by the last phrase in footnote F to that table:
increases in income generated by higher demand for goods and services.
Cross-posted at Asymptosis.
I say let’s step it up a notch :
Top 1% incomes decline $500 billion.
Low-middle incomes increase $600 billion.
Net GDI increase of $100 billion , due to higher MPC and reduced political corruption capacity.
As a non-economist I only have one economic rule:
“Nothing happens until someone buys something.”
@EMichael: “Nothing happens until someone buys something.”
Luvvit. Right at the core of my thinking as well. I would add: buys something real, that can be consumed by humans.
My chance to brag again.
A strange creature The Economist
In the land of supply and demand
He sees neither the salesman
Nor the guy with cash in hand
Only the fine line of a Laffer Curve
Horizontal neither up nor down
And when their well planed models fail
(as they must)
Only market forces can be found.
And the title of this poem is?
My numbers are a little different — either way, the $10.10 minimum wage or the E.I.T.C. don’t add up to much — cut and paste:
Progressive economists should readily admit — shout — that a “moderate” federal minimum wage increase, typically 10% cited in conservative studies, should indeed have little or no effect on poverty rates. Why would an extra 1/4 of one percent of GDP added to low wage pay checks be expected to clear a broad swath through poverty? That is what a $1 an hour increase in the federal minimum wage equates to — about $40 billion out of a $16 trillion economy. (E.I.T.C. shifts $55 billion.)
A $15 an hour minimum wage OTH would send about 3.5% of GDP the way of 45% of American workers — about $560 billion (much of it to bottom 20 percentile incomes who today take only 2% of overall income).
* * * * * *
Could raising the wages of 45% of the workforce actually raise demand for the goods and services they produce? Sounds sensible at some level; raising wages so much ought to add demand somewhere – but, is it all smoke and mirrors? Before the 45% — who would get a wage hike to $15 an hour — can raise demand anywhere, they would need to get the extra cash from somewhere else – meaning the 55%. (Bottom 45 percentile incomes – not wages – currently take 10% of overall income – so, at no time are we talking giant chunks of the economy here.)
The 45% can get higher pay even as “numerical” (to coin a phrase?) demand for their output declines due to higher prices — as long as labor gets an bigger enough slice of the new price tags. This can be compared to a leveraged buyout or buying stocks on margin.
* * * * * *
Did I forget to mention … ? The poverty line that a “moderate” minimum wage could not help anybody cross — $20,000 for a family of three – is only about half as high a hurdle as a realistically worked out minimum needs line should be. .
A practical line would be more like $40,000 a year. Today’s official federal formula is an early 1960s creation: multiplying the price of an emergency diet by three (dried beans only, please; no expensive canned) – no current basket of goods. For a reasonable basket of goods consult page, 44, of the, 2001 (2008), MS Foundation book “Raise the Floor.”
So, a so-called “moderate” increase in the minimum wage will not even clear a half-height hurdle.
Final thought: Why does everyone obsess so over the “hazards” of raising one price in our economy — low wage labor’s. Nobody shudders when the Teamster Union raises its price. It is not like the price of low wage labor has been habitually tested against market willingness to pay and been barely holding its own. It is more — it is exactly — like the price of low wage labor has sunk further and further below market willingness — precisely for lack of testing — as the ability to pay has grown and grown — for almost half a century now. To see, click my everything-adjusted-for-everything minimum wage history chart.
“My chance to brag again.”
Or really ANY title I care to chose since it IS MY poem. I first wrote it on MAXSPEAK in 06 or 07 I’m no longer sure. On occasion I throw it out there when it seems appropriate.
Dennis Drew: Marx did say that The Rich conspire to keep The Workers down. I’m not a Marxist by any stretch but like the old saying goes, “Even a stopped clock is right twice a day.” All this HARD fighting to keep Poor People from getting even a little ahead looks suspicious. Then add in the near desperate fight to kill food stamps and services all across the spectrum looks more to me than the USUAL Greed&Stupidity.