Open thread March 4, 2016 Dan Crawford | March 4, 2016 7:05 am Tags: open thread Comments (16) | Digg Facebook Twitter |
I’m thinking of sending this around to top minimum wage raise opponents next week. 🙂 If anybody can poke holes in the min wage part I’d love to hear it.
If a minimum wage is hiked to the right price it will bring in more dollars from higher wage people for fewer hours of work– but the demand picture doesn’t end there.
Those extra dollars will be diverted from purchasing choices that higher wage people would have made. The extra dollars instead will be spent on buying decisions lower wage people make.
Poor people buy other poor people’s second hand cars – used car lot too pricey. Middle wage people buy off the used car lot. Higher wages put you in the showroom.
1/ll/14, NYT article “The Vicious Circle of Income Inequality” by Professor Robert H. Frank of Cornell: “… higher incomes of top earners have been shifting consumer demand in favor of goods whose value stems from the talents of other top earners. … as the rich get richer, the talented people they patronize get richer, too. Their spending, in turn, increases the incomes of other elite practitioners, and so on.”
Overall, a higher minimum wage – if priced right – should predict a few more customers for Mickey D’s and a few less for Olive Garden. Probably that’s what we saw in Card and Kruger — studying firms with “giant” 33% labor costs no less.
Further clarification: if orange sellers and apple sellers started out charging the same price but orange sellers toyed with their price until they could get more money for fewer oranges out of apple sellers – then – the businesses that apple sellers like to buy from, cabbage sellers, would suffer – but the firms that orange sellers buy from, lettuce sellers, would prosper.
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Given the perpetual motion aspect of shifting demand it could seem that collecting what economists call rents via excess market power might not – as a mathematical question – make any difference to efficiency or overall output at all.
As a human equation — less than rational top one-percenters cannot figure out to spend all their money (could you?), tending to sluggish demand. OTH, less well educated, less healthy, less happy more under paid, etc., employees will make for a less productive economy (drug dealing doesn’t count). But, today we are only dealing with the math.
“Efficient-market hypothesis”/”rational expectations”/”perfect competition” focused folks are often caught up in the presumption that — assuming we let every market actor just do their thing – maximum output will result (could be) along with fairest distribution (“by definition”?).
But, like random molecules blown out by the Big Bang, individual economic actors tend to coalesce into structures that do not maximize desirable distribution. Businesses tend to coalesce into one-buyer monopsonies. Labor, if it is able, will gravitate to collective bargaining units (unions) to balance off monopsony market power.
If we didn’t know the topic of conversation was labor unions I don’t think anybody would argue with the statement: it is better for economic output to sorted out by pure consumer choice than by monopsony putting maximum squeeze on one arbitrarily chosen part of the supply chain.
Further down the slide-to-the-bottom: competing with other monopsonists forces firms to squeeze employees even harder – for survival, not just extra profit.
Further clarification: balancing monopsony power (one buyer) with monopoly power (one seller) sounds much closer to the definition of perfect competition (for those concerned with that) than every actor (especially employees) cut loose on their own.
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Last little tasty: why would we build a Social Security retirement Trust Fund (TF) if we did not intend to deplete it at some point? Possible real utility: to cover a temporary shortfall in FICA revenue while Congress gets around to upping FICA or cutting benefits. From that standpoint, today’s TV is equipped for about a 20 year long “emergency.”
Would it make sense to maintain today’s giant TF at today’s level forever – “slush fund”? – if income and outgo varied back and forth year to year but basically balanced out. That would just define a mechanism for converting FICA revenue – supposedly saved for the future – to permanently paying for current expenses that should be covered by income tax revenue.
No fear. By the time the TF is running out it will be paying 25% of SS retirement – with income tax – or as much as $250 billion (quarter of a trillion!) dollars a year. Just lower the income tax and hike the FICA tax. Without further ado: by then per capita income should be up 20-30% (along with whatever free gifts of technology). What me worry?
If this writing is meant to be support for a higher minimum wage, it is way too convoluted to be easily understood.
Beware the likes of people with no moral integrity who are running big banks, corporations and government that are abusing their power. We do not need more “revolving door” appointments in Washington. Have we not learned from our past mistakes? The cozy relationship between Hillary Clinton and Larry Fink from Blackrock is very troublesome indeed. Please go see Wallstreetonparade.com for more details… Econ 101 revised or corrected version. When workers have more money, businesses will have more customers and need more workers which in turn builds the middle class consumer spending who create the new jobs. New jobs are Not created by the wealthy elites who will tell you that if wages go up, employment must go down if a false economic dicotomy.The data shows that when workers are treated better
Why not just articulate what most people I know implicitly understand. The entire country is about 10-15 years late for a badly needed pay raise. Including the retired, the underemployed and yes the unemployed.
2016 will hinge on whether or not people believe that or not. And the ones that agree with it will choose Hillary or The Donald based on who is more likely to achieve that broad increase in incomes. Her record won’t help her with that. Unfortunately.
The data shows that when workers are treated better their businesses get better. There should be no false-fake lean from the owners or top managers of the company. Money only has value when the majority of society has enough to support a decent middle class life style. Remember that greed becomes self consuming and in the battle for survival,(us) and power (them) money becomes meaningless to the greedy.
“Her record won’t help her with that”
Are you implying that Trump, an international businessman who has shipped jobs overseas, is more likely to raise the minimum wage?
Rising Demand for Safe Assets
Trump is in real estate. His record on jobs is pretty clean, particularly compared to some of the people who dropped out of the Republican race or who have run before.. He uses domestic labor when he’s building things, and as Republicans go, he’s even good on unions.
Trump is against raising the minimum wage.
GOOFED — CORRECTION OF NEXT TO LAST PARAGRAPH ABOVE:
Would it make sense to maintain today’s giant TF at today’s level forever – “slush fund”? – if income and outgo varied back and forth year to year but basically balanced out. Even less sense to keep inflating it? That would just define a mechanism for converting FICA revenue – supposedly being saved for the future – into cash for current expenses that would otherwise be covered by income tax.
J. Goodwin: Rubio and Cruz were all over Trump for using immigrant labor on his projects.
Cruz won Kansas today with 51% of the vote. Rubio was 3rd behind Trump.
A lot of construction laborers are immigrants. Being an immigrant isn’t a crime, and employing them isn’t a crime, as long as you have done the required paperwork checks and they are eligible to work.
Honestly I don’t know what the specific New York law was and I’m not sure what federal law was on employer verification was 35 years ago when the most popularized incident occurred (the Polish demolition workers, I think the effective law federally was from 1952 which was more generally about naturalization processes, and I didn’t find anything in a brief look through that would have indicated that employers needed to verify labor nationality, unless it fell somehow under harboring illegals). In 1986 PL 99-603 definitely forbade employment of illegal immigrants and put the burden on employers, and in cases where subcontractors were used, if the higher level contractors were aware of the use of illegal labor, then they were considered to be as responsible as the hiring party.
As I recall, the immigrants in question were Polish and illegal. Trump’s company was fined for it. Yesterday he backed off his previous position and approved of H1B immigrants, especially for tech companies.
I is illegal to hire foreign workers to displace current -capable and qualified American workers and displace them from their jobs with a lower qualified foreign H1B worker. This rampant abuse practice by the corporate greedy must be stopped and should not be allowed to displace qualified American workers in our society. This is nothing more than unchecked corporate greed especially when asked to train your replacement worker who is in the lowest quartile of education or training. To fight this abuse please go to Support US Worker.org and file your case-complaint.
” We came. We saw. She died. Oops. ”
Another trophy on the mantle for Hillary.