Just as I thought - you have a pet model which has nothing to do with the real world. Has the output of this model (whatever that is) been verified against real world data ?? Or is this just a tool to be used to prove that capitalism takes advantage of the workers of the world, aka Marxism ??
This is idiotic on two fronts. First, the model is based on rejecting unrealistic assumption. We're back to the sad reality that your original comment was based on the stupidity of textbook 'perfect competition' (though you didn't realise it!). Second, that job search frictions exist is obvious reality. Acquiring new employment is not costless. Bit obvious really. First, I've already informed you of the nature of the empirical evidence (where stochastic frontier methods are used to test hypothesis and also calculate underpayment). Second, you're the one devoid of economic sense. You haven't realised that your position continues to be based on ludicrous perfect competition assumption. No excuse as you've been informed of that obviousness and you've simply hid from economics// Not mentioned any Marxist theory (though I'm sympathetic to their class conflict analysis into inflation). However, I doubt you have any understanding of Marxist economics. Look it up on wikipedia!
I respectfully disagree with you. I believe the qualitative factors are more relevant here than organisational size. As for job search frictions... it is not an invalid theory, but one can question how much it truly applies here.
And that would be irrelevant as I referred to the empirical evidence applied to supply & demand. Give your alternative to supply & demand or you have nothing This is fluff. Have you been getting away with this on here?
had we kept the minimum wage indexed to inflation, starting in the late 1960s, when the economy was stronger for the middle class, we would have a MW somewhere around d $22 /hour.
I agree it may not be not be regarded as the most economically ideal, but perhaps the true ideal would not be politically feasible or as socially acceptable. Minimum wage may be better than lack of any other option. It does have direct damaging effects on those who, for various reasons, may have trouble finding a job. But indirectly, it might actually help through wider distribution of wages and increasing consumption. And one can argue about how much it actually decreases employment. Because there seems to be plenty of minimum wages jobs already, they are not going away. And then there is the whole interplay between immigration and minimum wage... which we cannot even begin to touch on in this thread, but needs to be considered. For the most part, immigrant labor has already displaced those who are less desirable, so I hardly think a minimum wage hike would cause any more trouble.
More recent empirical work has been showing that the minimum wage isn't harming employment. The Card-Krueger studies have shown either negligible job losses, or increasing jobs.
Not surprising. There does not seem to be any shortage of low wage jobs available. It's the decent paying jobs which are in short supply. Putting a minimum wage on the low end of things does not seem unsensical.
Inane innocence! The recent empirical evidence refers to improvements in econometric methodology. Data used goes back decades
Higher minimum wages help. But in the US, the loss of an activist class of people, who fought for their very lives and economic liberty in the union movement, has allowed corporations to gain the upper hand. Particularly with the insane amounts of money the wealthy are dumping into politics. - - - Updated - - - Nope. http://www.huffingtonpost.com/2013/02/13/minimum-wage-productivity_n_2680639.html
I believe we should solve simple poverty using Capitalism with sufficient Socialism to correct for a capital, natural rate of unemployment and that market failure regarding full employment of resources in our market for labor.;
IMO the economy is a separate entity from society and government. The economy is not obligated, in the arena of competitive free enterprise, to provide a living wage or minimum wage to anyone. The economy garners demand then satisfies that demand in order to earn profits and grow. One of those costs of doing business is labor and every penny of labor effects the price to the consumer and can impact the business model's success. If the cost of labor and it's collateral impacts become untenable, then business can close the doors or seek lower production costs by outsourcing, automating, or importing, etc. since today American business can operate in every corner of the world. Meanwhile, Americans demand lower cost products and services, validated by the successes of Walmart, etc. which again puts pressure on business to control and reduce their costs of doing business. Lastly, Americans are spoiled and entitled demanding to live far beyond their means, which is demonstrated by the numbers suggested in the OP for living expenses! To have $3000 per month in cash means the gross income must be $3700 or $44,400 per year...while the median income today is around $35K this suggests more than 90 million American workers are not receiving a 'minimum or living wage'. $44K requires a minimum wage of approximately $21+/hour! Go ahead and force this onto the economy and see what happens...
And that makes no sense as the government is the 'key' economic agent: i.e. capitalism is prone to crisis and, without government, it will be destroyed (indeed, markets typically exist because of previous government interventionism). Then you are essentially supportive of coercion as, without the living wage, workers are denied basic rights (which then feeds into further abuse, such as zero hours contracts as employers find means to further exploit labour and magnify economic rents)
Indeed! When folk suggest otherwise they're typically just trying to force their ideology (as illustrated by the bogus American libertarians, financed by corporations, to coerce a government that supports rent-seeking behaviour)
Businesses however have a set amount to spend on labor based on profitability requirements. If the price of labor is artificially set high fewer will be employed. The net effect on the comsumption of those still employed will be the same as before the minimum wage was raised. The net consumption however will also reduced because less of the product from the specific companies affected will be purchased. Neumark and Walsher in their book "Minimum Wages" identify an problem with the Card & Krueger in that they do not consider the lagged effects of raising the minimum wage which would reverse their findings with regard to their study of the 1991 federal minimum wage increase and show that their is an adverse effect on employment. There is also a paper by Baker, Bengiman, and Stanger which shows this lagged negative elasticity effect. The Neumark and Walsher book compiles and compares ~ 30 separate studies (some are their's) on the effects of the minimum wage over the last few decades. It's a must read if you are interested in this subject. We often hear the argument that raising the minumum wage would result in corporations paying more in wages resulting in the gov/taxpayers paying less in welfare. That's bogus because there would be more unemployed and prices would rise. IMO it is far better to have the maximum employed regardless of the wage and welfare making up the difference because the best individual job training and individual productivity improvement mechanism is to have a job. It is also a very positive individual activity building confidence and self respect to have a job and earn a raise by good performance on the job.
You're treating this as if a) this is just one company made to raise their wage, when it would be a systemic raise across states or the nation, and b) that with the increased inequality of recent decades, that larger companies relying on minimum wage workers don't have the money to be able to pay better. I'd say both are coming at it the wrong way, as recent empirical studies continue to show that employment isn't adversely affected by increasing the minimum wage, as econometrics have gotten more precise. Not if the minimum wage was allowed to keep pace with inflation. If it is, then consumption goes up every time the wage is raised. Putting more money in the hands of consumers always increases consumption. I'm sorry, but your statement doesn't really make sense, as more money in the hands of those who spend it means more demand. Neumark's and Wascher's work has largely been shown to have a lot of problems with the data they used from the fast food trade groups that supplied the data. Card and Krueger used more comprehensive tax receipts to compare Pennsylvania to New Jersey, and subsequent work to fix some problems with their studies were addressed. Other works have shown that counties that border other counties (almost always at state lines) with wage differences from a higher minimum wage compared to counties with the lower minimum wage, sees no loss of employment. http://escholarship.org/uc/item/86w5m90m the problem with your opinion is that in states that have raised the wage compared to those that haven't, the job gains were faster and larger, generally, as more demand was created in the economy. - - - Updated - - - He attacked your opinion, the way it looks to me.
Most empirical studies show that increasing the minimum wage increases unemployment especially hurting those who need jobs the most. Neumark and Washers book shows this based on the 30 studies considered. Both Card et al. and Dube et al. 's work is considered and errors pointed out in their book included the lag time issure and the problems with the comparison of Card's work concerning NJ and PA. All of this is discussed in the book in detail. Consumption does not go up with inflation adjusted min wage because prices also go up. "Putting" money in the hands of cosumers does not increase consumption. The money must come from somewhere. Either from the loss of income of those who lose jobs or the reduced overall consumption resulting from higher prices. The only way effective demand is created in a society is through wealth creation. To increase this wealth creation good governance seeks to reduce the costs of production. Increasing overall labor costs by fixing labor cost artificially high results in less wealth creation. That's the simple fact - the most successful countries produce more. Your last statements are correlation without causation. How does increasing the costs of production result in more economic growth ?? The variable commonly not controlled for is population growth. The only possible result of increasing the costs of production is reduced wealth creation (GDP growth). He is clearly attacking me. I asked for real world confirmation of the studies and he was not able to provide any. This is a major problem with academic economics - models are created but never tested or verified in any way. The Romer multiple Multiplier model for the Obama Stimulus is a great example of that. When Romer went back to Berkeley she indicated that she didn't understand why the economy did not respond "properly" and that she did not know how to fix it.
Economists seem to be leaning towards the idea that raising the wage does not harm employment, as most recent studies have been able to show Wascher and Neumark wrong. Just this past year, states with higher minimum wages have outperformed those with the Federal minimum wage as the baseline in job growth, economic growth, etc. sure it does, because inflation lags behind the wage growth. The following year, if the wage goes up again, consumption increases before inflation starts to catch up. Again, you're making the wrong assumption that jobs would be lost, when the data doesn't support that idea. And, consumption would rise from wage increases, and the consumption would in turn fuel more hiring. The most successful countries have relatively high wages and from that comes a consumer base. not if the increased wages increase consumption. And the minimum wage increases consumption by putting money in the hands of those who consume the majority of their income, the poor, and middle class families. Another way that middle class families win is that many companies, looking to be competitive for productive workers, will offer to pay higher wages, to stay ahead of the minimum wage, and thus also pass increased wages on to higher wage earners. It was clear that the stimulus was too small, if you've been following any of the economic discussion in the past six years.
That is not what the majority of studies indicate. The economic "iron rule" is that when product prices increase less product is purchased/consumed. Borrowing from thermodynamics this is similar to entropy. The entropy of the universe always increases. For localized systems it can be shown that the entropy does not increase but when the entirety is considered it does. It's the same for the minimum wage - the result will be fewer jobs and a reduction in overall wealth creation. The studies which show no effect or benefits of raising the minimum wage are curiosities. That raising wages artificially will result in increased wealth creation and increased economic growth is akin to arguing for a perpetual motion machine. What are the bounds of raising the minimum wage ?? If you argue that raising it a small amount is good then raising it larger amounts would be better. The history of the minimum wage is instructive. It was first implemented by labor unions to restrict the hiring of black craftsman traveling from the south to the north after the civil war. The policy has a racist background and was successful in reducing the number of skilled blacks who were willing to work for a smaller wage than the existing white population. It was effective and deprived black tradesmen from making a living. Higher wages in the most successful countries are a result of the ability of those countries to produce. The higher wages are an effect and not a cause. It is clear that the model used to generate the stimulus plan was not correct. The typical argument is that the stimulus was too small which is the usual case when a progressive policy does not work - the reason is that not enough money was spent. Spending by the US government has been going down and is now back to pre recession levels and the economy finally has been showing some life. The entire housing bubble/financial crisis/recovery history has been a condemnation of gov policy and gov regulation.
Times have changed and more and more adults are working for minimum wage, or slightly above in order to have income. The federal government should not have to help support a working family. That is corporate welfare. My feelings on the minimum wage is it should support a one income family of 3 above the poverty level. Currently the poverty level for a family of 3 is $20,000 or so. This would equal a 10.00 minimum wage based on 50 weeks/year and 40hrs/week. Raising the federal minimum wage to $10.00 will have very little impact on the economy as a whole, or even the lives of the workers who get the pay raises. However what it does is reduce dependency on government checks, and makes working for a living more attractive then living off the government for a living. 21.3 million workers(roughly 20% of the private workforce) as of December2013 earn10.10/hr or less. Might be slightly less today. So 21.3 million workers will see a pay increase and roughly 4 million will see a 2.75/hr increase. Very minimal amount in dollar terms. even if all 21.3 million receive say a 3.00/hr increase it would equal based on 2000 hrs/year a grand total of 128 billion dollars/year. Corporate post tax profits are roughly 10% of GDP which equals roughly 1.7 trillion dollars. So we are asking companies to pay less then 10% of their profits more to get their lowest income earners to a level that keeps them afloat without the government? I'd say that is not asking a lot out of corporate America. Oh what about the small businesses with small margins? Well the average small business employs 20 people has revenues of 2 mil and 200,000 of that is profit. so lets say all 20 make 7.25 and get a 3.00 raise. This would equal 120,000 dollars/year. The company still has a 4% profit. However we all know all those employees don't make 7.25 so the impact is even less on profits. 52% of people work for small businesses or roughly 50 million people and we all know not all low wage workers are small business workers, so the impact will be minimal for them too.
All these configurations on a livable wage, to me are meaningless. What constitutes a livable wage in NYC or SF is simply not applicable in Jackson MS. or most small towns. If the Federal stayed out of the way, except for maybe DC...leaving it to each individual State to establish a wage (even if no limit) everything would work out just fine. Most employers, including myself for years, paid the going wage or if you prefer, what people I hired would take to do some job. Yes, most were at MW (in the time), but most had never held a job, needed work history (some for welfare) or supplemented there spouse's income. It's safe to say, in my mind few, if any depended solely on the income for everything and since there was very little turnover, were happy for the chance.
The only practical minimum wage, in my political opinion, is one that also functions as a social safety net and promotes the general welfare through better employment of resources in our Institution of money based markets simply because we have a Commerce Clause.
