The stimulus failed because it was almost all spread out into tiny insignificant tax cuts. Direct spending programs, like the highway funding, had significant impacts. If the stimulus had been 80% direct spending and 20% tax cuts instead of the other way around it would have had a far larger effect on the economy but the republicans demanded the tax cuts for their votes, morons. What the majority of studies on cost increases, things like increased material, utility and wage costs, indicate is that prices do not necessarily rise and when they do it is never by as much as the cost increase. This is due to a thing called market competition, maybe you heard about it. In highly competitive markets, like fast food, the seller is not free to raise prices to cover increased costs unless all competitors also raise their prices, which never happens because some will maintain lower prices and accept a smaller profit margin in order to gain market share. In fast food it is all about volume and market share and increases in fixed costs like labour, rent or utilities will need to be quite significant to lead to even a small price increase. One analysis I saw calculated the average increased cost of a Big Mac if the Federal minimum wage rose to $10.10. It was 8 cents, not nearly enough to trigger a price increase. The history of higher wages is also the history of economic advance.The first textile mills moved away from New England because workers were demanding higher wages due to the increased cost of living because increased consumer demand generated by their incomes had caused prices to rise. These mills were replaced by other manufacturers, including textile manufacturers who could pay the greater wages because they were able to create greater value from their workers labour. While textile manufacturers continued their quest for low wages manufacturing in New England continued to move up the value scale and still does to this day, making the most sophisticated and high value products in the world while continuing to pay the highest manufacturing wages. There is a clear choice here. Join the race to the bottom or continue on top. Low wage low margin price competition is a race to the bottom. In the past wage pressure was far more tuned to the economy but these days social welfare subsidies are stifling competition and innovation, entrenching established businesses that have long ago paid off their capital costs and creating a high barrier to entry for new, more efficient competitors. A way to reduce this is unfair advantage is raising the minimum wage, the other is to eliminate social welfare subsidies. In any case, the days of high employment are coming to a close. Everything is being automated in every sector of the economy so it will become increasingly problematic to provide consumer incomes from employment alone. Employment subsidies will become an increasingly futile strategy in an economy that is structurally incapable of generating jobs.
The older studies based on economic theories support Neumark and Wascher. The newer empirical works show Neumark and Wascher wrong. Reality is trumping the theory. In reality, even when wages rise, prices remain fairly sticky, and won't rise quickly. Plus, companies have options of reducing profit margins per unit sold to capture more sales, or keeping prices higher per unit, to sell less, but at a higher margin. So, prices aren't automatically changes with wage increases.
If we want to grant a kind of "citizenship wage" of more than 3,000$ per month ... let's do that, but let's not say it's a "minimum wage". We all know very well that not only in the US there are masses of people doing "poor jobs" for less than 900$ per month. Impose to their bosses to pay wages / salaries around 3,000$ and many business activities will close, nothing more simple than this.
Why not call it a minimum wage as a Standard fixed by those representatives to government delegated the power to do so. It is much simpler and provides for sufficient latitude of construction in favor of the private sector in having fewer regulations (that may be burdensome regarding Commerce and our Commerce Clause and the Cause imputed to it by the Judicature in modern times.)
Ok, but let's make it pragmatical: are you suggesting that fast food workers should earn more than 3,000$ per month? Can you imagine how much would "happy meals" cost?
No, I am suggesting we promote the general welfare by actually correcting for market recognizable phenomena such as capitalism's, natural rate of unemployment through the socialism of the law, as required in our Constitutions: why not use existing infrastructure to correct for that market inefficiency of capitalism, through recourse to unemployment compensation simply for being unemployed on an at-will basis in any at-will employment State.
That ^ is simply not true. The Neumark - Wascher paper and book is based on analysis of 102 studies of empirical data including the ones you've referenced. These are not theoretical studies and there is nothing theoretical about the basic axiom of economics that increasing the price of something reuslts in reduced purchases of that something. What you are referring to is lag time in which the effects are not seen immediately but the negative effects will come through. This is the issue that Neumark and Wascher identified with the previous work you identified. Their conclusions from the book: http://18.7.25.65/sites/default/files/titles/content/9780262515085_sch_0001.pdf
The stimulus failed because it was made up of deficit spending. That's not going to help. It didn't in the 1930's and it didn't in the 00's. Gov spending does not stimulate the economy - if anything it made things worse. Remember the prediction by the architect, Christina Romer, that unemployment would not exceed 8% if her plan was impemented which it was. Competitors will keep costs down by replacing workers with technology if the price of labor is artificially raised by legislation. And those affected will be those in most need of a job. And they will be priced out of the market because of their low productivity. "The days of high employment are coming to a close" ?? That's nonsense. While it is true that developing economies produce more and more wealth using less and less labor (look at the labor requirements for agriculture over the last 200 years) that opens up vast opportunities in the service industries which the wealth created can "pay for." But for people to take advantage of these employment opportunities requires more and more training and education.
If an unskilled, uneducated, pimply faced grocery bagger who lives with their parents is to make $37K a year, what should skilled/educated labor be compensated? what happens when all the unskilled, uneducated, pimply faced grocery baggers who live with their parents are edged out of the entry level job market by more experienced, more responsible, more settled adults...or elimination of the position altogether? what happens to the incentive to finish high school and increase one's value to labor markets with continuing education if one can enjoy a lower middle class lifestyle with a 'career' bagging groceries? (in other words, progressive leftists (fascists) are either elitist, narcissistic, pathological liars who hold a very low opinion of their targeted audiences' intellect (ala Gruber)......or, they themselves, simply don't possess the intellect to understand the job loss / inflationary / disincentivizing components of their "living wage" nonsense. It's one or the other....deceitful or stupid)
Why doesn't the right have a better solution at lower cost? We could be correcting for the inefficiency of capitalism's, natural rate of unemployment.
with what? socialism? with the absurd inefficiencies associated with state ownership of means of production? hehehe...
We could be correcting for the inefficiency of capitalism's, natural rate of unemployment by using socialism to bail it out, like usual.
The empirical studies still show no discernible effects on employment. http://www.cepr.net/documents/publications/min-wage-2013-02.pdf http://www.risep-fiu.org/wp-content/uploads/2012/02/FL-Minimum-Wage.pdf And this paper is good for getting a handle on the differences between past and present studies on employment from increasing the MW. http://www.epi.org/publication/bp178/
The ARRA was successful for the small size it was in relation to the output gap from the housing bubble/recession. http://www.washingtonpost.com/blogs...esnt-work-here-are-the-studies-they-left-out/
Again not true. The data from page 5 of the Doucouliagos and Stanley paper shows this negative elasticity. Don't be fooled by equating precision to accuracy. What we see in the links you have posted is a focus on total employment. But that is a red herring. The focus should be on the lowest productivity workers - and that is where the job losses are. Considering total employment completely hides this effect - those who earn minimum wage (or below) only comprize ~ 4% of total hourly workers. The CBO analysis showed that ~ 500,000 jobs would be lost if the minimum wage were to be increased to $10.10 on a national basis. The Center for Economic and Policy Research is a progressive advocacy group. They of course will do everything they can to discredit Neumark and Waschers 370 page book in their 30 page pdf. The last article is a short survey published in the progressive Economic Policy Institute before the Neumark and Wascher book.
It did not work per the guarantees of the architects. And the overall effects of the deficit spending on the recovery has resulted in the worst recovery since the Great Depression. Comparing the performance to the predictions the only conclusion can be that it was a failure.
From an economical viewpoint in Europe we are studying several alternative options. Pay attention that, being Continental EU [and also UK, at the end ...] a system of socialdemocracies, here principals of socialism are still well embedded in our societies. For example, about minimum wage, we've got national contracts [In Italy and in other countries there are similar contracts] and the weight of the labor unions is enormous [this is the same in Italy, France, Germany, Spain ... it's always surprising to discover how labor unions are socially embedded in Germany and in Italy] and the conceptualization of minimum entry wage is culturally deep-rooted here. Not only this, the contract imposes to employers to increase this wage with a pace determined by law. And it's just some years that the seniority bonus has been erases [every 2 years your wage increases just because you worked those 2 years ...]. But this hasn't helped so much our economies in these last decades. Now that also France [and in less evident measure, Germany] are suffering, in EU we are thinking to alternative social instruments to pass this crisis. Unemployment here is really high and there is who is observing with interest what they are going to do in Switzerland. In Switzerland they are reasoning about a "citizenship wage". Are you a citizen? Have you lost your job? The State pays you just because you are Swiss [!!]. Honestly that's a bit too much for a real market economy, personally I would prefer to reason about "citizenship credits". Are you a citizen? Have you lost your job? You've got the right to receive a loan from a bank, granted by the Central Bank. This would sound more suitable for a market economy.
Been an employer for over 30 years, always paid my employees what I felt was enough for them to pay for housing, food, transportation, gave theam fully paid health care insurance, and vested them in our profit sharing account only after 1 year of employment. IMO minimum wage should be based on the cost of living, the real cost of living. If set by the federal government it would need to be based on the "average" cost of living(cost of housing, food, transportation, clothing). Not the Cost of Living determination method used for SS increases as that is a flawed method of calculating Cost of Living. If left up to the States to determine the cost of living, it would be an average of all cities within the State. But, it is pretty easy to see that no one earning the current minimum wage can pay monthly cost of living expenses and support themselves needless to say a spouse and children. Minimum wage should be a minimum of $10.00/hr IMO. And, most large employers and small businesses that rely on 5 or less employees to make the business run, pay at least that amount if not more. It is only fast food, some large retail employers, manual labor businesses that pay less. Often because they hire young h.s., college students and have a large number of part time workers or hire illegals. Small businesses generally pay a higher hourly wage because they rely more on their small number of employees and employee longevity is extremely important and they are wiling to increase compensation to retain their employees.
Totally agree. Forcing unemployment on those who most need the the experience and the income is counter-productive.
That's ridiculous. All the predictions from the Obama administration indicated that the stimulus would hold unemployment under 8% because of the 19 (IIRC) separate multipliers on the gov spending. Unemployment (U3) rose to 10% and U6 rose to ~ 17% and is still ~ 12%. Now the excuses are that it was too small - but that's always the case when progressive policies fail - we didn't spend enough.
Yes, if a minimum wage policy is to be implemented it should be done by the states and/or cities. IMO however wages should be determined by the individual employers based on their individual business situations and the productivity of their employees. Setting of a overall federal minumum wage does more harm than good.
The Obama Administration, hoping for a quick end to the recession, presented rosy figures. And they were wrong. But the professional economics field viewed the stimulus and less than half of what was needed to end the recession quickly. There was a $2 trillion output gap that had to be filled, and the ARRA was only $800 billion spread out over three to four years (for the bulk of the spending). Progressive policies rarely fail. What fails is half measures. But even half measures perform far better than the conservative, bubble economics or the Neo-classical and Austrian School nonsense being taught as somehow relevant after decades of failures. To say progressive policies fail is silly, when viewed against the backdrop of the studies on the stimulus, that show the ARRA did very well for the limited size. The thing about it, is that all of the caterwauling from the right about deficits and debt, grown larger from the policies the right endorse and implement, would be well on the way to be far less had we had a large enough stimulus. The economic opportunity losses alone will hold down gdp from far higher potentials, between the GOP's housing bubble bursting us into recession, and then the GOP obstructing job and economic growth throughout their tenure of the House majority since 2011.
