re: This particular horse. It’s dead, Jim.
Of course, in region where the LV is only slightly higher or the same as the MW, there will be little or no difference, because most or all of the workers are on the ‘margin’. But then, the LV won’t help much, either. So I assume we’re talking about situations where the Living Wage is substantially higher than the Minimum Wage. In those situations, we’re talking about a severe labor shock - perhaps doubling the cost of labor for some companies. That will not be absorbed without cost. Either those jobs will be lost, or the price of the goods they make will have to rise, or the quality of the goods will go down as they cut back elsewhere.
The other problem with a living wage is that it’s pegged to the cost of living, which means it could result in an inflationary spiral. If the cost of living is X, and everyone gets a raise, then the cost of goods in the region will go up. That means the living wage has to be increased further, which drives the cost of good up more…
I’m not making any absolute predictions as to exactly what will happen. The market is too unpredictable to make sweeping claims about exactly what form the adjustments will take. What we can be sure of, however, is that businesses can’t just absorb the cost without change. They can’t just ‘take it out of profits’. They may raise their prices, or they may cut back in other areas. They may adjust by hiring fewer workers but working them longer hours, or by cutting back their services. Here in Edmonton, we have a labor shortage which has pushed up the effective minimum wage to the point where burger flippers are getting close to $10/hr and 7-11 employees are gettnig $1000 signing bonuses. But in our case, the infrastructure is strained and all these stores are doing much more business, so they can afford the higher price of labor. But another effect is that a lot of them have cut back their hours. Businesses that can afford $10/hr labor during peak periods may no longer afford to have them on staff at midnight when there are few people in the store. So they cut those shifts. A lot of fast food places are now closing earlier. Also, they aren’t expanding as much. Several chain stores have said that they would like to open stores in Edmonton but they can’t because of the shortage of low-cost labor.
Now imagine if the $10/hr wage was applied by fiat in an area that already had high unemployement. You’d see fewer stores opening up perhaps, or stores cutting the non-productive shifts. That means fewer workers earning that $10/hr. So in that case you improve the wage for a few, and but others on the unemployment line.
The main point I would make is that mucking about with prices and the market like this is an especially bad way to achieve social goals. It would be much better to let the intersection between labor and business seek its own price level, so that labor is distributed with maximum efficiency, then deal with the social ills that arise from that with other programs such as subsidized job training, food stamps, relocation services, or the EITC.
There should be a form of Hippocratic oath for social planners: First, do no harm. Don’t break the engine of productivity because it’s not working well for 5% of the people. Don’t muck with the intricate relationships that have arisen over time in the marketplace, unless the market itself has broken down. Especially don’t attempt to solve social problems with wage and price controls and tariffs, because history has taught us that those really, really suck, and have unintended consequences that tend to hurt the people you think you’re helping. The evidence is not just clear, it’s incontrovertible to anyone willing to look past the blinders of ideology and the pleading of special interests and really try to understand how the market functions and why it behaves as it does.
Sam: I’m not disagreeing with your ideas, in principle. I just think that you would make a stronger case if you didn’t paint scenarios based on assumptions well outside the realm of what people mean when they use the term “living wage”. You don’t have to convince me-- if you’ve read any of my posts here, I’m against the LW. I believe there are better ways to fight poverty without introducing large distortions into the market and hurting the goose that laid the golden egg in the first place. When you came back down to earth and started talking about a LW of $10/hour (to replace the current MW of $5.15), you made the exact same arguments I made back on the first few pages of this thread.
Nothing, which is why he said it. It is an attempt to hand-wave away evidence he cannot refute.
:shrugs;
It’s not like he ever adds anything of substance to a debate anyway.
You were making an assertion about income mobility. Which assertion was incorrect.
Is it still the case that some union contracts are linked to the minimum wage, and thus an increase would trigger an increase in union wages? Thomas Sowell (IIRC) mentions this in one of his books. Which would explain why the Democrats, much more a party of Big Labor than any other, would be pushing for something that will not benefit many laborers in the US.
But what you say is, of course, quite correct - most people don’t make minimum wage, many states have a MW greater than the federal rate, and therefore any increase is going to be largely symbolic. An increase to a “living wage” is much more problematic.
Wasn’t it ACORN that was found to not be paying its workers the living wage they were insisting should be imposed? Funny how things change when it’s your own money being spent.
Regards,
Shodan
I’m curious as to that number, five percent, which seems so precise and definitive. From whence? Is this figure acceptable to you, as a needful sacrifice, however unwilling? At what point will MacSam cry “Hold! Enough!” Ten percent? Fifteen? Are you suggesting that a permanent underclass is unavoidable component of a productive society? Gee, tough luck for them, huh?
You assert without hesitation that the engine will be broken, but Shirley you are aware that learned minds disagree with your assessment, that it is not Holy Writ? What are your figures for the certain and unavoidable catastrophe sure to befall us? Will our economy suffer a loss equivalent to five billion? Ten? Fifty? Might not the risk be worthwhile, wouldn’t you happier if you were wrong, and we can relieve huge chunks of misery with a few pen strokes? We have squandered billions upon billions on a damfool military adventure, are we suddenly too risk-averse to help our own people?
Its a bit like we’re talking about a kid with strep throat, Dr. Sam recommends penicillin, and scorns the witch doctors who would apply leeches and shake some rattles. Youir claims of unassailable and incontrovertible fact are, at best, exagerrated.
And yours are, at best, non-existant. Do you have ANY evidence to back up your derision?
There’s another variable that needs to be taken into account before we embrace the Living Wage idea: illegal immigrants. If we bump the MW up to, say a $10/hr LW, we’re going to make it even **more **attractive for illegal immigrants come here and seek jobs. And let’s face it, we can talk about cracking down on illegal immigrants, but that’s like cracking down on drugs-- it doesn’t seem to ever work.
Employers will be even more motivated to hire illegals at sub-LW rates and illegal immigrants will be able to command a higher wage than they could before-- even if they often don’t make the LW. Of course, many illegals will make that LW, just as many make MW (or higher) now. Makes that dangerous trek across the desert seem all the more worth it.
Which leads us also to ask: how will the LW affect the underground economy? Employers and workers will be more motivated to negotiate “off the books” rates to do jobs that simply wouldn’t be done otherwise.
If instead of fighting poverty by inflating wages, we fight it by offering government services directly to those in need, we can better make sure that those services go to citizens and legal immigrants. The more I think about this, the more I can see what a bad idea it is. Why risk all those unintended consequences when there are other ways to accomplish the exact same thing?
Because it makes some people feel like they are doing something good even though it is ineffective or counterproductive. Buy hey! It’s the thought that counts!
Pure snark. See, its just this kind of rude confrontation which is why you guys never win any elections…
Funny thing is, so many who are opposed are opposed on the basis of rock-solid economic principles, on which all sensible economists agree, except for those who don’t. Who can be safely ignored, since they contradict arguments based on rock-solid economic principles.
We have learned, for instance, that such programs will have no effect whatsoever, except that the economy will utterly implode. Because poor folks will spend all their money on goods and services, which will lead to rampant inflation, unless they save their money, in which case providers of goods and services will go out of business. Because of the rampant inflationary effect of programs which have no effect. And aren’t needed, because they would have no effect, outside of cataclysmic ones.
It isn’t necesssary to do these things, because programs to assist the poor have made a vast population of lucky duckies. People who don’t need health care assistance, since all they need do is wait until their condition becomes life threatening, and go to the emergency room. People who don’t need public transportation investment, if they would simply quit whining and go buy a car. And the lavish expenditures approved for day care and education support…what? Well, they will be, very soon. Just as soon as Congresscritters, who live and die by money and power, become attentive to the wants and needs of the poor and powerless. (Which, of course, we can’t afford anyway, since we squandered it all on George and Rummy’s Excellent Military Adventure, and sacrifices have to be made, and we’ll sacrifice the the people who can’t stop us from sacrificing them. But I digress…)
Rather more verbage than the point deserves, I suppose, which is this: your arguments are mutually contradictory, but you ignore each other and train your fire on us. But doesn’t is strike you as odd when someone is on your side, but for reasons in direct contradiction to your own? Isn’t it odd that mutually exclusive argments are offered to precisely the same ends?
elucidator: I can’t figure out from your posts whether you are in favor of instituting a Living Wage or against it. Can you clarify? And who is “you” and who is “us” in the last paragraph of that post? I’m honestly completely baffled by what you are trying to say.
http://americanassembler.com/newsblog/index.php?p=670 The unemployment rate of 5 % is not close. I read a site last week that said a study in Los Angeles said it was under reported by 50 % . l.a. is not experiencing the problems the midwest is. Statistics are bent by eliminating any one when their unemployment runs out. If you are long term ,you are recatagorized. If you are observant ,you will notice the devastating effects NAFTA etc have done to the middle class.
It is many people with experience and education who are suffering. To simply state that low educational are going.is short thinking. It is the middle class jobs being exported now. The first to go were the jobs which required no education. Now the industrial and technical are going.
Of course after making 60 k plus a worker should quietly accept that he now is worth 5.15 an hour. And to some he does not deserve that. Companies should be allowed to pay him much less if they can get away with it.
I am entirely in favor of the Living Wage that will raise the poor from misery and want, and utterly opposed to the one that will bankrupt the economy.
My point being that is difficult to defend a proposition being attacked from so many directions, with so many arguments, several of which are mutually contradictory. And yet, the persons making such arguments dont seem to argue with each other, just with those of us who represent the progressive viewpoint.
First, there are the people who oppose doing anything because of an abiding and unwavering faith in the Market Almighty, a faith that finds no fault in a system that offers a CEO a thousand times what if offers a fireman or a teacher. Presumably, because deciding whether or not to market New Coke is such a socially crucial role, we must ensure that there are enough people wlling to toil in air-conditioned offices sweating over spreadsheets. He deserves it because he can get it, and he can get it because he deserves it.
And, for instance, your own argument that higher wages for the servile class will encourage illegal immigration. Well, of course it will! It will also encourage legal immigration, it will encourage higher birth rates, it will encourage all of those results that spring from a better, more equitable nation! Its like saying we shouldn’t cure a childs lameness because then the little bugger will want a bicycle!
But mostly, its the arguments from economic theory that chafe. As though economics were such a science as physics, where falsifiable experiments can be conducted. But it isn’t! When two physicists disagree, they can fashion an experiment to settle the issue, when two economist disagree, they just disagree more. Paul Krugman has a Ph.D in Economics, and yet hs viewpoint is diametricly opposed to an equally qualified Ph. D who draws his paycheck from the Heritage Foundation. Its a stacked deck and a crooked dealer, the rich man can give money to foundations that protect his privileges, and take it off his taxes to boot! (The poor man can also support those who labor on his behalf, and thus equality is preserved, just as the rich man is equally entitled to beg for bread…)
Then, at the very last, the argument that, yes, something must be done, but this isn’t it. Which would be fine, except that it doesn’t proceed. We’ve known about our emergency room problems for years, and do nothing substantial to provide health care even when it would save us money! Even when we know what the smart thing is, we won’t do it!
Issues of enonomic justice are ten times worse than the Hydra, no individual fix or tinker is likely to avail anything. What is a Living Wage? It depends entirely on what level of services are available to the disadvantaged. The current min wage might be entirely acceptable if affordable housing is available, and universal health care, and such programs as earned income vigorously enhanced.
But no one is doing any of these things! I would be perfectly thrilled to have the Living Wage movement be unnecessary, but every such progressive effort is met with howls of porcine rage and bland pronouncements from alleged economic “principles”.
How long have you been hearing about the crisis in the emergency rooms? Ten years? Fifteen? Twenty? See anything being done, esp. anything by the right? Conservatives will never lead on these issues because they wont take chances. They wont risk upsetting the apple cart because they own the apples. Hell, they would rather the apples rot than someone eat them for free!
Dammit, lead, follow, or get out of the way!
You know, Luci, when it comes to economics you sound just like the deniers of Global Warming. Hey, you found an economist who disagreed with the preponderance of thinking? Well then, that means you can simply ignore what the professionals think and hang on to your ideology.
The two issues are actually similar. The theoretical basis of the harm wage and price controls do is well understood. In practice, small changes are hard to quantify because there are so many confounding variables that it can be hard to isolate the effect of the change, so the data is sometimes ambigious. More ammo you can use to ignore the conventional wisdom in favor of that which supports your own biases and desires.
But make no mistake: Wage and Price controls are almost universally derided by modern economists. Free trade is one of the most settled issues in economics.
You cite Paul Krugman as an example of a dissenting viewpoint. Here’s what Krugman has to say about a “living wage” in his review of “Living Wage: What It Is and Why We Need It” by Robert Pollin and Stephanie Luce:
That sounds suspiciously like what John Mace and I have been saying. You know, when your exalted Paul Krugman isn’t even on your side, it might give you some idea just how far out on an economic limb you really are.
Krugman concludes:
Absolutely correct.
Well, no one is arguing that it will “bankrupt” the economy. And you conveniently left out the most important part of my argument. It’s not that illegal immigratin will increase, per se, that is the problem or that any of the other unintended conseques will ensue. It’s that there is another way to accomplish the goal without creating those unintedned consequences (or at leat minimizing them).
Which leads me to…
We discussed the Earned Income Tax Credit earlier. According to the wikipedia article I linked to earlier:
That’s hardly something turning your nose up to. Is it enough? Clearly not. But we have an existing program that seems to work well at targeting poverty, so why not expand it? I agree that something must be done, but why are you “progressives” so insistent that what must be done is institute a Living Wage? Why that particular solution as opposed to somthing else?
You talk about economics and the uncertainty of that science, but it doesn’t seem to be about economics-- it seems to be about your sense of “fariness”. Progressives seem to think it’s somehow unfair to offer someone a job that does not pay enough to support that person. There seems to be this idea that if you employ someone, you take on the burden of making sure that person has his basic needs taken care of. Why? Why isn’t that a burden that society, as a whole, takes on itself? If we are a community, as you so often like to say, why don’t we take care of our needy communally instead of sluffing that burden onto one segment of society? A segment, btw, that doesn’t consist entirely (or even mostly) of fat cat CEOs.
They’re not the same thing. The MW is legislated by government fiat. It is a fixed and respresentable number, and I believe currently $5.15/hr. The LW is not a fixed number. It will vary from person to person as well as from location to location. Proponents of LW want LW to be able to afford a home, a car, and college education for 2.5 kids (or whatever average). Obviously, this number is quite higher than $5.15/hr.
As you can see from above, LW is not terribly defined. If you say, let’s have a higher MW, then in a lot of areas, you’ll see that the MW is no where close to the LW, and it becomes a question of how much.
You do realize that the poverty level is also ascertained by government fiat. The government could say tomorrow that the poverty level is $30k/yr. There is huge price variance across the country. My sister’s two bedroom townhouse (which was a little bigger than my two bedroom apartment) is $450k. For $450k in South Carolina, I could get a 5 bedroom McMansion (~4k sq ft) in a very nice part of Columbia (on average). What if I go to New York where my last apartment was $1600/month (NY is way worse than CA, imho). What is the living wage then? How do we stop people from moving to these big cities, depressing their own local economies (Detroit, just about any city in Iowa (though not due to a poor economy, just it’s…corn). People flooding to the big cities will cause home prices to escalate and cause downward pressures on wages. However, there is a floor to the wages, which means that businesses cannot hire as many, causing more unemployment, which then means more tax money (wealth resdistribution) to support them. If we let it run its course, of course it will level off: best case scenario, we’re like Europe, less productive, less GDP, less wealth, and that much closer to stagnation; or b) we have massive inflation, a black market economy, and massive audtiing by the IRS (for good measure), not to mention a pretty crippled economy. Labor must exist at all price points for it to remain efficient.
What? How does this happen? If anything, it will raise wages causing unemployment to rise as well.
I see. You bask in the clear light of Reason, whereas my opinions are but the ignorant blatherings of a fool. With all due awe, Sam, you’re full of beans.
How handy for you! You will not have the slightest difficulty proving it! Unless, of course, “Free Trade” is not so crisply defined, unless it means different things to different observers. You know, one of those instances where the “data is sometimes ambigious”.
Was the data ambiguous when child labor laws were challenged? Did no one point out the anti-competitive nature of such laws, and bemoan the loss of business vigor? And the eight hour day? Was that universally applauded by the wise men of economics? Point out to me a progressive movement of major impact that was not vigourously opposed as being impractical, ruinous, and socialistic. Take your time.
My exalted? Sam, hate to break it to you, but I dont revere much of anybody. I like Krugman for his ability to phrase things in a way accessible to someone like me, who can’t keep “median” straight from “average”.
But the method for cure is secondary to the motivation to cure. Which is lacking.
Sam, there is no such thing as “absolutely correct”.
So…you didn’t say this? You have an evil twin? Advise.
In which we agree. Now that we have the libertarians on our side, the path is clear.
Net effect is pretty much the same, don’t you think? More money in the hands of the working class. You have a peculiar fascination with arguments about the defintions of terms. I am impatient with such arguments, I freely admit. Call it “Living Wage” call it the “Day of Jubilee”, I don’t give a rat’s, just DO IT!
You would prefer that Big Nasty Intrusive Government hand working folks a bonus, rather than forcing ghastly burdens on business? OK. Cool. You will, of course, stand in the front ranks demanding higher taxes to finance this goal? Good, see you there, I’ll bring the pie.
Gasp! My cunning agenda is exposed! “This just in! Progressives obsessed with issues of fairness, film at 11.”
Deftly worded. Oppressive misery is “offered”, like being seduced at gunpoint isn’t rape.
He gets it! He really gets it! I should quit now, while I’m ahead. But naaaah.
Tell you what, first we’ll soak up all the money that poor folks have been hoarding with such selfish zeal, and then we’ll eat the rich! Better?
As opposed to a segment in which they are entirely absent. Gotta point there, John?
I’m not an economist, and I don’t want to be. I just want to see a lot less poverty in the richest country in the world. Some of you sound as though this is an outrageous expectation. All of you who are railing against elucidator’s take on it haven’t provided an answer to the problem. All the talk about the science (feh) of economics and blah, blah, blah. But what do YOU propose we do? How do we as a society provide for the impoverished? The money’s there. What is your plan? Do you feel they deserve to be helped?
You know, if we could just bring few Marxist M.B.A.'s into this argument, it would sort of level the field…