Subsetting serves no purpose here other than to inflate already small percentages; hourly workers only comprise about half of the workforce. As already mentioned, your numbers are off, v.s. And the* median* MW worker age is more like 25. See BLS “characteristics of minimum wage workers”, published annually.
I don’t understand the connection between your Figure 1 and the post of mine that you quoted. Is it supposed to be a supporting argument? A rebuttal? Something else?
Bolding mine.
The rich don’t just sit on their money. If they did that, they would not be rich. They invest.
Slee
Minimum wage debates usually fail on two lines:
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“$15 per hour? Why not $50 per hour? Why not $100 trillion per hour?” This is just being silly. Your argument against $50/hr doesn’t work against a proposed $15/hr.
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“Minimum wage jobs are only for teens and they aren’t supposed to be work for adults.” Not true. There are a lot of people for various reasons, lack of skills or education, being in a tight job market area, being somewhat disabled for example, that really do rely on minimum wage jobs for survival. These people only get raises when Congress raises the minimum wages. This libertarian claptrap about negotiating for a better wage or getting a better job doesn’t hold water- these people are simply not in position to demand a better wage.
In terms of economics, I think it’s worth a shot. When minimum wage employees get a raise, they spend the money. The economy grows. When upper earners get a tax break, they might spend it on luxury items which might employ a few people, or they might spend it abroad or on imported goods, which doesn’t help American jobs. Or they might just sock it in their bank, which doesn’t really help anybody. If you want to grow the economy, give people incentive to spend.
Have you considered what the bank might do with that money? Do you think they just sit on it?
Show us. Any economic policy proposal should be accompanied by a compelling CBA. If you acknowledge that the minimum wage can be too high, as per the reductio, then there is no valid proposal without accounting for these deficits
The median age is 25, with the mode at 18. You are referencing long-term MW earners, which are how many, exactly? Given the age distribution of earners, we know they must be a small minority, and thus are not a compelling policy driver. If you want to help people who have trouble surviving, then target people who have trouble surviving and tax me to do it. Households with MW earners are off target.
Our economy is NOT ‘based on consumption’. It’s also not based on production, or on taxes, or profit, or any one thing.
A healthy economy is one in which people have incentives to be productive.
A healthy economy is one in which free flows of information allow us to determine the relative value of goods and services, so we can make intelligent decisions.
A healthy economy is one in which the free flow of information allows us to maximize productivity, connect producers to consumers, etc.
A healthy economy is one which has enough safety nets to maintain a civil society, while finding an optimum between safety and moral hazard so that people do not lose the incentive to be productive.
A healthy economy is one which strikes the correct balance between short-term spending and long-term investment, and the only way to do that is with a free market and freely floating prices.
A healthy economy is one in which the people retain the large bulk of economic capital, as the people who earn money are the best judges of what should be done with it.
A healthy economy is one which has close alignment between power and information - in other words, the people who have the most information necessary to be productive are also empowered to take action utilizing that information. And in a complex economic system, the vast amount of information required for economic coordination exists in the minds of the population, not in the reports delivered to central planners.
Now, it’s possible for an economy to wind up in a situation where there is a shortage of consumption relative to the norm, due to an economic shock, a panic, etc. In that case, it MAY make sense for the government to enact SHORT TERM policies to prop up consumption. This is the classic Keynesian stimulus, and for it to work it needs to be, in the words of Larry Summers, “Timely, Targeted, and Temporary.” But even Keynesian economists generally recognize that demand shortfalls are better met with monetary policy, and only revert to direct stimulus in cases where monetary policy is out of bullets, such as in a classic liquidity trap.
A minimum wage increase is none of these things, and it actually works against almost everything needed in a healthy economy. It’s a price floor, so it destroys important information about demand that is normally transmitted through the price system. It distorts economic activity, by giving some people higher wages at the expense of the employment of others. It distorts the relative value of labor, leading people to make poor choices. It’s a moral hazard, disincentivizing people from taking action to improve themselves in order to gain productivity and higher wages.
A large minimum wage increase is destructive to employment and to the economy as a whole. So far, the data that has come in from the cities that have begun implementing these price hikes on labor has shown that they do serious damage to the local economies of businesses that rely on low-cost labor, and that they act as a significant brake on job creation - again, mostly for low income people, but also in other places as the increased price of goods takes its toll on business.
You could make an argument that the minimum wage should be tied to the inflation rate, or tied to some basket of wages that can be used to track average wage increases or something. But large jumps in the minimum wage to attempt to ‘rev up’ the economy will have the opposite effect. It’s a terrible idea that should be pushed back into the ash bin of history where it used to reside.
So do the businesses who employ minimum wage employees, most of which are small businesses with fewer than 100 employees. Most small businesses are not socking away capital. On the contrary, as a group small businesses are under-capitalized, and often fail because they run out of money. Increasing the costs on that section of business is a funny way of ‘improving’ the economy.
You left out a few things:
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They might use it to GROW their business, which is actually the only way you actually improve an economy.
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They might use that money to pay down their business debt, giving them a better chance to survive and keep employing people.
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If all the businesses have more money, they will compete with each other to hire better workers, leading to natural wage increases rather than artificial ones imposed by a government.
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If those businesses are facing a major cost increase in one area of their business, they may try to offset it by cuts in that area. So if your labor costs increase, you’re going to do what you have to in order to reduce your labor costs. That will accelerate automation, lead to reduced service and overworked staff, etc.
Here in Alberta, our NDP government decided that a $15/hr minimum wage would be a great idea. So now it’s law, to be phased in over a couple of years. And guess what we’re seeing here? A huge boom in automated kiosks for fast-food ordering, longer lines for service at other fast food places as they cut back staff, and a complete drying-up of entry level employment. Summer jobs and minimum wage jobs used to be easy to get. Now, when one opens up, there’s a line of a hundred young people trying to get it.
No, if you want to grow the economy, give people an incentive to be more productive. If you think just spending will do the trick, we should go around and start randomly smashing windows. Then the homeowner has to take money out of the bank and give it to the window company, more window installers will be working, more glass will be made, and before you know it, we’ll all be rich!
That is, until some smart guy like Frédéric Bastiat comes along to explain that you’re being idiots, and you can’t consume your way to wealth.
If we leave aside the naive hyper-ideological liberalism of Stone and the other north american libertarians, it remains without any doubt from the economic evidence that the mandatory wage levels are a terrible and a stupid fashion to attempt to increase the economic growth.
it can be admitted that in the emperical economic evidence there is some large question at what point the income inequality can begin to have the negative economic growth consquences, it is a complicated questoin.
But it is clearly the case that the economic growth is best increased by the policies to help increase the productivity in the domestic economy, and the minimum wage policy is not something that has the clear positive impact (although maybe ironically it reduces low value wage labor demand…).
The OP’s policy proposal is and was extremely foolish and stupid, and it is not necessary to agree with our north american libertarians extreme views to see it as being a thinking best kept in the rubbish bin of history.
Sorry, but the second part is not true. The rich use their money. They invest it. If they just sat on it, it would be whittled away by expenditure, inflation, and death duties.
If you want to raise the MW because you think it’s good social policy, that’s an argument worth making. If you are going to claim that it is going to be good for the economy, then you need to show us your work. Show us how the math works. That involves at least these things:
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Show that there is empirical evidence that your increase in the MW doesn’t have a negative impact on the economy. We have some good studies of what small changes in the MW does, but if you got access to studies showing what a doubling of the MW does to a large economy, I’d like to see it.
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Failing #1, and falling back on a small increase in the MW, show us how injecting that small amount of $$ into a $20T economy can have a measurable effect on that economy. Hint: Unless you’re talking about added money on the order of 100B, at the very least, then forget it. You won’t be able to measure its effect.
The idea that we can up the rate of growth of the GDP to 4% by raising the MW is pure bullshit. If it’s not, show us your math.
Because the proper way to deal with an argument you can’t refute is to ‘leave it aside’.
By the way, the stuff I just said is not ‘hyper-ideological’. It’s mainstream economics. It’s also pretty basic stuff.
It’s the left that is attempting to invent a new ‘demand side’ economics, because it gives them an argument for the kind of redistributive politics they wanted anyway. The perversion of Keynesian principles into a new philosophy that it’s always good to take money away from producers and give it to consumers is quack economics developed for, dare I say it, "hyper-ideological’ reasons.
To be fair, some of it gets sat on. I keep a small amount in cash, cash equivalents, and gold. I suppose you could consider an FDIC-insured CD an investment, and it certainly let’s the bank loan more, but I don’t classify it that way in my head.
Not that I’d call myself rich.
Whether it’s 1%, 2.66%, or 4.3%, why are people literally marching in the streets over an issue that only affects such a small number of people?
Because it is sterile to argue the ideological American libertarian economics when in grosso modo I agree his ideas was stupid.
No, it was a very ideological presentation of some aspects of the mainstream liberal economic analysis with the particular norht american libertarian angle.
I am in fact an economist, a liberal market economist.
If you mean the OP, yes, the idea presented and supported by a few here is indeed bankrupt.
Here’s a 2016 study from UC San Diego on the effect of the 2007 minimum wage increase from $5.15 to $7.25:
In the end, they found that the minimum wage hike to $7.25 led to a 4% decrease in employment among minimum-wage workers at the lower end of the skill bracket.
They also found that the wage increase reduced national employment-to-population ratio by .6%
Now imagine what bumping it to $15 will do. To your other point, in the past minimum wage increases have generally been small, and therefore the effects hard to find when looking at the population as a whole. Once we have a number of jurisdictions actually hit $15/hr, we’re going to get some much more robust data - unfortunately for the workers involved.
I agree not a fair question to ask when a small increase in the MW is on the table. But when someone proposes to double the MW, I think that’s a fair question to ask.
Most states (and many cities) have their own MW laws. A federal MW should, by necessity, cater to the poorest state; the one least able to afford an increase in the MW. Congress should be a secondary player in this whole thing. What works on a pig farm in Iowa might not be what works in an electronics shop in San Jose, and vice versa.
But increasing the minimum wage doesn’t just affect those workers at or below the new wage. If you own a fast food restraunt you might pay your trainee workers minimum wage $7.45/hr but you might pay veteran workers $8.00/hr and managers $11.00 per hour. If the minimum wage jumps to 10 bucks an hour, then you going to pay your trainee workers $10, but you will have to bump your veteran workers up to $10.50 and your managers up to $13.50 to keep those positions competitive. So even though only a very small portion of your staff might earn minimum wage, upping the minimum wage will give everyone in your employ a raise.
And the best part is that you don’t have to raise your prices in order to do this, right? It’s almost like magic!
The thing about raising the MW is that when it affects only a small number of people, then it’s easy to absorb it into the economy with no or few adverse affects. As it affects more and more people, then it becomes a recipe for inflation. So anyone who wants to tout how it’s going to help so many people needs to explain how it’s not going to just be a trigger for inflation, in which case it doesn’t really help those folks like it’s supposed to.
Or they’ll get replaced by these.
