Yeah, when you hear things like “productivity has increased significantly but American workers are not sharing in the financial benefits” it makes it sound as if the reason for the productivity increase was that all of the workers in the US got PhDs in IE over the last 20 years. A more likely explanation, as you say, is that investment in productivity tools has made the same ol’ workers more productive. It should be no surprise, then, that the folks who invested in those tools are the ones reaping most of the rewards.
Now, that, too, is an oversimplification because some workers have indeed improved their output by acquiring new skills and moving up the knowledge chain of the workforce. But just because the McDonalds’ cashier can check out 50% more people when the keypads have pictures of burgers and fries on them instead of numerals, doesn’t mean the McD cashier of today has any more skills than his counterpart 25 years ago. In fact, he may have even less. And that’s the idea. Why hire a skilled person to do something an unskilled person can do with better machines if, in the end, it costs less to have the less skilled person do the task?
It’s often phrased that a $5 per hour raise for the $100/hour guy, and no raise for the $20/hour guy, constitutes a transfer of wealth from Mr. $20/Hour to Mr. $105/Hour.
Actually it is rarely about income from working, and usually about income from investments.
So it’s obvious, to you, then, that low wages, for the lowest paid people, results in higher employment - because it’s cheaper to just hire more people.
But higher wages results in unemployment, because businesses will get machines to replace people.
Do recognize this as an argument that wage inequality (paying the lowest paid workers less) leads to more employment?
And wage equality (paying the lowest paid workers more) results in unemployment?
Except there are millions of people, all over the world, working for the equivalent of a dollar an hour.
Those people live in countries with 1.) high levels of income inequality (a small number of people are very rich; almost everyone else is very poor, and 2.) high levels of unemployment.
Well, I’m working on two fronts, here. Half the people are saying of course income equality leads to more unemployment; the other half are saying nobody’s ever claimed any such thing, and demanding I find examples of people saying it.
I’d encourage the one half to get with the other half, and maybe we can make some forward progress.
As best I was able to ascertain once, when I looked into this, the legal minimum wage tends to track with the open market’s minimum wage. Or at least, there doesn’t appear to be any form of wage redistribution in states with and states without a minimum wage, which is what you would expect to see if a minimum wage was affecting anything.
Overall, it makes sense. The minimum wage is, by definition, the minimum wage that someone needs to make to survive. And if a job offered less than someone needed to survive, they wouldn’t be able to afford taking that job - so they don’t.
What does seem to be true, though, is that every time the minimum wage is raised, it causes a series of layoffs and business failures since it’s a sudden, sharp change to the marketplace.
Not at all. When you say ‘wage inequality’ that is talking about the comparison between two different wages, one at the top and one at the bottom. The fact that wages influence decisions on whether to hire or to automate have nothing to do with wages at the top. You’ve again conflated wage inequality with just one side of the comparison.
No - you are making the assertion. It is for you to support.
I hate to answer indirectly, but I’m not really concerned with minimum wages. What I am concerned with is unemployment. Where there’s lots of unemployment, workers are forced to compete for a small number of jobs, driving wages down. Where there’s little or no unemployment, employers are forced to compete for workers, driving wages up. The best way to drive up economic equality is to eliminate unemployment.
This is good for the majority of people, who have to work for a living, and good for the country (or any country) as a whole. Unemployed people, after all, produce nothing, which is the least amount of goods and services it’s possible to produce. But it’s bad for the ownership class, who’d prefer to hire people cheaply. To do that, they need the assistance of the army of the unemployed.
Assuming the entirely fraudulent scenario that all other wages remain stagnant, then, yes, greater wage inequality leads to more employment. This is why free market advocates (or “conservatives” in a generalist sense) are not ringing the bells of apocalypse over the growing inequality of the past 3 decades. I, for one, am alarmed that wages have remained stagnant with inflation for the bottom incomes. This is going to continue and will eventually lead to a stratified society of haves and have-nots.
Well, one thing you’re not getting is that income inequality is not primarily caused by differences in pay: the richest Americans are not rich because they make $100/hour. They’re rich because they own stuff: corporations, trademarks, brands, basketball teams, patents, etc. Many of them don’t work at all. Yet they consume. And if they’re consuming without producing, where does it all come from?
It comes from everybody else - everybody else must either work more or get paid less (or both) in order for the rich to consume without working.
I asked you to show some evidence. It’s your assertion. If others wish to chime in on your side and back you up, that’s fine. If you don’t wish to defend your assertion, well, that’s fine too.
OK, I lost track of what we were discussing, then. As a matter of policy, I don’t think any of us is going to disagree with you that it’s good to eliminate unemployment.
What economic theory asserts this? It sounds ridiculous on its face. And don’t you want more people working? (Ignoring for the moment the non sequitur about how they’d necessarily have to be paid less in order for the rich to buy more stuff.)
That’s odd, because it was one of the two main ideas you used to support your position, and one where you repeatedly conflated with income inequality. Are you backing away from that? I mentioned this in post 20, 23, 27. Mace mentioned it in 33, and others as well.
(my bold)
This reveals a fundamental misunderstanding of how the economy works. When you are talking about income inequality, it does not matter that income is from toiling away digging ditches, or income derived from investments. It is all income. If you are trying to make a more nuanced argument about wage income vs. investment income you have failed to do so.
People who earn income through investments are producing. They may not be directly producing tangible goods, but neither is the musician or poet. The fact that someone is willing to pay them for something means they are contributing.
If I have $100 to loan you, and will do so as long as after a set amount of time you will repay me $105, at the end of the transaction I have earned $5. You may use that money to engage in other productive activity, but the transaction itself, that of loaning you the money, contributes to the overall economy.
I will as some level of unemployment is healthy for the economy. That is unless we are talking about full employment.
Whether it’s good or bad, I suppose, depends on your perspective.
If you’re trying to decide whether to get a new battery for your shitty car so you can get your daughter to her shitty school on time, or to buy her new clothes so the other shitty kids don’t make fun of her every day, while holding down a shitty job that barely pays the rent, then it kind of sucks.
If your biggest dilemma is whether to spend the summer in France or Italy this year, while working only if you feel like it, or not at all, then it’s nothing to be concerned about.
The point is that it’s the person with the shitty under-paying job (and millions like her) who subsidize the lifestyle of the second group.
I’m not sure if you’re saying that income inequality leads to more employment, or not.
You do seem to be saying that “free-market” advocates believe it does.
To be clear, I’m saying there is no “free market”. All markets are created, controlled, regulated, and policed by government. Without government, there is no market.
“Free market” advocates are frauds because 1.) they refuse to recognize the non-existence of the thing they advocate, and 2.) because they consistently label anything that favors the poor as “interventions” in the free market, while ignoring changes in the rules that favor the rich, or else calling them “improvements”.
The rich rely on the government for their wealth. Without it there would be no royalties, no patents, no copyrights, and no corporations. That they rail against the government any time it does anything to help anybody but themselves, while relying on it to subsidize their own existence makes them pure hypocrites.
Since unemployed people have little income, perhaps the unemployment increases the GINI coefficient directly.
The thrust of your argument, I think, relates to how the fruits of production are split between workers and owners. Since the value of owned capital (robots etc.), intellectual property (music, drug patents, etc.), land (which is scarcer per capita as population increases), has risen in an era of globalisation and technology, the share of unskilled labor falls. Even skilled labor falls in value as competition rises among millions of skilled workers around the globe. Just as the ratio between best paid and worst paid worker has risen in America, so has the ratio between corporate profits and total wages and salaries (even incl. CEO bonuses.)
This is not a simple area, but most serious thinkers would agree with me (and LinusK) that given the rising Gini in developed countries, and “all other things being equal”, policies that reduce such inequality are better than further increase.
(LinusK may go on to make neo-Marxist arguments, which I will ignore, except to note the recent suggestion that all scarcities should have private rent collectors is malarkey.)
I would not call the “free market” bogus but I do agree that government is necessary for successful capitalism. This is shown by history; all successful periods being led either by a strong governing state, a strong military or slave-holding regime, or, in some cases, by an extension of such a state or regime. (Recovery of Europe from the “dark ages” began as Kings were able to establish courts, mercenary armies, etc.)
The underlying sentiment may have some validity but we shouldn’t make a caricature of our own ideas.
2, 3, 4, 6. OK.
I don’t understand the desire to deprive living artists of the fruit of their labor. I agree that the Mickey Mouse law is absurd. (But at least Walt Disney created Mickey Mouse. I’d prefer to denounce the usurpation of A.A. Milne’s characters.)
Inflation is possible (probable indeed especially with the “bonds that would be bought by the Fed, and kept indefinitely”). Moreover, even without inflation, high interest rates are appropriate in the event, heaven helping, of restored capital production growth.
Some tax simplifications are plausible, but flat-tax and no-deductions are problems not panaceas.
Actually, the theory that some level of unemployment is good for the economy is a popular theory among many (most?), economists, particularly conservative ones, and has been for decades. (See NAIRU, or the "non-inflationary rate of unemployment.) they used to think it was somewhere between four and six percent (despite the fact there was little or no inflation during WWII, and no unemployment.) Then, during the Clinton years, unemployment fell two or three percent, again with little or no inflation.
Despite the lack of empirical evidence for the theory, it remains popular.
It justifies government policies that foster unemployment, which, as I said, is good for the ownership class.