My bad – that’s supposed to happen next year.
Yeah, when you mix in adults and children it becomes tricky because $15,000 would be a fine income subsidy for a single adult but would not go very far in a family of five, and a $75,000 subsidy would be ridiculous, and lowering it to a reasonable amount per child (say, $5,000), would create incentives to declare emancipation early for the extra $10,000 a year.
I suppose you could just ramp it up from birth to 18 or whenever. I haven’t seen any proposals like that.
On the basis of what numbers do you make that assertion? And how does one justify excluding vote-getting from the criteria for anything that a government does, in a democracy?
The question isn’t what employers are ‘expected’ to do. Assume employers will pay whatever the MW is, which in general is true. The question is the degree to which you depress employment of lower skilled people, which is a real question, and it’s not wiped away by Card and Krueger’s endlessly cited paper purporting to find that didn’t happen with min wages in mid $4 v low $5 range in NJ and PA ca. 20 yrs ago (IOW granted that’s equivalent to higher numbers now). Krueger himself has been quoted doubting whether a >$12 MW now is harmful. It’s a matter of the details, not a general principal, or else you could apply the general principal to a $30 MW, employers have to do it if their competitors do, they have to find a way to profit regardless. All those arguments could be applied to any number, but it’s obvious any number won’t work well, therefore those arguments fairly obviously don’t settle the issue. It’s in the details.
The steel analogy is the wrong way around. The analogy with steel tariffs is to look at eg. Caterpillar not steel makers. Like a MW for a low skilled industry (which doesn’t much apply to generally high skill/wage Cat) a steel tariff artificially raises Cat’s input costs. There’s a market return on capital demanded by investors for a given risk, it’s not decided by Cat or they’d set it sky high (why not?). Any capital improvement to make Cat more productive would make sense if it got over that return hurdle regardless of input prices. Cat’s response to the higher input price must be mainly to raise their output price to meet the required return on capital, relying on a demand curve for Cat products that doesn’t step down to zero if they raise prices a bit. They raise prices, sell less stuff, and therefore employ fewer people. There is no silver lining for the workers laid off or who don’t get new jobs they otherwise would have.
Same with artificially raising labor input prices more than marginally, especially unskilled. For skilled workers (say with unions) artificially high wages might have greater countervailing effect in terms of continuity of workforce, vetting, training etc by the union. Although still at some point it just reduces employment. Card/Krueger taken at face value showed that similar effects might exist with unskilled, but again once you lift the MW beyond the noise or fog of those countervailing effects, employment simply goes down by classical economics. There is no reason to suppose actions by companies would zero out that effect, whether lowering the return on capital permanently, or any other form of ‘getting more competitive’.
It’s really just not how it works, which you can even see where serious but left leaning economists express doubts about very high MW’s. $15 MW’s in any but very high cost areas are very likely to reduce employment noticeably, nationally in the US it absolutely would. While also raising prices on products/services lower income people tend to buy relatively more of than better off people do. There’s no reasonable question that subsidizing wages would have a lower cost to society overall if the idea is to make a big change, as opposed to setting a MW low enough that almost nobody can find workers at that wage anyway in an up economy (the situation now, many places). Subsidy in general is less inefficient than not allowing markets to clear. The same is actually true of steel companies.
People naturally want to believe the simple and relatively politically feasible course of high MW’s won’t have a lot of negative side effects, but at some level it will. And that level is almost surely well below $15 nationally in the US now (compared to ~9 historical peak MW in today's 's in the '60’s and seldom more than 8 in today's 's since there’s been one).
By my calculation CPI puts the 1968 peak at ~$11.70.
The eyeball test. Obviously people are willing to work for less than minimimu wage. We see that with foreign labor. Obviously we have citizens who are not employable at minimum wage but would like a job. The law prohibits hiring people here but not doesn’t prohibit offshoring or robots. What have we seen a huge rise in?
Sure. That could justify invading Canada too. Doesn’t make it right or the best alternative.
No. You don’t need a basic income high enough for subsistence. You can have a basic income with no minimum wage and some means tested assistance programs. The flexibility to respond to local or temporary conditions that means tested assistance would provide should save money.
Yes, there are many ways in which Basic Income will be unfair or create wrong incentives. And one-size-fits-all income subsidies don’t match reality: some regions are more expensive; some people have costly handicaps; etc. Every time this topic comes up I make my suggestion and am booed down, but I’ll persist:
Emphasize free (or highly subsidized) services, not cash. Free education and free basic healthcare, for starts. Free childcare makes sense for many reasons (though perhaps parents taking advantage should be required to help tend the children one day a week).
Any free housing provided would be of low quality or even low privacy. This keeps costs low, while maintaining the incentive for people to seek employment and strive for affluence. Some will say this is unfair; that a citizen may want to spend his share of Basic Income on an iPhone while saving costs by living on the street. Or wants cash to spend on recreational drugs rather than free childcare.
Yes, my approach would mean that society imposes its values on less affluent citizens. But that’s already the case: nobody proposes that education subsidies be removed so that parents can spend on marijuana instead of their children’s schooling. The *gigantic *cost of any Basic Income program means that any unfairnesses and bad incentives will also be huge. A scheme that emphasizes free food and services will avoid many potential flaws of a cash-only scheme.
Hiring
Wow. In a complex universe more than one action can occur?
one of these things is bigger than the others. One of these things is not so small.
Sing it with me!
I have no idea what you are trying to say. Is that a Sesame Street reference?
A $30 MW where no one would profit would be unreasonable, which I excluded. I’m all for setting the MW based on local conditions. Towns near me have raised it to $15 with no ill effect (help wanted signs are all over) but we are a high cost area, and it wouldn’t do in Alabama. Nationally the increase has not seemed to hurt.
A $30 MW would no doubt lead to an increase in automation and productivity, but that would flow to business owners and investors and increase income inequality.
For lower MW the first order effect of employees being more expensive has to be balanced by increase in demand from higher salaries, and the elasticity of demand from better paid customers.
Irrelevant. My point is that subsidization of businesses which is what using the EITC to raise wages instead of the MW leads to lack of innovation. Which is what happened with steel. A part of the problem with tariffs comes when competitors are global, and thus not affected, and when there are no tariffs on the finished products (or lower tariffs) which also hurt the competitiveness of domestic companies.
What is very high? We should at least index the MW to local cost of living. That would avoid major bumps which we have today, which is far more disruptive than steady increases. I never advocated for $15 nationally. At least not now.
But EITC might raise effective wages also (and if it does not it is even worse than I’ve said) while not offering an incentive for improved productivity.
If it were used as a method of income redistribution it might be a bit better.
That’s a strange use of “subsidization.” If I have a kid and my credit goes up, my employer doesn’t see any of that extra money. Just like she doesn’t see if I suddenly get to add a dependent when filing my taxes return. It’s only a subsidy in the same sense that a graduated tax is.
I’ll remind everyone you can earn over $50/h and receive EITC. It’s about overall annual earned income and household composition. Not just wage. And likewise, a good chunk of federal MW earners don’t receive EITC.