Where is America Headed?

[_Some Schmo]

You find it incredible how many people think that if you raise the price of something, demand goes down?

Frankly, I'm disappointed more people don't understand that.

Did you read the article?

Who said anything about raising prices?

Sounds like you're another one of the brainwashed ones (or are perhaps trying to help with the brainwashing).

[_AmyJo]

The Trump administration is already in decline - some say even in freefall. Article out by USA Today describes Kushner and Don Jr as in "Decline and Fall" already. Trump may have believed he was covering his behind by hiring only loyalists like his children to key positions. However, they are the very ones putting him in real jeopardy. Nepotism has a price.

"While there is no compelling basis for prosecution on the current facts, Kushner could well be in legal jeopardy over the course of the unfolding federal and congressional investigations. Nepotism can have an impact on the legal defense strategy for the White House. Counsel cannot control or confine the damage if they cannot separate the president from a targeted official. You cannot cut off a target who is bound to the president by blood or marriage. That means the administration has limited options and has to double down when called out on the relationship — as the president did in Paris. That is the cost of nepotism, and those costs are only likely to grow with time."

https://www.usatoday.com/story/opinion/ ... 477008001/

[_Chap]

In a country with a decent welfare system, one very good reason for insisting on a minimum hourly wage is as follows:

1. People who work full-time but still do not earn enough to support their families are entitled to draw welfare to make up the difference.

2. Thus an employer knows that he can pay peanuts to his workers, and the government will pay the difference between what he pays and what his employees need to live.

3. So (surprise!) employers do just that ...

You could deal with that by

(a) Refusing to pay welfare to anybody in full-time work. Employers would thus be forced to pay more unless their employers could stay alive by getting money from elsewhere (maybe part-time prostitution, or working all night after working all day.)

OR

(b) Setting a minimum hourly wage.

This is an old, old problem. See:

The Speenhamland system

The system was named after a 1795 meeting at the Pelican Inn in Speenhamland, Berkshire, where a number of local magistrates devised the system as a means to alleviate the distress caused by high grain prices.[2] The increase in the price of grain may have occurred as a result of a poor harvest in the years 1795–96, though at the time this was subject to great debate. Many blamed middlemen and hoarders as the ultimate architects of the shortage.

The authorities at Speenhamland approved a means-tested sliding-scale of wage supplements in order to mitigate the worst effects of rural poverty. Families were paid extra to top up wages to a set level according to a table. This level varied according to the number of children and the price of bread. For example, if bread was 1s 2d a loaf, the wages of a family with two children were topped up to 8s 6d. If bread rose to 1s 8d the wages were topped up to 11s 0d.

The immediate impact of paying the poor rate fell on the landowners of the parish concerned. They then sought other means of dealing with the poor, such as the workhouse funded through parish unions. Eventually pressure due to structural poverty caused the introduction of the new Poor Law (1834).

The Speenhamland system appears to have reached its height during the Napoleonic Wars, when it was a means of allaying dangerous discontent amongst a growing rural proletariat faced by soaring food prices, and to have died out in the post-war period, except in a few parishes.[3] The system was popular in the south of England. William Pitt the Younger attempted to get the idea passed into legislation but failed. The system was not adopted nationally but was popular in the counties which experienced the Swing Riots during the 1830s.

Criticisms
The Poor Law Commissioners' Report of 1834 called the Speenhamland System a "universal system of pauperism". The system allowed employers, including farmers and the nascent industrialists of the town, to pay below subsistence wages, because the parish would make up the difference and keep their workers alive. So the workers' low income was unchanged and the poor rate contributors subsidised the farmers.

[_cinepro]

You find it incredible how many people think that if you raise the price of something, demand goes down?

Frankly, I'm disappointed more people don't understand that.

Did you read the article?

Who said anything about raising prices?

Sounds like you're another one of the brainwashed ones (or are perhaps trying to help with the brainwashing).

The "price" I was referring to was the price of labor. When you raise the minimum wage, you are raising the price of labor to employers. When you change prices, you change behavior.

Whenever this conversation comes up on reddit, there is always someone who, at the logical end, says "If a company can't pay a [living wage] and stay in business, then they don't deserve to be in business."

But the corollary to that also applies to low-skill workers under a minimum wage. You are effectively saying "If a low-skill worker can't convince a company to hire them at $15/hr, then they don't deserve to work."

Sure, there may be some workers that are able to get jobs (or keep their jobs) at such a rate, but there will be huge changes to the labor market, and it's disingenuous to pretend all the changes will be good for low-skill and entry-level workers. There will be a lot of collateral damage (not to mention a huge benefit to more highly skilled and educated workers that can now get jobs at $15/hr and not have to compete).

[_EAllusion]

To be fair, min wages only appreciably change employer behavior when those wages are some measure above labor market value. That's why there's a decent body of studies showing min wage increases in various localities having little to no effect on unemployment. Min wages actually can have a suppressive effect on wages by artificially setting the negotiating point low if the market labor value is higher.

[_Chap]

The "price" I was referring to was the price of labor. When you raise the minimum wage, you are raising the price of labor to employers. When you change prices, you change behavior.

Whenever this conversation comes up on reddit, there is always someone who, at the logical end, says "If a company can't pay a [living wage] and stay in business, then they don't deserve to be in business."

But the corollary to that also applies to low-skill workers under a minimum wage. You are effectively saying "If a low-skill worker can't convince a company to hire them at $15/hr, then they don't deserve to work."

Sure, there may be some workers that are able to get jobs (or keep their jobs) at such a rate, but there will be huge changes to the labor market, and it's disingenuous to pretend all the changes will be good for low-skill and entry-level workers. There will be a lot of collateral damage (not to mention a huge benefit to more highly skilled and educated workers that can now get jobs at $15/hr and not have to compete).

The kind of argument cinepro puts forward ('Some jobs might not be offered if there was a minimum wage') are completely without force unless they are actually based on evidence of a quantitative kind:

How many jobs are not offered as a result? Some, no doubt, but enough to matter?

How many workers do in fact benefit from the wage rise, and to what extent?

And as for:

You are effectively saying "If a low-skill worker can't convince a company to hire them at $15/hr, then they don't deserve to work."

Then that is cancelled by the contrary that if you allow an employer to pay a full-time worker less than he can live on, that employer is expecting the government, via welfare, to subsidise his business.

I live in an economy that had has a minimum wage for some time: the rate of unemployment is comparatively low, and many businesses that want to hire workers for jobs at the minimum wage cannot find people to fill them.

Economics is complicated and quantitative by its nature. Arguments that say 'If you do A to create benefit B, then that will lead to disbenefit D' but without numbers, are mere rewordings of political attitudes into pseudo-facts.

[_cinepro]

This isn't rocket science. Henry Ford was a Son of a Bitch in many ways. He didn't invent the automobile, or the assembly line. What he did do is pay his employees enough to afford his cars. He made himself extremely rich in the process.
SEE https://www.youtube.com/watch?v=CKCvf8E7V1g

I agree it's not rocket science. It's math (and common sense). You should be able to look at that claim and recognize it's not a good theory about Ford's wages. But in case you can't see it right away, let's do the math.

Car production in the year before the pay rise was 170,000, in the year of it 202,000. As we can see above the total labour establishment was only 14,000 anyway. Even if all of his workers bought a car every year it wasn't going to make any but a marginal difference to the sales of the firm.

We can go further too. As we've seen the rise in the daily wage was from $2.25 to $5 (including the bonuses etc). Say 240 working days in the year and 14,000 workers and we get a rise in the pay bill of $9 1/4 million over the year. A Model T cost between $550 and $450 (depends on which year we're talking about). 14,000 cars sold at that price gives us $7.75 million to $6.25 million in income to the company.

It should be obvious that paying the workforce an extra $9 million so that they can then buy $7 million's worth of company production just isn't a way to increase your profits. It's a great way to increase your losses though.

https://www.forbes.com/sites/timworstal ... 18e0df766d

The real reason Ford paid more (in fact, needed to pay more) is because he needed to reduce turnover. It is costly to hire and train new employees, so a higher wage can help mitigate that cost. In my business, it can cost between $5,000 - $10,000 to train a new employee, so I factor that cost into the wages I pay to keep people around. The harder someone would be to replace, the more I pay them.

Ford might have thought his success came from somehow increasing demand by paying his employees a lot, but there just weren't enough employees and too many cars. It would be like Apple thinking they could save the iWatch by paying their employees a little more and having them all buy iWatches. True success comes from all the non-employees buying the products (and creating a good product that people want to buy).

The idea that you can create demand by raising the minimum wage is the economic equivalent of perpetual motion. It's a great idea until you actually think about it.

[_Some Schmo]

The "price" I was referring to was the price of labor. When you raise the minimum wage, you are raising the price of labor to employers. When you change prices, you change behavior.

Yes, and the change would net out as a better overall economy.

The point of the article is that the money that is saved by not paying employees a living wage has been going entirely toward profits for owners and shareholders. It's about income inequality (and also about how people's feeling of desperation over not having enough money led to the kind of anxiety that caused a Drumpf for President). There was a time when labor costs kept up with inflation, and companies didn't suffer for it. In fact, they benefited because people had more money to spend on less essential things, therefore, more businesses were viable. When you have more customers, you require more labor. I've heard business owner after business owner talking about how tax savings never made them hire more people; only more customers did that.

Right now, because Walmart, one of the country's largest employers, pays a poverty wage, we are subsidizing their workers through welfare programs. So essentially, our tax dollars are going toward making up the difference between what Walmart pays and what people need to live. As a tax payer, I'd rather not pick up the tab for Walmart.

Keeping wages low is the worst idea for a thriving economy.

[_cinepro]

The kind of argument cinepro puts forward ('Some jobs might not be offered if there was a minimum wage') are completely without force unless they are actually based on evidence of a quantitative kind:

How many jobs are not offered as a result? Some, no doubt, but enough to matter?

How many workers do in fact benefit from the wage rise, and to what extent?

To the first point, it's awesome that you're actually acknowledging the possibility that a minimum wage could hurt job creation. Usually, the focus is entirely on existing jobs (and the assumption that existing workers in existing jobs won't change).

The CBO did appear to take a stab at estimating how many jobs would be lost, and these were their estimates back in 2014:



So if we're losing that many jobs, I can only imagine how many aren't even created, since the math for starting a business that depends on low-skill labor will have drastically changed.

And as for:

Then that is cancelled by the contrary that if you allow an employer to pay a full-time worker less than he can live on, that employer is expecting the government, via welfare, to subsidise his business.

I live in an economy that had has a minimum wage for some time: the rate of unemployment is comparatively low, and many businesses that want to hire workers for jobs at the minimum wage cannot find people to fill them.

Which economy is this?

If a business can't find people to work at the minimum wage, then there is no need for a minimum wage. It's totally superfluous. It would be like the government telling In n' Out they had to charge at least $1 for their hamburgers. They would say "great, but we sell all we want at $2 a burger." If the minimum wage is $10/hr and an employer can't find people at that rate, they'll have to pay more so their "minimum" wage is higher; the market price is already higher.

For additional data and food for thought about how the minimum wage affects poverty and wages, here are some more CBO predictions from the report.

The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. Just 19 percent of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates.

Moreover, the increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income for the people who became jobless because of the minimum-wage increase, for business owners, and for consumers facing higher prices. CBO examined family income overall and for various income groups, reaching the following conclusions (see the figure below):

-Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion.

-Real income would increase, on net, by $5 billion for families whose income will be below the poverty threshold under current law, boosting their average family income by about 3 percent and moving about 900,000 people, on net, above the poverty threshold (out of the roughly 45 million people who are projected to be below that threshold under current law).

-Families whose income would have been between one and three times the poverty threshold would receive, on net, $12 billion in additional real income. About $2 billion, on net, would go to families whose income would have been between three and six times the poverty threshold.

-Real income would decrease, on net, by $17 billion for families whose income would otherwise have been six times the poverty threshold or more, lowering their average family income by 0.4 percent.

[_Some Schmo]

Ford might have thought his success came from somehow increasing demand by paying his employees a lot, but there just weren't enough employees and too many cars. It would be like Apple thinking they could save the iWatch by paying their employees a little more and having them all buy iWatches. True success comes from all the non-employees buying the products (and creating a good product that people want to buy).

You can't take one company in isolation and make a broad statement about the economy based on a what would happen to that single company if only they made the change and nobody else did. If you raise the minimum wage, everyone's wage has to adjust for that change, not just Apple or Ford employees. More money would be changing hands across the board, and that's what economies are based on - money moving around.