Is the frame "Income Inequality" gonna fly?

[ksen]

You'll have to sort through the problems of what your imagination does to your recollections of minimum wage discussions on your own.

No time for that now. I'll be playing the Final Fantasy XV demo tonight.

 

[ronburgundy]

How tiny of a percentage? I'm curious because in raising the MW threads I hear all sorts of talk about how raising the wages for this tiny percentage of workers will lead to massive job losses and business closings.

I think it used to be around 2% but going up some with the minimum wage increases of late.

Awesome. So before you posted, I was writing the below in anticipation of your likely reply, and you didn't disappoint.

Ksen, anticipate a b.s. misrepresentation in the area of 2-3% which dishonest conservative sources (like Forbes and National Review) get to by using the Fed min wage, and ignoring the additional 2.5% who make below the min wage because their jobs supposedly but often don't include "tips". But the real reason that it is b.s. is because 29 states (including 4 of the 5 most populated) have their own min wages that are higher than the Fed, which means most Americans cannot be legally paid at the Fed min wage being used to calculate this meaningless number. What is needed is the people at their local/state minimum. Also, less than a dollar above local minimum doesn't mean much. Many jobs hire at min, then give tiny raises for a few years, then nothing. So a more valid number would be something closer to the % within a $1 or so of their local minimum.
I can't find numbers on that, but it would be close to the number getting under $10 per hour, which is 18 million out of 115 million private sector jobs, which is over 15%. Not so "tiny".

 

[ksen]

I think it used to be around 2% but going up some with the minimum wage increases of late.

Awesome. So before you posted, I was writing the below in anticipation of your likely reply, and you didn't disappoint.

Ksen, anticipate a b.s. misrepresentation in the area of 2-3% which dishonest conservative sources (like Forbes and National Review) get to by using the Fed min wage, and ignoring the additional 2.5% who make below the min wage because their jobs supposedly but often don't include "tips". But the real reason that it is b.s. is because 29 states (including 4 of the 5 most populated) have their own min wages that are higher than the Fed, which means most Americans cannot be legally paid at the Fed min wage being used to calculate this meaningless number. What is needed is the people at their local/state minimum. Also, less than a dollar above local minimum doesn't mean much. Many jobs hire at min, then give tiny raises for a few years, then nothing. So a more valid number would be something closer to the % within a $1 or so of their local minimum.
I can't find numbers on that, but it would be close to the number getting under $10 per hour, which is 18 million out of 115 million private sector jobs, which is over 15%. Not so "tiny".

Good point, I hadn't thought about that.

 

[Axulus]

According to DOL, the bottom 10% of hourly jobs pay $8.74 or below, the bottom 25% pay $10.90 or below, as of May of 2013. Employment was estimated at 132,588,810 jobs.

http://www.bls.gov/oes/current/oes_nat.htm#00-0000

 

[Underseer]

I'm not sure the Dems are gonna do themselves any favors pushing income inequality or class warfare.

Here are the gallop numbers http://www.gallup.com/poll/1675/most-important-problem.aspx

The gap between the rich and poor is only important to 3%, up from 2%.

Can this dog hunt?

"Class warfare"?

Your slavish devotion to the aristocracy is... well, your tenacity is admirable anyway.

Yes, there has been class warfare going on for decades, but despite what they tell you to think at FOX News, it's not the middle class waging "class warfare" on the aristocracy. The mere fact that you are upset that we ask the aristocracy to stop waging class warfare on the rest of us proves that this framing cannot work because people like you have been too thoroughly programmed by the extreme right wing media.

 

[Axulus]

I'm not sure the Dems are gonna do themselves any favors pushing income inequality or class warfare.

Here are the gallop numbers http://www.gallup.com/poll/1675/most-important-problem.aspx

The gap between the rich and poor is only important to 3%, up from 2%.

Can this dog hunt?

"Class warfare"?

Your slavish devotion to the aristocracy is... well, your tenacity is admirable anyway.

Yes, there has been class warfare going on for decades, but despite what they tell you to think at FOX News, it's not the middle class waging "class warfare" on the aristocracy. The mere fact that you are upset that we ask the aristocracy to stop waging class warfare on the rest of us proves that this framing cannot work because people like you have been too thoroughly programmed by the extreme right wing media.

Seeing as the top tax rate is the highest it has been in almost 30 years, and the proportion of federal taxes paid for by the top 1% is the highest it has ever been before in the history of the country, the financial sector just had the largest package of new regulations added since the great depression, the healthcare system had the largest overhaul since Medicare was enacted 50 years ago, and government spending in the US (federal, state and local) is higher as a percent of GDP compared to at any other point in the history of the country, what battles do you see that the "aristocracy" has won? Which battles is it winning?

 

[Loren Pechtel]

The problem with the labor theory of value is that it puts the cart before the horse.

The labor that goes into something says nothing about it's value. The labor that goes into something says what it's minimum price will be. Absent a monopoly the market will force the price down to this value + a reasonable profit margin.

The big difference is that Marx ignores the demand side of things--if the price people are willing to pay for it is less than the cost to produce the price doesn't come down, the product simply isn't on the market, or is only on the market as a specialty item for those few willing to pay the cost.

Maybe Marx liked his Apple products and realize your claim was full of bunk seeing a premium is added to the price that has absolutely nothing to do with the cost of the product production.

Note what I said about monopolies. Apple has a monopoly on iProducts. If you don't like the price, go Android.

And you're not going to accomplish your objective in most markets. When you shift money away from profits the field looks less inviting--more players leave, fewer enter. Eventually profits come back to the normal level. (And the reverse also happens--when a field has too much profit you get new players driving down the price. You can only sustain excess profit if you have a monopoly.)

Or they just raise the price of the service / product in order to adjust to the increase in Labor costs. You keep talking as if this isn't an option. If all low wage corps have to do this, the increase will be across the board.

And when you raise the price of the product you're back where you started, just with inflation added to the mix. If you raise the minimum wage from $8 to $10 and the price of widgets goes up from $8 to $10 in response to the increased labor cost you might feel you have done good but in reality you have done evil.

 

[Loren Pechtel]

In 1970 the normal level of profit in the economy was about 5% of GDP. The latest level of profit is nearly 11% of GDP. The share of GDP that goes toward wages has dropped in the same time by, surprise, 6%. The level of business investment has actually dropped in that time. Which is the normal level of profits, 5% or 11%?

It doesn't look to me as if profits have returned to a normal level. To me profits have more than doubled by reducing wages.

All you need to explain this is to look at Bush. The economy ran off the rails. We're still nowhere near back to normal.

There's also the factor that equipment is an increasing percentage of the cost of a product.

 

[Loren Pechtel]

Here's a paper that is related. It's argument is that wage inequality has been because our firm size has grown

http://people.stern.nyu.edu/hmueller/papers/inequality.pdf

Yup, what I've been saying all along. The bigger firms put more of a premium on getting the best, this drives up wages at the top. It's sensible behavior on their part as the more people effected by their actions the bigger the benefit of a good hire or cost of a bad hire is.

There is a very non-linear relationship between skill and pay at the top of the spectrum. It's not just in the business world, we see the same thing with entertainment and athletics.

- - - Updated - - -

Here's a paper that is related. It's argument is that wage inequality has been because our firm size has grown

http://people.stern.nyu.edu/hmueller/papers/inequality.pdf

It's not that shocking that as businesses increase their leverage over workers they force wages down.

I don't know about you, but my side has been aware of this for quite awhile which is why we actually lament the fall of unions since they were a countervailing force to corporate power over wage negotiating.

Except that's not what's going on. They're not driving wages down, they're paying the top people more.

 

[Loren Pechtel]

The paper coloradoatheist linked to above found that the largest firms also have the highest level of wage inequality. So if you work for one of those companies and you have high skills that's great for you. If you have mid to low skills you'd probably be better off working for one of those other companies.

Remember what happens when you ass-u-me?

Your first conclusion is right--if you're a top worker you want to be working for a big company. However, if the other half of this were true then you would see the big companies not being able to hire enough lower level workers. The reality is that the big companies pay about the same as the little companies.

- - - Updated - - -

How do you think that prices are set? If the producers could raise their prices after the wage increases why didn't they raise them before to make more profits? Were they being magnanimous toward their customers?

I know you addressed this to Jimmy Higgins but I'll address it anyway.

What you are missing is that normally they couldn't raise prices because they would lose customers that way. However, when everyone's costs go up they know everyone's prices will go up, they can raise their own without losing customers.

 

[Loren Pechtel]

This is why a tiny percentage of jobs pay minimum wage, you know.

How tiny of a percentage? I'm curious because in raising the MW threads I hear all sorts of talk about how raising the wages for this tiny percentage of workers will lead to massive job losses and business closings.

It will have a big effect amongst that population, little effect outside it. Those minimum wage jobs are concentrated, not dispersed.

 

[NobleSavage]

Jeb's against the Federal Minimum Wage and still talking income inequality. http://thinkprogress.org/economy/2015/03/17/3634877/jeb-bush-minimum-wage/

 

[Canard DuJour]

Here's a paper that is related. It's argument is that wage inequality has been because our firm size has grown

http://people.stern.nyu.edu/hmueller/papers/inequality.pdf

Firstly, I'm not convinced that more people work for bigger firms than when there was less wage inequality. They apparently calculate it by looking at firm size and sales volumes of the 50 and 100 largest firms per country. Which is just ridiculous.

Secondly they find the same purported increase in firm size in countries where wage inequality DIDN'T increase (Belgium, France, Denmark, Greece). Oops, oh dear.

Lastly, there's a screaming obvious way to test their contention that wage inequality has been driven by growth in firm size : Compare wage differentials in similar sized firms over the period in which aggregate wage inequality increased. They don't do this because we all know exactly what they'd find : same firm size, increased wage inequality.

 

[SimpleDon]

No, no I don't.

What's really going on is mergers. We have far fewer CEOs of substantial firms now than in times past. An awful lot of the lower-paid CEOs aren't CEOs anymore.

cite?

I don't doubt that you believe this, you repeat it often enough. But it isn't true. In another thread I gave you a link to the census bureau data that the number of companies have increased over the years in all size categories.

Besides the CEO's wages have increased ten times based on the average workers wages. You would have to show that the number of companies has been reduced by something on that order.

The industries with the highest average wages have much greater profit margins - think finance, internet companies, software, pharmaceuticals. Those industries with lowest wages tend to have far lower profit margins - think restaurants, retail, hospitality.

We are seeing much greater returns for companies holding intellectual property that are able to sell the product on a worldwide market. These firms pay great wages.

The paper coloradoatheist linked to above found that the largest firms also have the highest level of wage inequality. So if you work for one of those companies and you have high skills that's great for you. If you have mid to low skills you'd probably be better off working for one of those other companies.

But the average wages are still much higher. The bulk of the profit is being made from these high skill workers.

Furthermore, what is the dividing line between profits and wages when one is a business owner or when one has an equity stake? Mark Zuckerburg and the other Facebook founders worked to develop Facebook. That labor contributed to a large portion of Facebook's current $200 billion market valuation. However, only a minuscule amount of this labor is reflected in actual wages they paid themselves. They were being paid through their equity stake in the company instead.

Or take the example of another billionaire like George Lucas. His writing, management, production and directing skills lead to the creation of Indiana Jones and Star Wars franchises. Yet he earned the vast majority of his wealth not through wages but through his company Lucasfilm. The wages he was paid do not reflect the full amount his labor earned him.

Or think of the multimillionaire (or even billionaire) hedge fund managers, who receive a large chunk of their compensation in the form of "carried interest", which is not classified as wages in the data, even though it relates to their fund management labor.

You don't understand the difference between wages and profits? That could explain a lot of the confusion here on this subject if it is a widespread misunderstanding.

Wages are paid for labor. Profits are unearned income paid from the employment of capital, that is, the wages paid to capital. ("Unearned" means that no labor is involved, not that it is undeserved.

The purpose of business in capitalism is to deploy capital and labor to produce profits that are invested as more capital utilizing more labor. In a word, growth.

"Carried interest" is a fabrication from very expensive lawyers to pretend that wages, sales commissions in this case, are actually capital gains because the taxes on the latter are lower than on the former.

 

[SimpleDon]

No, no I don't.

What's really going on is mergers. We have far fewer CEOs of substantial firms now than in times past. An awful lot of the lower-paid CEOs aren't CEOs anymore.

cite?

I don't doubt that you believe this, you repeat it often enough. But it isn't true. In another thread I gave you a link to the census bureau data that the number of companies have increased over the years in all size categories.

Besides the CEO's wages have increased ten times based on the average workers wages. You would have to show that the number of companies has been reduced by something on that order.

The industries with the highest average wages have much greater profit margins - think finance, internet companies, software, pharmaceuticals. Those industries with lowest wages tend to have far lower profit margins - think restaurants, retail, hospitality.

We are seeing much greater returns for companies holding intellectual property that are able to sell the product on a worldwide market. These firms pay great wages.

The paper coloradoatheist linked to above found that the largest firms also have the highest level of wage inequality. So if you work for one of those companies and you have high skills that's great for you. If you have mid to low skills you'd probably be better off working for one of those other companies.

The skills argument for the reason behind the income inequality is largely bogus. Keynes said,

The insufficiency of effective demand will inhibit the process of production in spite of the fact that the marginal product of labour still exceeds in value the marginal disutility of employment.

In other words, it is no use to increase the skills of the workers when there is no effective demand for the product. Effective demand means that not only does the consumer want the product, that the marginal utility of the product makes it worthwhile to purchase it at the price offered, but that the consumer has to have money with which to purchase it. This seems logical doesn't it? But neoclassical economics doesn't include the bolded part.

Our current level of income inequality means simply that we have too much of the nation's product going to profits and not enough going to wages, we have too much supply and not enough demand.

 

[SimpleDon]

I don't feel like playing Socratic Method.

If you have a case you want to make go ahead and make it.

Hmm, I didn't think that point was hard to figure out.

Here it is in non-question form:

How are you You are not going to differentiate yourself from the competition and get better employees by paying a little more if the competition is paying the same as you?.

If you are paying a little more how can your competition be paying the same as you?

 

[dismal]

Hmm, I didn't think that point was hard to figure out.

Here it is in non-question form:

How are you You are not going to differentiate yourself from the competition and get better employees by paying a little more if the competition is paying the same as you?.

If you are paying a little more how can your competition be paying the same as you?

Exactly.

 

[Axulus]

You don't understand the difference between wages and profits? That could explain a lot of the confusion here on this subject if it is a widespread misunderstanding.

If it's so easy, why did you not address any of my examples? You do realize that business owners set their own wages, and it typically has nothing to do with fair market value, correct?

Wages are paid for labor. Profits are unearned income paid from the employment of capital, that is, the wages paid to capital. ("Unearned" means that no labor is involved, not that it is undeserved.

So JK Rowling didn't earn her income from the Harry Potter authorship. Her labor was worth ~$50k/year (average income for an author), the rest was just unearned, huh?

 

[SimpleDon]

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And you are making the bad assumption that creating the living wage won't hurt the people that need it. If raises costs to business have no impact, then we should have no problems raising the living wage to a million dollars.

That is ridiculous. We aren't talking about increasing wages to increase costs and there is no reason that increasing wages slowly over time would have any harmful effects to employment. What we are talking about is increasing wages and cutting profits, that is all. Increasing the amount of income that goes to the 99% by decreasing the amount of income that goes as profits to the 1%.

Profits and wages are both costs of production. We simply want more money to go to wages and less to go to profits. All of the inflation that we have had since 2009 has been due to increased profits.

Strawman. He's not saying the purpose of raising wages is to increase costs, but rather that the effect of raising wages is to increase costs.

And you're not going to accomplish your objective in most markets. When you shift money away from profits the field looks less inviting--more players leave, fewer enter. Eventually profits come back to the normal level. (And the reverse also happens--when a field has too much profit you get new players driving down the price. You can only sustain excess profit if you have a monopoly.)

Or they just raise the price of the service / product in order to adjust to the increase in Labor costs. You keep talking as if this isn't an option. If all low wage corps have to do this, the increase will be across the board.

How do you think that prices are set? If the producers could raise their prices after the wage increases why didn't they raise them before to make more profits? Were they being magnanimous toward their customers?

I will ask you the same question I asked Loren. (no fair comparing answers.) In 1970 the profit level in the whole economy was 5% of GDP. The latest level is 11%. The share of GDP that goes to wages has dropped by 6%. It looks to me as if profits have more than doubled by reducing wages.

In 1980 we instituted economic policies to do that very thing, to increase profits by suppressing wages. It seems to me that those policies worked, they increased profits and decreased wages. This isn't a very big leap in reasoning, is it?

But all of a sudden the very same people who told us in 1980 that these economic policies would do this, increase profits and decrease wages, have seemingly forgotten it now and are off for any other possible reasons that profits have increased by reducing wages.

The profits have bounced around and now are higher than normal, but you can have a lot of contributing factors that explain it. The government has in recent decades put in a lot of supply-side deterrents that have slowed down growth and allowed profit margins to creep up, even though you want to blame tax rates.

But you can't explain the other contributing factors? But you know that the government has put a lot of supply side deterrents into the economy that explains part of the reasons that profits have gone up and wages have gone down. You do realize that this is a contradiction? The supply side is the side that rewards capital, these rewards are called "profits." Supply side deterrents would suppress profits.

Supply side economics, Reaganomics, neoliberal economics, trickle down economics, whatever you call it was more than just increasing the effective income of the very wealthy by decreasing their taxes. They also increased the taxes of everyone else. They also intentionally suppressed wages by suppressing labor unions, by keeping the real minimum wage low, by changing trade policies to expose the labor in the US to competition from low wage countries, etc.

The supply side economists said that doing these things would increase profits and decrease wages. More precisely, they said that doing these things would increase the percentage of the national product that goes to profits and decrease the part of the national product that goes to wages. In the language of economists these are refer to as the capital share and the labor share, respectively.

This is what they said that was needed to be done to generate more money for investment, that is for more profits. And these are all things that we did.

And these measures worked, profits went up and wages went down.

And they said that providing more money for investment would result in more growth in the economy, because the economy is lead by investment and profits. This is why they call it "supply side economics.

But growth didn't go up. In fact, it decreased from what it had been before.

These are demonstrable facts. That they were part of the theory of supply side economics. That they do increase profits and decrease wages. That they were instituted as economic policies of the US.

And you say that unnamed, supply side deterrents were enacted by the government that decreased growth and increased profits. And, presumably, decreased wages.

So the question in my mind is what do you think that all of the supply side economic policies that were instituted did? The ones that I listed above. Do you believe that they didn't work to increase profits and to decrease wages as the supply side economists said that they would do? Which ones failed?

 

[ronburgundy]

According to DOL, the bottom 10% of hourly jobs pay $8.74 or below, the bottom 25% pay $10.90 or below, as of May of 2013. Employment was estimated at 132,588,810 jobs.

http://www.bls.gov/oes/current/oes_nat.htm#00-0000

So that is coheres quite well with my estimate that about 15% are paid within $1 of the actual minimum wage or less (actual meaning the local/state minimum not the meaningless Fed minimum that doesn't apply to most states).
Many States (especially the most populated ones) have minimums between $8 and $9 per hour, so over 10% are at or below the local minimum in their state, and another 15% are less than $2 over their local minimum. Factoring in non-hourly workers and the number is probably around 15% of the total workforce who are less than $1 over the minimum. Regardless, it isn't near "tiny" and 5-10 times higher than what conservative sources typically claim.