Minimum wage - leads to price increases more regressive than sales tax, only 35% of the benefits go to those under 2x poverty line

[Togo]

It isn't. Labor obeys the laws of supply and demand just like anything else. Welcome to reality-based economics.

So... why are you treating putting up the cost of labour as a market distortion, but not the putting up of a product price? Or is it just a market distortion when it doesn't fit your model?

I think you missed my point - why are you treating the minimum wage as different from any other form of price setting?

No, I understand what's going on just fine.

I think you got the point, and dismal missed it.

I'm not sure that really makes sense. The underlying demand is there, but suppressed by higher prices triggered by lack of competition. In other words, firms are reaping extra profit by raising prices. But a scenario where profits are high, competition is low, demand is captive, and there is a large pool of ready-trained employees, is ripe for new entrants into the market. It doesn't sound like a new equilibrium at all.

But, remember, the profit isn't extra because they are paying higher labor costs.

But that isn't, under your account, what drives up the price. What drives up the price is the number of firms that go out of business. That reduces completion, which increases the price. The price increase in your account is entirely dependent on market exit, and not connected in any way to an increased wage bill.

[What we are seeing is a return to a similar average profit, but with fewer firms left in the market.

Can't be - there's nothing to drive that equivalence. You want to say that the increased profit you described only serves to balance out the increase in the wages paid, but as the two aren't in any way connected, there's no justification for that.

The only way to restore a market equilibrium is to balance out the loss of competition with more competition (market entry), or reduced profits. You're leaving a gap in the market - either that gets filled, or competition between existing market participants gets fiercer to close the gap, which means lowering profits to compete on price.

What your scenario of the market settling down with higher average price and fewer participant relies on is nothing to do with completion, or indeed much to do with economics. It's an unsubstantiated claim that a minimum wage hike will be of a sufficiently large reduction in the profitability of the industry sector, that it will reduce the number of participants by making the market less attractive. It's nothing to do with relationships between the variables, and everything to do with an assumption of the scale of the impact. After all, the people you're arguing with agree with you that profitability will go down. All you're arguing is that lowering profitability and higher wages is a bad thing.

What I don't understand is that, in your analysis, you're portraying increased automation and the closure of loss-making companies as bad outcomes. Doesn't that actually improve the economy overall?

It's bad for the employees who are out a job or have had their hours reduced to part-time.

Sure. But people in marginally profitable and less able companies losing their jobs is a basic feature of capitalism. The capital gets redeployed and in the long it's better for everyone. Either you are for this process, or your are not.

Also, the overall effect on the economy is negative (since there will be less output as a result of the higher costs)

Sorry, can you show your working? How are you calculating that the positive effects of the wage increase are less than the negative effects of reduced profitability? Because that's just an ideological position, no?

 

[dismal]

So... why are you treating putting up the cost of labour as a market distortion, but not the putting up of a product price? Or is it just a market distortion when it doesn't fit your model?

Putting it up because the law bans selling it at a lower price is an artificial reason that distorts the market. Putting a price up (if you can) because it is required to stay in business is not.

If the cost of robots is too high to justify automation then the product is more efficiently produced with more labor. If the price of labor is artificially jacked up by law and caused producers to use robots instead of labor you are suboptimizing versus what would happen if the law did not exist. You are not using resources as efficiently.

Just like if you banned selling chicken for less than $10 a pound people would consume less chicken than they otherwise would and suffer a loss of well-being versus what they would prefer to do if the law did not exist.

 

[Jolly_Penguin]

There should be no minimum wage. There should be guaranteed minimum income, implemented as tax refund to all. The infrastructure is already there in the tax system.

Use minimum basic income to level the playing field between employer and employee so they have more equal bargaining power, and so the employee isn't desperate.

 

[Jolly_Penguin]

Without a minimum wage, market forces determine the wages. The statement is also demonstrably false: a "bad" employer who tries to pay below market wages will perform worse than the "good" employer who pays market wages.

I miss all those good paying jobs from before the MW was instituted as employers kept bidding wages up in competition with one another.

They would if there was a universal basic income and employers had to compete for employees, since those employees wouldn't be so desperate as to work for peanuts.

 

[fromderinside]

BTW: What was the effect of Henry ford raising the daily wage minimum for his workers to $5 from an average of $2.31 in 1915? Oh. Turnover dropped, quality increased, productivity increased, profits increased, etc, etc.etc. I wonder why many of the larger corporations provided paid sick days, health insurance, and the like to their employees? Exactly. they saw gains in quality of work, retention of workforce, worker confidence, etc.

Amazing how all those conservative chart makes miss all this stuff.

Argh, the fact that employers voluntarily raise wages to lower turnover because there is competition for good workers etc cuts against the argument that government needs to ban low wages.

Geez there was a whole article about how supportig minimum wage was good for both thelower and middle classes and you go after my BTW comment about Ford

You should be spouting the typical implausible bullshit about how there is a labor market oligopoly and employers beat down wages to subsistence levels if you want to argue for a Minimum Wage.

Geez. You get an article which demonstrates supporting a living minimum wage works both for the lower class and for the middle class and you go off on a BTW editorial comment I made after I presented the essence of their findings. On the Ford proposition though it is relevant in that the workers could be anybody standing at a station doing completely machine work. For such positions increasing wages increases retention and increasing retention increases profits.

 

[ksen]

I miss all those good paying jobs from before the MW was instituted as employers kept bidding wages up in competition with one another.

They would if there was a universal basic income and employers had to compete for employees, since those employees wouldn't be so desperate as to work for peanuts.

And that's why basic income will never be enacted. It's too useful to business to have people desperate for peanuts.

 

[fromderinside]

Prices contain information. When you mess with prices the economy rebalances into a less optimal allocation of resources.

Prices are messed with by demand, by supply, by tedium, by whatever. Apparently if it isn't the "messed with" you like the result will be bad.

We've already demonstrated: tedium increases employee turnover which can be compensated by increasing wages resulting in more demand and profitability; prices aren't the driver for many products due to some cache factor or another; reducing margin when money is spent to increase employee competence increase both productivity and ultimate profitability; we are in a situation oversupply of unskilled labor so bad that some companies reduce automation because it is cheaper to use people (usually overseas); and the beat goes on and on and on. All of these rebalancings result in better allocation of resources.

What you need to do dismal is reset your presumptions along lines more in concert with our industry, workforce, and promotion. Unless you adjust your calculations for each situation you will most always be wrong.

 

[dismal]

Prices contain information. When you mess with prices the economy rebalances into a less optimal allocation of resources.

Prices are messed with by demand, by supply, by tedium, by whatever. Apparently if it isn't the "messed with" you like the result will be bad.

We've already demonstrated: tedium increases employee turnover which can be compensated by increasing wages resulting in more demand and profitability; prices aren't the driver for many products due to some cache factor or another; reducing margin when money is spent to increase employee competence increase both productivity and ultimate profitability; we are in a situation oversupply of unskilled labor so bad that some companies reduce automation because it is cheaper to use people (usually overseas); and the beat goes on and on and on. All of these rebalancings result in better allocation of resources.

What you need to do dismal is reset your presumptions along lines more in concert with our industry, workforce, and promotion. Unless you adjust your calculations for each situation you will most always be wrong.

I am telling you things you would be taught in a the first week of a basic economics class.

I don't have some special or unique way of thinking about prices, supply and demand. Just repeating the synthesized product of a few centuries of smart people thinking about the subject.

 

[ksen]

we are in a situation oversupply of unskilled labor

Is it just that? I think another part of the current economy is huge amount of underemployed people taking some of those jobs that would normally go to unskilled labor.

People have to eat. Businesses don't have to make certain levels of profit. And when eating and profits come into conflict I think eating should win out. But I'm a socialist so what do I know?

 

[dismal]

But I'm a socialist so what do I know?

Apparently not that our poor people in America are suffering an obesity and diabetes epidemic. You may want to update your rhetoric for developments in the last 100 years.

If you go carrying pictures of Chairman Mao, you ain't gonna make it with anyone anyhow...

 

[Nice Squirrel]

Prices are messed with by demand, by supply, by tedium, by whatever. Apparently if it isn't the "messed with" you like the result will be bad.

We've already demonstrated: tedium increases employee turnover which can be compensated by increasing wages resulting in more demand and profitability; prices aren't the driver for many products due to some cache factor or another; reducing margin when money is spent to increase employee competence increase both productivity and ultimate profitability; we are in a situation oversupply of unskilled labor so bad that some companies reduce automation because it is cheaper to use people (usually overseas); and the beat goes on and on and on. All of these rebalancings result in better allocation of resources.

What you need to do dismal is reset your presumptions along lines more in concert with our industry, workforce, and promotion. Unless you adjust your calculations for each situation you will most always be wrong.

I am telling you things you would be taught in a the first week of a basic economics class.

Wow, not just Econ 101 fallacy, but first week of Econ 101.

 

[fromderinside]

I don't have some special or unique way of thinking about prices, supply and demand. Just repeating the synthesized product of a few centuries of smart people thinking about the subject.

Your second sentence is what I'm prescribing for. Smart people thinking of changing things in the same way is the pathway to demise.
Once it was word of mouth, no more. Once it was hand labor, no more. Once it was a single standard underlying commerce, no more.

Why is it all your smart people on the conservative side are screaming that we're bound for hyper inflation that never comes. In the answer you might see the light probably not give your enchantment with 300 year old theory. When you understand modern variations of Keynes economics you will be able to track how the world is reacting to labor oversupply in terms of your economics because of what you call "open markets".

Just for laughs, please explain Japan, EU, and to some extent US trying to avoid deflation when your conservative economic guru buddies are screaming about hyper inflation that just isn't in the cards.

 

[dismal]

I am telling you things you would be taught in a the first week of a basic economics class.

Wow, not just Econ 101 fallacy, but first week of Econ 101.

Yeah, except they actually do teach supply and demand in the first week of Econ 101 so there's no fallacy.

I'm not sure why you take particular pride in being entirely ignorant of basic economics. It's not an impressive achievement.

 

[ksen]

I am telling you things you would be taught in a the first week of a basic economics class.

Wow, not just Econ 101 fallacy, but first week of Econ 101.

I wished I lived in an economy that operated on a first week of econ 101 basis. *le sigh*

eta: Wait, no I don't!

 

[Nice Squirrel]

Wow, not just Econ 101 fallacy, but first week of Econ 101.

Yeah, except they actually do teach supply and demand in the first week of Econ 101 so there's no fallacy.

I'm not sure why you take particular pride in being entirely ignorant of basic economics. It's not an impressive achievement.

Yeah, stayed beyond the first week in the course and know a little more about that over simplistic model of supply and demand they use to teach the basic concepts.

 

[dismal]

I don't have some special or unique way of thinking about prices, supply and demand. Just repeating the synthesized product of a few centuries of smart people thinking about the subject.

Your second sentence is what I'm prescribing for. Smart people thinking of changing things in the same way is the pathway to demise.
Once it was word of mouth, no more. Once it was hand labor, no more. Once it was a single standard underlying commerce, no more.

Why is it all your smart people on the conservative side are screaming that we're bound for hyper inflation that never comes. In the answer you might see the light probably not give your enchantment with 300 year old theory. When you understand modern variations of Keynes economics you will be able to track how the world is reacting to labor oversupply in terms of your economics because of what you call "open markets".

Just for laughs, please explain Japan, EU, and to some extent US trying to avoid deflation when your conservative economic guru buddies are screaming about hyper inflation that just isn't in the cards.

Again, there is nothing "conservative" or "liberal" about supply and demand curves with respect to prices. You are attempting to politicize something that isn't argued about.

If you have some great alternative to supply and demand curves that explains the world better than the last few centuries of thinkers have been able to do, please bring it forward.

- - - Updated - - -

Yeah, except they actually do teach supply and demand in the first week of Econ 101 so there's no fallacy.

I'm not sure why you take particular pride in being entirely ignorant of basic economics. It's not an impressive achievement.

Yeah, stayed beyond the first week in the course and know a little more about that over simplistic model of supply and demand they use to teach the basic concepts.

Excellent. So if Chicken sells for $3 per pound and the government decrees no one may sell Chicken for less than $10 per pound what happens to the supply and demand for chicken?

Hit me with that advanced stuff you learned.

 

[Nice Squirrel]

Your second sentence is what I'm prescribing for. Smart people thinking of changing things in the same way is the pathway to demise.
Once it was word of mouth, no more. Once it was hand labor, no more. Once it was a single standard underlying commerce, no more.

Why is it all your smart people on the conservative side are screaming that we're bound for hyper inflation that never comes. In the answer you might see the light probably not give your enchantment with 300 year old theory. When you understand modern variations of Keynes economics you will be able to track how the world is reacting to labor oversupply in terms of your economics because of what you call "open markets".

Just for laughs, please explain Japan, EU, and to some extent US trying to avoid deflation when your conservative economic guru buddies are screaming about hyper inflation that just isn't in the cards.

Again, there is nothing "conservative" or "liberal" about supply and demand curves with respect to prices. You are attempting to politicize something that isn't argued about.

If you have some great alternative to supply and demand curves that explains the world better than the last few centuries of thinkers have been able to do, please bring it forward.

- - - Updated - - -

Yeah, except they actually do teach supply and demand in the first week of Econ 101 so there's no fallacy.

I'm not sure why you take particular pride in being entirely ignorant of basic economics. It's not an impressive achievement.

Yeah, stayed beyond the first week in the course and know a little more about that over simplistic model of supply and demand they use to teach the basic concepts.

Excellent. So if Chicken sells for $3 per pound and the government decrees no one may sell Chicken for less than $10 per pound what happens to the supply and demand for chicken?

Hit me with that advanced stuff you learned.

Depends on the current retail price and the perception of the potential buyers. This was something that was brought up in the 1990s with the economy destroying luxury tax on boats costing over $100,000. Demand increased despite the aggregate price increase, but we are not discussing chickens or boat. We are discussing larger more complex systems. The kind that exist in reality. I apologize if this is too complex to fathom.

 

[Axulus]

Another unintended consequence - minimum wage increase results in more crime:

Does crime respond to changes in the minimum wage? A growing body of empirical evidence indicates that increases in the minimum wage have a displacement effect on low-skilled workers. Economic reasoning provides the possibility that disemployment may cause youth to substitute from legal work to crime. However, there is also the countervailing effect of a higher wage raising the opportunity cost of crime for those who remain employed. We use the National Longitudinal Survey of Youth 1997 cohort to measure the effect of increases in the minimum wage on self-reported criminal activity and examine employment–crime substitution. Exploiting changes in state and federal minimum wage laws from 1997 to 2010, we find that workers who are affected by a change in the minimum wage are more likely to commit crime, become idle, and lose employment. Individuals experiencing a binding minimum wage change were more likely to commit crime and work only part time. Analyzing heterogeneity shows those with past criminal connections are especially likely to see decreased employment and increased crime following a policy change, suggesting that reduced employment effects dominate any wage effects. The findings have implications for policy regarding both the low-wage labor market and efforts to deter criminal activity.

https://www2.bc.edu/~beauchaa/CrimeMW.pdf

Thanks for the extra crime conservoprogressives.

 

[fromderinside]

Again, there is nothing "conservative" or "liberal" about supply and demand curves with respect to prices. You are attempting to politicize something that isn't argued about.

If you have some great alternative to supply and demand curves that explains the world better than the last few centuries of thinkers have been able to do, please bring it forward.

Re: bolded

From  Supply and Demand

We find:

At least two assumptions are necessary for the validity of the standard model: first, that supply and demand are independent; second, that supply is "constrained by a fixed resource". If these conditions do not hold, then the Marshallian model cannot be sustained. Sraffa's critique focused on the inconsistency (except in implausible circumstances) of partial equilibrium analysis and the rationale for the upward slope of the supply curve in a market for a produced consumption good.^[19] The notability of Sraffa's critique is also demonstrated by Paul A. Samuelson's comments and engagements with it over many years, for example:"What a cleaned-up version of Sraffa (1926) establishes is how nearly empty are all of Marshall's partial equilibrium boxes. To a logical purist of Wittgenstein and Sraffa class, the Marshallian partial equilibrium box of constant cost is even more empty than the box of increasing cost.".

Enjoy.

 

[dismal]

Again, there is nothing "conservative" or "liberal" about supply and demand curves with respect to prices. You are attempting to politicize something that isn't argued about.

If you have some great alternative to supply and demand curves that explains the world better than the last few centuries of thinkers have been able to do, please bring it forward.

- - - Updated - - -

Yeah, except they actually do teach supply and demand in the first week of Econ 101 so there's no fallacy.

I'm not sure why you take particular pride in being entirely ignorant of basic economics. It's not an impressive achievement.

Yeah, stayed beyond the first week in the course and know a little more about that over simplistic model of supply and demand they use to teach the basic concepts.

Excellent. So if Chicken sells for $3 per pound and the government decrees no one may sell Chicken for less than $10 per pound what happens to the supply and demand for chicken?

Hit me with that advanced stuff you learned.

Depends on the current retail price and the perception of the potential buyers. This was something that was brought up in the 1990s with the economy destroying luxury tax on boats costing over $100,000. Demand increased despite the aggregate price increase, but we are not discussing chickens or boat. We are discussing larger more complex systems. The kind that exist in reality. I apologize if this is too complex to fathom.

I said the current market price was $3. And once you have shown me your non-simplistic techniques on this example we can move on to more complex systems.

- - - Updated - - -

Re: bolded

From  Supply and Demand

We find:

At least two assumptions are necessary for the validity of the standard model: first, that supply and demand are independent; second, that supply is "constrained by a fixed resource". If these conditions do not hold, then the Marshallian model cannot be sustained. Sraffa's critique focused on the inconsistency (except in implausible circumstances) of partial equilibrium analysis and the rationale for the upward slope of the supply curve in a market for a produced consumption good.^[19] The notability of Sraffa's critique is also demonstrated by Paul A. Samuelson's comments and engagements with it over many years, for example:"What a cleaned-up version of Sraffa (1926) establishes is how nearly empty are all of Marshall's partial equilibrium boxes. To a logical purist of Wittgenstein and Sraffa class, the Marshallian partial equilibrium box of constant cost is even more empty than the box of increasing cost.".

Enjoy.

What bearing does that have on what we are discussing here?