Cash for the poor doesn't work very well

[Canard DuJour]

1) Note that it's per worker. My data showed 60% of them aren't working at all.

2) Note that it's showing hours per worker, not hours per poor worker.

[1] That's called "unemployment". If your point was about unemployment and poverty, fine ..duh. Your assertion was interjected in an exchange about the working poor, where international comparison suggests it's wrong.

[2] Unless the parents of children officially in poverty are somehow rich, it is indeed talking about hours per poor worker. Meanwhile 60% of your data is apparently not about hours per poor worker, but unemployment

In fact objection [2] is double idiotic. If you assert that A causes B, then exclude non-B from comparison, any correlation with A might be a selection artefact.

 

[Loren Pechtel]

1) Note that it's per worker. My data showed 60% of them aren't working at all.

2) Note that it's showing hours per worker, not hours per poor worker.

[1] That's called "unemployment". If your point was about unemployment and poverty, fine ..duh. Your assertion was interjected in an exchange about the working poor, where international comparison suggests it's wrong.

It doesn't matter what you call it, the fact remains that it's not working. Wages are irrelevant to someone working 0 hours.

[2] Unless the parents of children officially in poverty are somehow rich, it is indeed talking about hours per poor worker. Meanwhile 60% of your data is apparently not about hours per poor worker, but unemployment

In fact objection [2] is double idiotic. If you assert that A causes B, then exclude non-B from comparison, any correlation with A might be a selection artefact.

Americans work longer hours and yet their children are more likely to live in poverty.

It doesn't say poor Americans. That's looking at all workers.

And note that while their numbers include the effect of the safety net they pretend it's due to work.

If you can get out of poverty with zero hours/week that's safety net, not wages!

 

[Canard DuJour]

It doesn't matter what you call it, the fact remains that it's not working. Wages are irrelevant to someone working 0 hours.

Then it very much does matter in a discussion of why the working poor are poor, to which your data are 60% irrelevant.

[2] Unless the parents of children officially in poverty are somehow rich, it is indeed talking about hours per poor worker. Meanwhile 60% of your data is apparently not about hours per poor worker, but unemployment

In fact objection [2] is double idiotic. If you assert that A causes B, then exclude non-B from comparison, any correlation with A might be a selection artefact.

Americans work longer hours and yet their children are more likely to live in poverty.

It doesn't say poor Americans. That's looking at all workers.

No, that's your loose paraphrase of the first two sentences, not the point of the international comparison which you evidently haven't understood. Unless there is something unique about the US working poor, both in comparison to other Americans and to the working poor elsewhere, their relative poverty rates are better explained by low wages than too few hours. Otherwise the nation with the highest propensity to work long hours ought to have the fewest working poor, not the most. If you look at poor Americans in isolation, any correlation is likely a selection effect. What I said.

And note that while their numbers include the effect of the safety net they pretend it's due to work.

If you can get out of poverty with zero hours/week that's safety net, not wages!

Doesn't matter. You'd have to work more hours at a low pay to get out of the bottom decile regardless and the US has the highest incidence of low pay.

 

[laughing dog]

Doesn't matter. You'd have to work more hours at a low pay to get out of the bottom decile regardless and the US has the highest incidence of low pay.

LP's own cited data backs that up, since more working poor do work full time than those who are counted as working part time.

And, of course, LP is implicitly assuming that the non-working poor are choosing to remain unemployed.

All of which are actually irrelevant to his OP. Cash for the poor does work well - it helps them alleviate their poverty. If the cash was sufficiently high enought, it would elevate them out of poverty. That is basic reasoning.

Moreover, there is nothing inherently inflationary about elevating everyone out of poverty. Nor is it inherently inflationary to raise wages sufficiently and guarantee employment to raise all workers out of poverty. Whether or not a specific income maintenance program or earned income program is inflationary depends on how it is designed, implemented and financed.

 

[Emily Lake]

Moreover, there is nothing inherently inflationary about elevating everyone out of poverty. Nor is it inherently inflationary to raise wages sufficiently and guarantee employment to raise all workers out of poverty. Whether or not a specific income maintenance program or earned income program is inflationary depends on how it is designed, implemented and financed.

Can you describe a scenario in which cash transfers and mandated wage increases to raise everyone out of poverty would not be inflationary? I confess that macroeconomics wasn't my favorite class (as well as being many years ago), but I'm having a tough time coming up with a scenario that isn't inherently inflationary. I welcome an expansion of my understanding.

 

[laughing dog]

Moreover, there is nothing inherently inflationary about elevating everyone out of poverty. Nor is it inherently inflationary to raise wages sufficiently and guarantee employment to raise all workers out of poverty. Whether or not a specific income maintenance program or earned income program is inflationary depends on how it is designed, implemented and financed.

Can you describe a scenario in which cash transfers and mandated wage increases to raise everyone out of poverty would not be inflationary? I confess that macroeconomics wasn't my favorite class (as well as being many years ago), but I'm having a tough time coming up with a scenario that isn't inherently inflationary. I welcome an expansion of my understanding.

Cash transfers that are financed out of current tax revenues by cutting spending elsewhere will not be inflationary because there is no change in overall outlays by the government.

The issue of inflationary wage increases is more complicated. Prices can be thought as the sum of unit production costs plus unit value added. Unless a wage increase causes an increase in unit valued added, there should be no effect on prices. A wage increase can have no effect on unit value added if it is offset by a proportional increase in labor productivity or an equivalent reduction in the other sources of valued added (profits, etc....). That outcome is unlikely in the case of a mandated wage increase, but it is possible.

The complicated part is distinguishing between an one time increase in the prices and inflation. Let's suppose that all wages are mandated to increase by 8% this year and that labor is, on average, about 25% of the per unit cost of production. That implies a price increase of 2%. Which is inflation. However, once that occurs, there is no more subsequent inflationary impetus from that mandated wage increase alone. So that inflationary effect (recalling that inflation is a general rise in the price level) would result in increase in the level of prices, but once that rise occurs, there is no more inflation. If that wage increase occurs in conjunction with counter inflationary policy, it is possible that no inflation occurs. Do I think this is likely - no. But my point is that there is nothing inherent about a wage increase that necessarily means inflation.

 

[Emily Lake]

Moreover, there is nothing inherently inflationary about elevating everyone out of poverty. Nor is it inherently inflationary to raise wages sufficiently and guarantee employment to raise all workers out of poverty. Whether or not a specific income maintenance program or earned income program is inflationary depends on how it is designed, implemented and financed.

Can you describe a scenario in which cash transfers and mandated wage increases to raise everyone out of poverty would not be inflationary? I confess that macroeconomics wasn't my favorite class (as well as being many years ago), but I'm having a tough time coming up with a scenario that isn't inherently inflationary. I welcome an expansion of my understanding.

Cash transfers that are financed out of current tax revenues by cutting spending elsewhere will not be inflationary because there is no change in overall outlays by the government.

The issue of inflationary wage increases is more complicated. Prices can be thought as the sum of unit production costs plus unit value added. Unless a wage increase causes an increase in unit valued added, there should be no effect on prices. A wage increase can have no effect on unit value added if it is offset by a proportional increase in labor productivity or an equivalent reduction in the other sources of valued added (profits, etc....). That outcome is unlikely in the case of a mandated wage increase, but it is possible.

The complicated part is distinguishing between an one time increase in the prices and inflation. Let's suppose that all wages are mandated to increase by 8% this year and that labor is, on average, about 25% of the per unit cost of production. That implies a price increase of 2%. Which is inflation. However, once that occurs, there is no more subsequent inflationary impetus from that mandated wage increase alone. So that inflationary effect (recalling that inflation is a general rise in the price level) would result in increase in the level of prices, but once that rise occurs, there is no more inflation. If that wage increase occurs in conjunction with counter inflationary policy, it is possible that no inflation occurs. Do I think this is likely - no. But my point is that there is nothing inherent about a wage increase that necessarily means inflation.

Thank you for the explanation, that makes sense. I agree, however, that I don't think those are likely outcomes.

 

[Worldtraveller]

Does anyone know how much it costs the government to run all of these various programs (welfare, food stamps, and all the other social safety net type programs that might be eliminated if a simple UBI/cash system were implemented)? I ask because it turns out that in some cites, it was less expensive to just give homeless people a place to stay (the equivalent of section 8 housing) than it was to try to manage them. With all the hyperbole about how much it might cost to give cash to poor people, would we potentially actually be saving some? If so, that would more or less eliminate any argument for inflation.

 

[Horatio Parker]

Moreover, there is nothing inherently inflationary about elevating everyone out of poverty. Nor is it inherently inflationary to raise wages sufficiently and guarantee employment to raise all workers out of poverty. Whether or not a specific income maintenance program or earned income program is inflationary depends on how it is designed, implemented and financed.

Can you describe a scenario in which cash transfers and mandated wage increases to raise everyone out of poverty would not be inflationary? I confess that macroeconomics wasn't my favorite class (as well as being many years ago), but I'm having a tough time coming up with a scenario that isn't inherently inflationary. I welcome an expansion of my understanding.

Cash transfers that are financed out of current tax revenues by cutting spending elsewhere will not be inflationary because there is no change in overall outlays by the government.

The issue of inflationary wage increases is more complicated. Prices can be thought as the sum of unit production costs plus unit value added. Unless a wage increase causes an increase in unit valued added, there should be no effect on prices. A wage increase can have no effect on unit value added if it is offset by a proportional increase in labor productivity or an equivalent reduction in the other sources of valued added (profits, etc....). That outcome is unlikely in the case of a mandated wage increase, but it is possible.

The complicated part is distinguishing between an one time increase in the prices and inflation. Let's suppose that all wages are mandated to increase by 8% this year and that labor is, on average, about 25% of the per unit cost of production. That implies a price increase of 2%. Which is inflation. However, once that occurs, there is no more subsequent inflationary impetus from that mandated wage increase alone. So that inflationary effect (recalling that inflation is a general rise in the price level) would result in increase in the level of prices, but once that rise occurs, there is no more inflation. If that wage increase occurs in conjunction with counter inflationary policy, it is possible that no inflation occurs. Do I think this is likely - no. But my point is that there is nothing inherent about a wage increase that necessarily means inflation.

Nitpick: isn't inflation a continuous rise in the price level? So a one time price rise would be inflationary or inflation biased but not inflation?

 

[laughing dog]

Cash transfers that are financed out of current tax revenues by cutting spending elsewhere will not be inflationary because there is no change in overall outlays by the government.

The issue of inflationary wage increases is more complicated. Prices can be thought as the sum of unit production costs plus unit value added. Unless a wage increase causes an increase in unit valued added, there should be no effect on prices. A wage increase can have no effect on unit value added if it is offset by a proportional increase in labor productivity or an equivalent reduction in the other sources of valued added (profits, etc....). That outcome is unlikely in the case of a mandated wage increase, but it is possible.

The complicated part is distinguishing between an one time increase in the prices and inflation. Let's suppose that all wages are mandated to increase by 8% this year and that labor is, on average, about 25% of the per unit cost of production. That implies a price increase of 2%. Which is inflation. However, once that occurs, there is no more subsequent inflationary impetus from that mandated wage increase alone. So that inflationary effect (recalling that inflation is a general rise in the price level) would result in increase in the level of prices, but once that rise occurs, there is no more inflation. If that wage increase occurs in conjunction with counter inflationary policy, it is possible that no inflation occurs. Do I think this is likely - no. But my point is that there is nothing inherent about a wage increase that necessarily means inflation.

Nitpick: isn't inflation a continuous rise in the price level? So a one time price rise would be inflationary or inflation biased but not inflation?

Realistically, price levels do not simply jump and stop in one "hop".
So, it is reasonable to call it inflation while the price level increases. When it stops, the price level is higher but there is no more inflation from that cause. If that is the only cause, then there is no inflation at that point.