Minimum Rage!

[ksen]

I mean wage.

Ok, let the MW arguments start here!

 

[ZiprHead]

I think in todays economic climate, increasing the power of the demand side is essential. I do believe the anti-MWs arguments that employment could be effected is quite valid. Demand creation should be our primary goal though.

Post number one here.

 

[Underseer]

I think in todays economic climate, increasing the power of the demand side is essential. I do believe the anti-MWs arguments that employment could be effected is quite valid. Demand creation should be our primary goal though.

Post number one here.

Sure. If corporations don't have to pay anything, they can hire everyone.

The problem with that argument is that if they don't pay anyone, then no one can afford to buy their crap, so they won't need employees to manufacture anything. The employment thing is a completely meaningless argument. Minimum wage has not kept up with the cost of living, which means for all practical purposes the minimum wage has been going down ever since the 1960s or so.

If the employment argument held any water, then we would see a correlation: employment rates should have been steadily rising ever since the 1960s, with sudden drops in employment rates whenever minimum wage was actually raised. Right now, we should have much higher employment rates than we had in the 1960s.

 

[Cheerful Charlie]

But that is NOT what we see. We see drops of employment with recessions and not with raising MW. Raises in MW do not automatically cause loss of jobs, the ideologically driven claim of conservatives. On the other hand raising MW does not automatically cause a drop in unemployment either, everywhere. MW is only one factor in economics. An important one but no job killer. I note "job killer" is now a knee jerk right winger trope. In Washington, Boehner mewled this in response to Obama's fair overtime proposals. It resonates with right wingers.

Cheerful Charlie

 

[SimpleDon]

I posted this in the wrong thread.

Let me try to explain this the way that I understand it, from the post-Keynesian economic perspective.

When we are looking at the economy as a whole, what economists call the macroeconomy, there are winners and losers from any change. Money that goes to one sector has to come from another sector. It is simple cash flow accounting.

If you force wages up the money has to come from somewhere else in the economy. That somewhere else is profits. There is no other possibility.

Yes, all of the things that conservatives say will happen if the minimum wage is raised probably will happen somewhere in the economy. But all of these effects, higher prices, loss of employment, will be balanced out against positive results from the increase. It is this balance that we are concerned with looking at the whole economy.

It doesn't help us to consider the extremes. Yes, it is bad if we raise wages so high that there are no profits. Yes, it is bad if we lower wages to zero and have money flowing only to profits and capital, what we call slavery. These extremes don't tell us anything. They are not at all instructive beyond the obvious, don't go to extremes.

In the macroeconomy supply and demand don't balance each other. Any automatic mechanism to balance the two that naturally exists in the economy is so weak and acts so slowly that it is reasonable to say that for all practical purposes it doesn't exist. The economy behaves exactly like we observe it to behave, it can remain imbalanced for decades. This is the most important point that Keynes taught us. To see the truth of it we have to look no further than our economy since the financial crisis of 2008 or the Japanese economy over the last two decades.

It is the fiscal policies of the government that determines the balance between supply and demand, between the capital share and the labor share and between profits and wages. In the broadest sense there are all different ways of saying the same thing.

It takes a huge logical disconnect for conservatives to argue that there is a natural mechanism in the economy that will balance supply and demand, that is that the free market exists, and then to argue that we should continue to have fiscal policies that increase supply, profits, at the cost of demand, wages. That we should double down and increase the efforts to increase supply by further lowering the taxes on the rich and increasing taxes on the poor and the middle class. And then to argue that increasing the minimum wage violates the so-called free market, that we can't increase demand or that we shouldn't increase demand. It is saying that the market only works in one direction, that only one form of interference in the operation of the market is justified.

The only reason to continue policies that increase supply is that there is too much demand in the economy and not enough supply. After thirty years of intentionally boosting supply, with record profits and the huge glut of capital that has built a constant stream of asset bubbles and with effectively negative real interest rates I don't think that any objective observer can say that we are lacking supply, capital, in the economy and that we have too much demand.

Conservatives are arguing now that the supply side economic policies aren't the reason for the glut of capital, the income inequality and the lack of demand in the economy so that we must not only continue, what are according to them, these ineffective policies we should increase them. Logical disconnect.

(I am not lumping Loren into this argument. He has always treated my arguments with respect even when he disagrees with them. Even when the arguments that I presented didn't deserve any respect.)

 

[SimpleDon]

Most of the academic studies by conservatives to support their "job killer" thesis studies teenage employment since this should be the first place that increasing unemployment would show up after an increase in the minimum wage. Here is an article where they found that there are two factors that affect the teenage employment rate, recessions and demographics, the reduction of the absolute number of teenagers. That the minimum wage has no effect. The conservatives' studies always treat teenage unemployment as if the minimum wage is the only factor that effects it.

Here is the article.

Their conclusion,

Finally, i regressed the teen unemployment rate against four variables.

1. Adult unemployment

2. A dummy variable for recessions that is one when the economyis in a recession and zero when it is in an economic expansion. This series is created by Haver Analytics and is in their databases. I used it to create the recession shading in my first chart here. Moreover, the St. Louis Fed also uses it to create recession shading in their charts. So Im not playing games with the dummy variable. It is a widely used and recognized variable among economist.

3. The teen population.

4. The minimum wage.

The regression says that the business cycle and teen population dominate the teen unemployment rate and that the minimum wage is insignificant.

Here is the graph referred to in the conclusion.