You have yet to make the case that the Samoan case generalizes to every situation in any economy.
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Wealth Redistribution or Wealth Return?
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OK I got to a desktop PC and browsed through old mentions of American Samoa on this forum.
If this is what you mean by "gone over" this subject then you haven't actually "gone over" it, ever.
Canard DuJour
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Re the American Samoa tuna cannery, the firms in question aver that:
In both cases, operations were relocated - some to Thailand and the Solomon Islands (lower wages); some to the US state of Georgia (higher wages, better situated) - i.e. no aggregate increase in unemployment.
..not that you can generalise from some little island with a single industry anyway
"Chicken of the Sea (headquarters in El Segundo, California)
According to Chicken of the Sea officials, limited tuna supply was key factor in the decision to close the cannery. The American Samoa minimum wage increases were a minor factor, but not as significant as other factors related to tuna supply, labor availability, logistics, and utility costs in contributing to the cannery’s closure.
(...)
Tri Marine (headquarters in Bellevue, Washington)
Tri Marine explained that the American Samoa minimum wage increases were a minor factor—not as significant as rising price competition and high production costs, such as for utilities—in contributing to Samoa Tuna Processors’ closure. "
In both cases, operations were relocated - some to Thailand and the Solomon Islands (lower wages); some to the US state of Georgia (higher wages, better situated) - i.e. no aggregate increase in unemployment.
..not that you can generalise from some little island with a single industry anyway
Nice catch. Once again, reality shrouds the results of kneejerk ideological "analysis".Re the American Samoa tuna cannery, the firms in question aver that:
"Chicken of the Sea (headquarters in El Segundo, California)According to Chicken of the Sea officials, limited tuna supply was key factor in the decision to close the cannery. The American Samoa minimum wage increases were a minor factor, but not as significant as other factors related to tuna supply, labor availability, logistics, and utility costs in contributing to the cannery’s closure.(...)Tri Marine (headquarters in Bellevue, Washington)Tri Marine explained that the American Samoa minimum wage increases were a minor factor—not as significant as rising price competition and high production costs, such as for utilities—in contributing to Samoa Tuna Processors’ closure. "
In both cases, operations were relocated - some to Thailand and the Solomon Islands (lower wages); some to the US state of Georgia (higher wages, better situated) - i.e. no aggregate increase in unemployment.
..not that you can generalise from some little island with a single industry anyway
Once again, as this recent analysis (Effects of Minimum Wage - Recent Results) shows, the effects of a minimum wage is an empirical matter.
The situation was largely attributable to the fact that their economy was heavily dependent on a single industry. Moreover, key companies in that industry decided to relocate, leading to a significant loss of employment. This domino effect resulted in individuals having less disposable income. An economy thrives on circulation of wealth, and without money to spend, its gears grind to a halt.
If there is a relevant lesson to draw from that situation, it's that the issue wasn't rooted in wealth redistribution or return. Rather, it was the outcome of self-interested players who refused to participate unless the game was entirely skewed in their favor.
That punk spoiled child that will only play the game if all the rules are in their favor. If not, they take their ball and go home.
If there is a relevant lesson to draw from that situation, it's that the issue wasn't rooted in wealth redistribution or return. Rather, it was the outcome of self-interested players who refused to participate unless the game was entirely skewed in their favor.
That punk spoiled child that will only play the game if all the rules are in their favor. If not, they take their ball and go home.
Bilby already posted them.
The single industry was a perfect storm that caused a big change in the size of the effect, it did not change the nature of the effect. And relocation is one of the things that happens--jobs move to where labor is cheaper. Not all jobs move but fairly small changes in the labor force can have big effects on wages. (Look at what's happened with Covid--lots of people taken out of the work force by PCAS. Also, lots of people retired early but that is going away because they're reaching normal retirement age.)
Can you link to bilby's post? I can't find a post where he has done this.
Are you actually referring to Canard DuJour's post, which links to the GOA report?
Is that your source for your information on American Samoa? That report is from 2020 but you've been posting about American Samoa since 2014.
That report is very informative, but it isn't clear which specific events you have been referring to.
- The report notes several minimum wage increases, where the largest occurred incrementally from 2007 to 2009. I presume this is the one since the more recent increases happened after 2014?
- The report mentions a couple of cannery closures, the closest to 2007 being Chicken of the Sea, which closed in 2009. Is this the loss of jobs that you're referring to?
- If so then how have you measured the change in (un)employment related to each change in minimum wage? Which years following 2007 have you included? Did you just cherry-pick 2010 where employment dropped by a large margin?
Canard DuJour
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According to the cannery operators, you have misidentified the cause, never mind the size or nature of the effect.
If someone says they did x mainly because of a,b and c, with d being a minor factor, then it is not a clear example of d causing x, but an example where d on its own would probably not have caused x.
bilby
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Nope.
@ZiprHead posted a link to an article in Business Insider, which includes a bunch of figures; I commented, using those figures as a basis for my comment, but I have no particular reason to believe that they are accurate or complete, as they're not from any peer reviewed study - or if they are, I don't know where to find it.
bilby
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Why on Earth would you imagine that?
Do you really believe that poor Samoans, given an extra dollar to spend, will almost invariably use it to buy canned tuna?
Because it's clearly true that the vast majority of any extra dollar given to a poor person in the American mainland will be spent on stuff being marketed by American businesses, and a sizeable fraction of that stuff will be from American manufacturing.
Money serves as the indispensable fuel propelling the engine of our contemporary economy. Even if you possess boundless fields of crops ripe for selling, without potential buyers possessing sufficient funds, those crops will merely decay untouched.
Boosting the minimum wage is akin to infusing a nutrient-rich life source into an anemic body. Should a misguided entrepreneur choose to reject this principle, opting instead to remove the business equivalent of a vital organ - such as the liver - one cannot attribute the resultant blood loss to the process of raising the minimum wage.
Usually the cause for the need of a blood transfusion in the first place is the loss of blood. How do economies suffer from a loss of money? Too much savings, deflation, economic recession, financial crisis & hoarding makes the list. Raising the minimum wage doesn't.
The necessity for wage increases must have been triggered by a pre-existing issue that warranted such action. When the immediate reaction is to sidestep or undermine remedial efforts, it naturally diminishes the effectiveness of the solution.
Boosting the minimum wage is akin to infusing a nutrient-rich life source into an anemic body. Should a misguided entrepreneur choose to reject this principle, opting instead to remove the business equivalent of a vital organ - such as the liver - one cannot attribute the resultant blood loss to the process of raising the minimum wage.
Usually the cause for the need of a blood transfusion in the first place is the loss of blood. How do economies suffer from a loss of money? Too much savings, deflation, economic recession, financial crisis & hoarding makes the list. Raising the minimum wage doesn't.
The necessity for wage increases must have been triggered by a pre-existing issue that warranted such action. When the immediate reaction is to sidestep or undermine remedial efforts, it naturally diminishes the effectiveness of the solution.
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What's the advantage of a minimum wage boost, which restricts the extra fuel to those who have jobs, instead of a guaranteed minimum income or a welfare boost, putting more money in the hands of all the poor?
The principle being, the patient has anemia due to insufficient iron so find the source of his blood iron and increase the flow? Since the source of his blood iron is the spinach farmer, we'll pass a law requiring spinach farmers to be blood donors. Should a misguided spinach farmer choose to reject this principle, opting instead to move away or go into another line of work, thereby cutting off the spinach supply, one cannot attribute the resultant worsening of the anemia to the process of compulsory blood donation. Oh, wait, actually, yes we can. People respond to incentives.
If propelling the engine of our contemporary economy depends on more money in the hands of the working poor, why shouldn't that money be paid by all who benefit from the propulsion of the economy -- by all the taxpayers? Why single out the people who are already putting money in those people's hands and put the whole burden on them, as if they were a bunch of misguided spinach farmers? Why not boost the EITC instead of the minimum wage?
Loss of money causes deflation, not vice versa. Saving and hoarding and recession and crisis don't cause loss of money -- the money supply is limited only by government choice not to make more.
So what pre-existing issue are you talking about? I presume you aren't claiming the minimum wage should always be increased, no matter how high it already is; so how do you tell when it's too low? What criterion determines what the right level is?
When an immediate action is to adopt a win-lose strategy instead of a win-win strategy, the immediate reaction of those designated to lose will always be to sidestep or undermine the action. Bar people in chronic pain from getting the oxycontin they need, cause them to buy heroin from street dealers; jail more people you catch dealing heroin, cause dealers to spike their product with fentanyl. People designing policies need to anticipate cause and effect and take it into consideration in their decisions, not just try to deflect blame afterwards for the predictable consequences.
No, you've altered my analogy. While your modification may have aimed at accurately reflecting medical practices, it deviates significantly from the original analogy I constructed. In my comparison, I likened blood to money. Your revised analogy, however, introduces elements of iron and spinach. Could you clarify what these represent in the context of our discussion? Please understand that due to a particularly busy period at work, my tolerance for debates that intend to mislead or create confusion is considerably reduced.
You probably have a point here. However, some folks may attribute any economic downturn to the act of distributing wealth to the poor. No matter how it's done. Therefore, We'd return to our initial predicament.
Ah, you've grasped my point! That is indeed the root cause of the economic downturn – not the incentives themselves, but the people's response to them. Or more precisely, certain people's counteractions.
Imagine we share a car and one of the tires goes flat. You attempt to reinflate the tire while I, objecting to the type of air you're using, continue to puncture more holes in it. Can you see the analogy now? Your effort to reinflate the tire might have succeeded if not for my actions directly undermining your efforts. Do you comprehend now?
Gosh!
bilby
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People hate giving money to people who don't work.
In a democracy, policies that entail doing stuff people hate are rarely achievable, and it's better to do something half-arsed than to attempt to do something better, knowing that the attempt is futile.
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Bomb#20
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It looks like that's the post where somebody suddenly changed the topic from whether wages were keeping up to whether a minimum wage hike causes unemployment. Assuming the new topic was meant to have something to do with redistribution, there are a few things that need to be kept in mind.
1. The so-called "unemployment rate" is a miserably poor proxy for measuring the effect of anything on employment, because it only counts people who are actively seeking work. Of course when jobs are hard to come by that means there are many applicants for each job, which drives up the frustration level among job seekers, which inevitably causes many unemployed people to get discouraged, give up, stop looking, and no longer count in the government's statistics.
2. Even if two workers are functionally identical an intervention may cause worker A to get a job and worker B to lose a job, or not get one in the first place.
3. Workers are not functionally identical. There isn't just one employment rate; there's a rate for workers with X characteristics but completely different rates for workers with Y characteristics, Z characteristics and so forth. A raw number of unemployed people conflates many different rates.
With that background, consider...
The equilibrium market price for unskilled labor is P1. Suppose we raise the minimum wage to P2. The intended effect of that policy is to redistribute the wealth in the orange square and in red triangle BEA from employers to employees. But the actual effect is to redistribute only the orange square. The unintended effects are that the employers' wealth in red triangle BEA is destroyed instead of redistributed, and the employees' wealth in red triangle CEA is also destroyed. The orange square is typically bigger than red triangle CEA, so this intervention is a good deal for unskilled laborers as a class, which is why minimum wage hikes are popular with unskilled workers and their advocates, but of course the proceeds of this redistribution are redistributed unevenly. There's a net reduction in hours of unskilled labor purchased from Q1 to Qd. If that reduction is accompanied by shortening the work week then it can be win-win for all the workers, who all get, say, 5% fewer hours and 10% higher wages; but in practice the work week is rarely shortened, so some workers keep their hours and other workers no longer get hours. So in addition to the redistribution from employers to employees there is also a net redistribution to the working poor from the unemployed very poor. Is their sacrifice for the greater good? Depends on point of view.
Now, as to whether this is all true or just theory. Does a minimum wage hike actually reduce purchases of hours of unskilled labor? Of course it's true. It has to be, because that's how it accomplishes the redistribution of the orange square. The minimum wage does not order employers to buy unskilled labor for more than P1; it merely prohibits them from buying it for less than P2. Not the same thing at all -- they have the option of not buying. They won't buy it for P2 if they're only seeing it give them P1 of extra income. That would mean taking a loss on all the unskilled workers they hire, so why hire them? The intervention can only convince an employer to pay more for the labor by making the labor worth more to her. How much the labor is worth to her is line DL. How much a given service is worth to buyers depends on how much they buy -- that's the Law of Diminishing Return. An extra bit of something benefits you more when you only have a little than it does when you already have a lot. Removing the Q1 - Qd hours from the purchase causes the remaining Qd hours to be worth more to buyers, and that's what makes them willing to pay P2 instead of just P1. There's no way for a minimum wage hike not to reduce purchased hours of unskilled labor unless the area of red triangle CEA is zero, i.e., if line DL is vertical. That's called "inelastic demand". So the claim that minimum wage hikes don't reduce hours amounts to a claim that the demand for unskilled labor is completely inelastic, a highly atypical characteristic in goods and services. The only other good or service with a completely inelastic demand curve is heroin.
So it seems to me the endless challenges to Loren to prove minimum wage hikes raise unemployment are misplaced -- people who claim employers are addicted to unskilled labor are making an extraordinary claim, and have burden-of-proof. If somebody does a study that fails to show a rise in the so-called "unemployment rate", see points 1 to 3, above. Reduced availability of unskilled jobs may add 1% to the number of job seekers but also cause 1% who used to be seeking jobs to get discouraged by the extra competition and give up looking. Employers may choose to reduce purchases gradually by hiring freezes and attrition instead of immediately with layoffs, resulting in net redistribution between cohorts of teenagers indistinguishable except for year of birth. And the government mandate on employers to pay skilled-labor prices for unskilled labor may cause employers to hold out for a skilled worker instead of hiring a lower-paid unskilled worker, so unemployment among the unskilled goes up but unemployment among the skilled goes down. Any way it settles out, there's still an unemployed guy whose wages got redistributed away from him.