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Economists agree: Raising the minimum wage reduces poverty

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Re: Economists agree: Raising the minimum wage reduces poverty

#81

Post by nhaehnle »

saosebastiao wrote: post #65

This is silly...of course it reduces poverty for those that do not lose their jobs...and if you operate under the assumption that anyone earning the minimum wage is living in poverty, then of course it would reduce the percentage of people living in poverty in aggregate. There is still a few major problems with it as policy: 1) For those that do lose their jobs, their effect is extremely negative. 2) For those with l…

3) For those who do not lose their jobs, the fact that they didn't lose their jobs is indicative of more major problems...they either don't understand the value of their labor, or they don't know how to negotiate with their employers.

Oh, they understand perfectly well about negotiations. Here's the employer reaction when they try to negotiate: "Well, I guess I'll fire you and hire this unemployed person instead."

The employer reaction when the minimum wage is raised is to say, well, guess I now have to pay those guys more.

So a minimum wage increase helps people perfectly well. You could argue that it would be even better if we as a society decided to eliminate unemployment by making sure that demand for labor was always high enough.

Re: Economists agree: Raising the minimum wage reduces poverty

#82

Post by nhaehnle »

spikels wrote: post #80

No they don't! [1-6] The author of this piece, Mike Koczal, is an ideological blogger. You can catch him on Salon, MSNBC, TNR, etc. The main economist mentioned, Arin Dube, is not mainstream. He is actually sympathetic to Soviet central planning[7]. And the UMass Amherst Economics department has a well know for its "offbeat" views (e.g. numerous courses that take Marx seriously), not mainstream, not concensus. The tr…

"offbeat" views (e.g. numerous courses that take Marx seriously)

Right, how could anybody possibly take one of the most important thinkers in the history of political economy seriously!

Marx has important but inconvenient things to say even today. He may not have been right about everything, but a lot is spot on. It's just that lucid writing about class struggles is rather uncomfortable to those who are winning these class struggles. In any case, those who ignore him do so at their own (intellectual) peril.

Re: Economists agree: Raising the minimum wage reduces poverty

#83

Post by crdoconnor »

bqpro1 wrote: post #43

Of course I am not an economist at all, but still I see here some paradox. Minimal wedges are paid for the jobs that require low qualifications or in fact no qualifications. So for example if we raise 4$ per hour to 5$ for such jobs, we may reduce the value of 1 dollar. If 1 hour of such job was worth 4$ and now is worth 5$, then now 1$ has less value than it used to have. As a consequence the whole economy may exper…

It mostly eats into corporate profits first. Then it starts having an effect on inflation.

If you think corporate profits are too low (fwiw they're at record highs right now), and corporations deserve more profit you shouldn't support a raise in the minimum wage.

If you're interested in what happens to prices if the minimum wage is hiked, read here:

http://164.36.50.178/lowpay/research/pdf/NMW_profits_and_pri...

"Our analysis of retail prices in 3 catering industries (canteens, restaurants and takeaways) does not indicate that prices in these industries were differentially affected according to their exposure to the minimum wage. Surprisingly, the only evidence of any price effect is found in the canteen industry where prices rose by a modest 1% in April 1999. "

Re: Economists agree: Raising the minimum wage reduces poverty

#84

Post by nhaehnle »

xixi77 wrote: post #61
ddebernardy wrote: post #25

Earlier quoted context omitted.

Not handy, but use your common sense if you will: if you're surviving on $8/hour or whatever it currently is in the US, and your wage increases by a dollar per hour, then all things being equal you're going to be spending that extra buck on a range of things that had been delayed for a while: shoes for the kids, new tires for the car, and what not. This is consumption, and it's going to get recycled over and over aga…

The question you have to ask is, where does this extra dollar come from? (owners' margins? wages of workers who are now unemployed? consumers' budgets?), and how much extra consumption it generates in the still-employed workers' pockets, compared to where it was before ?

I guess we can agree that the money is shifted downwards in the income spectrum relative to where it was before. Other things equal, lower-income households have a higher marginal propensity to consume. So shifting money downwards will boost consumption.

Re: Economists agree: Raising the minimum wage reduces poverty

#85

Post by crdoconnor »

nhaehnle wrote: post #82
spikels wrote: post #80

No they don't! [1-6] The author of this piece, Mike Koczal, is an ideological blogger. You can catch him on Salon, MSNBC, TNR, etc. The main economist mentioned, Arin Dube, is not mainstream. He is actually sympathetic to Soviet central planning[7]. And the UMass Amherst Economics department has a well know for its "offbeat" views (e.g. numerous courses that take Marx seriously), not mainstream, not concensus. The tr…

"offbeat" views (e.g. numerous courses that take Marx seriously) Right, how could anybody possibly take one of the most important thinkers in the history of political economy seriously! Marx has important but inconvenient things to say even today. He may not have been right about everything, but a lot is spot on. It's just that lucid writing about class struggles is rather uncomfortable to those who are winning these…

I find it amusing since Marx is basically a mirror image of Neoclassical economics (the dominant strain in American academia today).

They're both awful at making predictions. They're both highly ideological. They're both highly unscientific (making non-disprovable assertions).

When applied religiously, both lead to horribly broken economic outcomes.

And, ultimately, they both perform similar roles for the dominant power structures of their day. Marxism was taught in the Soviet Union to promote the Soviet State and economic system. Neoclassical is the intellectual justification of our neoliberal system.

Both have interesting parts which it is possible to learn from, but they're basically both the ideological opinion forming apparatus of the state.

It's not wise to point this out in polite company, however. People get upset.

Re: Economists agree: Raising the minimum wage reduces poverty

#86

Post by pkulak »

We can all argue about weather minimum wage hikes kill jobs, but the fact remains that there are not enough jobs, and a lot of the jobs that are around exist only because labor is cheaper than automation, which hurts efficiency and GDP. The real solution is to not worry about 1 job for every 1 person and guarantee citizens a basic income.

Re: Economists agree: Raising the minimum wage reduces poverty

#87

Post by spikels »

nhaehnle wrote: post #82
spikels wrote: post #80

No they don't! [1-6] The author of this piece, Mike Koczal, is an ideological blogger. You can catch him on Salon, MSNBC, TNR, etc. The main economist mentioned, Arin Dube, is not mainstream. He is actually sympathetic to Soviet central planning[7]. And the UMass Amherst Economics department has a well know for its "offbeat" views (e.g. numerous courses that take Marx seriously), not mainstream, not concensus. The tr…

"offbeat" views (e.g. numerous courses that take Marx seriously) Right, how could anybody possibly take one of the most important thinkers in the history of political economy seriously! Marx has important but inconvenient things to say even today. He may not have been right about everything, but a lot is spot on. It's just that lucid writing about class struggles is rather uncomfortable to those who are winning these…

You are correct that Marx is important in the HISTORY of economics (and it's idealogical cousin, political economy) but he has contributed almost nothing to modern economics. When he wrote a 150 years ago he understood little of what you would learn in a freshman intro to economics class. For example, his most famous belief that all value is derived from labor is so simplistic and clearly wrong as to be absurd (try responding to this post without capital).

The UMass Amherst economics department describes itself as a center for "heterodox" economics[1]. Look up the definition of that word and tell me again how they are mainstream.

BTW - I found Engles to be much more lucid than Marx's rather archaic prose. He is still almost completely wrong but at least his meaning is clearer.

[1] http://www.umass.edu/economics/facjobs.html

Re: Economists agree: Raising the minimum wage reduces poverty

#88

Post by glenra »

saosebastiao wrote: post #65

This is silly...of course it reduces poverty for those that do not lose their jobs...and if you operate under the assumption that anyone earning the minimum wage is living in poverty, then of course it would reduce the percentage of people living in poverty in aggregate. There is still a few major problems with it as policy: 1) For those that do lose their jobs, their effect is extremely negative. 2) For those with l…

> For those who do not lose their jobs, the fact that they didn't lose their jobs is indicative of more major problems...they either don't understand the value of their labor, or they don't know how to negotiate with their employers

You left out a more likely option - that they effectively didn't WANT a higher wage and are being made worse off by the change - their job is now crappier and less desirable than it was before DESPITE paying more than it did before. Changing any single term of a contract by fiat usually makes both parties worse off - the fact that they could have negotiated for that outcome but chose not to suggests it's part of a suboptimal equilibrium.

What makes a job good isn't just the wage. If you force employers to pay more in MONEY per hour worked they will pay less in other ways to compensate. Less benefits. Less flexibility. Less training. Less "slack"/tolerance. Less willingness to take a chance on less qualified applicants. And so on.

Re: Economists agree: Raising the minimum wage reduces poverty

#89

Post by dragonwriter »

thaumasiotes wrote: post #55
bjornsing wrote: post #52

Earlier quoted context omitted.

On paper there's a solution to this problem: Negative income tax [1]. Would be interesting to see it implemented somewhere... 1. http://en.wikipedia.org/wiki/Negative_income_tax

What's the Earned Income Tax Credit if not a negative income tax?

A negative income tax is a strictly progressive income tax systems which has a range at the low end of the income scale where the marginal rate of is negative.

The EITC is not itself, and does not make the US federal income tax system, a strictly progressive system, since the EITC creates both progressive and regressive ranges.

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