> Monetary policy isn’t the only or even the primary driver of inflation.
After two degrees in economics, my perception is that monetary policy is definitely considered a primary driver of inflation, probably THE primary driver. But this is probably irrelevant - see below.
> In this case, the inflation comes from increases demand on a portion of the food supply chain (shipping services).
Yes, for example: "in North America... a shortage of both shipping containers and truck drivers".
> The alarmism in the comment section largely comes from people misreading the headline.
To me, it feels alarmist for Bloomberg to consistently say "inflation" instead of "price increases" throughout the article. A temporary problem with supply/demand is not the same as inflation. Food prices will almost certainly fall back to their normal trajectory within a year or two, once supply/demand normalizes, whereas if there was truly inflation that would almost certainly NOT occur.
To be fair, the question was "with inflation" or "without inflation" (inflation rate of zero). A currency with a limited supply results in deflation as the economy grows. Deflation gives an advantage to savers, the same way inflation gives an advantage to debtors. A currency with an unlimited supply which is supplied at the same pace as economic growth results in zero inflation. And that's nice because then the government isn't giving anybody an artificial advantage. Zero inflation means a level playing field.
> To be fair, the question was "with inflation" or "without inflation" (inflation rate of zero).
As you're pointing out, currencies don't have built-in inflation or deflation, that's why it didn't make sense to answer the exact question that the parent comment was asking.
Speaking as an economist, I tend to get nervous when other economists talk about circumstances where "morality trumps economics." As a profession, we have a miserable track record on morality. Economists widely endorsed eugenics in the first half of the 20th century, for example. And many modern economists endorse a minimum wage, as eugenicists did then, but with even less regard for the harm it causes. Personally, I find it hard to entertain an economist's morality argument unless it goes something like, "We shouldn't do that because it could harm people."
In this article, The Economist is telling governments to force companies to produce "large supplies at fixed prices". Even if governments had that kind of authority in free countries, and they probably don't, that sounds like a policy that could easily cause harm. Companies can't just push one lever to maximum and expect nothing else to change. But most importantly, we don't need it. Yes, we've seen some small-time punks buy up too much hand sanitizer, but the big manufacturers are being decent. As The Economist pointed out, "3M, one of the world’s biggest manufacturers of high-end masks ... has stuck to its list prices and doubled its production." So there's not very good empirical or theoretical support for this idea. But there's hope for economists - "more than half" of economists surveyed about this idea criticized it.
> And many modern economists endorse a minimum wage, as eugenicists did then, but with even less regard for the harm it causes.
You are comparing the moral stance of supporting eugenics with the moral stance of supporting a minimum wage? Are those just the first two random moral stances taken by economists that you recall, or are you trying to color the perception the latter with the true horror of the former?
Eugenics had wide scientific support; it wasn't a horror when they proposed it.
A seriously high minimum wage ($100,000/year for example; no other policy changes) would probably lead to a period of horror and mass unemployment. Possibly famine, I don't know what would happen if it no longer made economic sense to employ people to transport food around. Maybe they are already high earners, what do I know.
A minimum wage is saying "this work isn't worth doing if you can't justify paying someone $minimum". That isn't a morally positive or morally negative position without more information. And it is certainly not more morally sound than "we should be proactive in making sure that children are born with the best chance at life" which is the positive spin on eugenics.
Economists should not be making moral arguments. They get them wrong too readily.
Other people think the concept of price controls is tied to morals when it comes to minimum wages.
When you consider our democratic system it becomes pretty obvious. You need slightly more than 50% of the votes. So the minimum wage is picked so that at least 50% of the population earns more than it. Therefore by definition a minimum wage chosen by politicians is going to set it to a really low value that will then be associated with poorer people. Therefore the minimum wage gains a reputation of helping poorer people.
But at the end of the day it's just a price control. Minimum wage has nothing to do with morals. It's just a rule that says who can or can't have a job. It doesn't actually give people a minimum wage job. You can set it high or low. If it is too low then it does nothing. If it is too high then it prevents people from getting a job. The minimum wage must always follow the market, because the market won't follow the minimum wage.
I used to believe this, back in the 80s I was a true Thatcherite believer. I still largely am, but some of the things I believed back then have turned out to be false, and the dire economic impact of minimum ages seems to have turned out to be one of them. This is why Conservative governments in the UK have been carefully ratcheting up the minimum wage here over the last decade or so.
A feared employment apocalypse at the low end has stubbornly refused to appear, at minimum wage levels that would have been considered reckless not long ago, and it's proved a useful policy coup neutralising a key Labour campaigning point.
> Eugenics had wide scientific support; it wasn't a horror when they proposed it.
But it is a horror now that we've seen a few genocides, which is why it shouldn't be compared to something of a completely different kind, like the minimum wage.
Instead, compare it to wars - which are far closer in terms of the harms they cause - and have also received moral support from economists.
> A seriously high minimum wage ($100,000/year for example; no other policy changes) would probably lead to a period of horror and mass unemployment.
This is reductio ad absurdum, since the min wage wouldn't go that high without major structural and contextual changes in the society and economy.
In the case of eugenics, we don't need to conjure such wild hypotheses about what would happen, because we've repeatedly seen what happens when that idea is carried to it's extreme by governments.
> Companies can't just push one lever to maximum and expect nothing else to change.
They should expect profits to fall. That can happen during a pandemic. Act of God and all that.
> But most importantly, we don't need it. Yes, we've seen some small-time punks buy up too much hand sanitizer, but the big manufacturers are being decent.
And we should gamble our lives on the continued decency of profit-maximizing corporations.
In many countries, child labor wasn't banned because of moral reasons, it was banned as an anti-competitive measure against un-mechanized factories.
Slavery was enforced (and subsidized) by many governments; it wasn't exactly a creature of the free market. Segregation was similar. Indentured servitude may be a different matter, though it brings up some more complicated questions.
"Not demanding payment up front" has nothing to do with morality; I've gone to many nice restaurants where they didn't charge me up front, and they weren't doing it because they were saints. The history of fire-fighting is also interesting, as it was private for quite some time in many places; insurance companies don't like buildings burning down.
You say that companies should expect profits to fall, but do you expect the companies to drive themselves into the ground (thus leaving their employees unemployed) in an attempt to do a little to help? Most companies spend about 50% of their revenue on labor, and have a profit of less than five percent. That means that a 10% increase in labor costs (think overtime) means they make no money, so they really can't afford to reduce their margins much, and remain an extant firm.
You say we shouldn't gamble our lives on the continued decency of for-profit corporations, but I have more confidence in their ethics than those of the common man. As we saw with toilet paper (and hand sanitizer), the average person will hoard anything they are afraid will not be available tomorrow. Companies have shown more restraint in this crisis and others.
> Slavery was enforced (and subsidized) by many governments; it wasn't exactly a creature of the free market.
Chicken or egg. You can make this argument either way. The fact is that slavery has been around for a lot longer than the governments that "enforced" it and it eventually took governments to abolish it completely.
> As we saw with toilet paper (and hand sanitizer), the average person will hoard anything they are afraid will not be available tomorrow. Companies have shown more restraint in this crisis and others.
Luckily in a well functioning democracy it would not be the toilet paper hoarders that'd be charged with coming up with ethical legislation.
It's not either or. Legislation doesn't solve everything, but neither does a completely free market (which doesn't and couldn't exist anyway).
> In many countries, child labor wasn't banned because of moral reasons, it was banned as an anti-competitive measure against un-mechanized factories.
OK, then child soldiers. Or chemical weapons. Pretty much anything outlawed by the Geneva Convention–all economical ways to wage wars, trumped by morality. Not as anti-competitive measures against killer robots.
> I've gone to many nice restaurants where they didn't charge me up front,
Restaurants also typically don't risk their lives for you, so not really relevant.
> You say that companies should expect profits to fall,
That's what I said.
> but do you expect the companies to drive themselves into the ground (thus leaving their employees unemployed) in an attempt to do a little to help?
That's not what I said. It helps if you stick to what I actually said.
> Most companies spend about 50% of their revenue on labor, and have a profit of less than five percent.
We're not talking about most companies. We're talking about big industrial PPE manufacturers like 3M, which reported net income of about $5b dollars in 2018, and because of accounting tricks,[1] probably under-reported their income. They have a profit margin of about 50% for at least the past five years.[2]
> That means that a 10% increase in labor costs (think overtime)
We're not talking about a uniform, across-the-board 10% increase in labour costs, we're talking about targeted cost increases specifically for PPE manufacture.
> they really can't afford to reduce their margins much, and remain an extant firm.
Based on the actually relevant numbers, it looks like they'll be just fine.
> You say we shouldn't gamble our lives on the continued decency of for-profit corporations, but I have more confidence in their ethics than those of the common man.
I'm just curious, who do you think makes up these for-profit corporations, some kind of special saints? As opposed to 'common' people?
Your penultimate point doesn't address that this isn't about expectations. It's asking companies to actively cause their own profits to fall. Raw material prices are being bid up - but even assuming you fix those prices somehow - you can't price fix labor prices while scaling up. Most production companies can't scale without running OT or hiring new employees, both of which will drive cost-per-unit up significantly. In a competitive industry, it's not crazy to think the difference between profitable and unprofitable is less than the increase cost of overtime pay.
3M may be large enough and have enough similar production lines that they can shift production around and still make a marginal profit on the scaled up production, but that's not a given. Smaller companies or more specialized ones would have to decide to increase production to their own detriment. Some might do that out of goodwill, but your last point correctly calls that out for the gamble it is.
> Smaller companies or more specialized ones would have to decide to increase production to their own detriment. Some might do that out of goodwill, but your last point correctly calls that out for the gamble it is.
There is no gamble here. Maybe you're misunderstanding the article but again here is what it says:
> Ordering large supplies at fixed prices is the right policy.
Emphasis: ordering is the suggested policy. Not forcing companies to fill orders. Companies able to fill those orders will do it because those are the only orders that make sense for their scale. Small companies unable to ramp up production will produce what they can and fill smaller orders that make sense for their scale.
That makes no sense. People can enslave others without any "government" being involved, and they have done so for thousands of years. The people enslaving the others just need bigger weapons so the slaves cannot revolt.
Government can prevent people from being enslaved. But without a government being involved, slavery will still happen. In fact, it will happen much more often as is evidenced by the fact that modern day slavery happens primarily in countries where governments are not powerful enough to stop it.
> Speaking as an economist, I tend to get nervous when other economists talk about circumstances where "morality trumps economics."
Krugman invokes Rawls:
> The classic argument here is, of course, that of Rawls, whose 1971 “A Theory of Justice” argued that we should evaluate social arrangements by imagining ourselves having to choose institutions and policy behind a “veil of ignorance”: what society would you prefer if you didn’t know who you would be?
I think economists have done pretty well overall. It got termed the "dismal science" for opposing slavery in the 19th century ("They'll be more productive if they get paid") and generally being against imperialism ("Can't we just trade with them?"), being against the corn laws, etc.
And if I go look at the Wikipedia page Eugenics in America[1] and read through the bios of the first few supporters I can find I get Francis Galton (Polymath uninvolved in economics), John Harvey Kellogg (Doctor), Charles Davenport (Biologist), Henry H. Goddard (Psychologist), Harry H. Laughlin (Sociologist), Madison Grant (Conservationist), Karl Pearson (Biostatistician), Alexander Graham Bell (Inventor), David Starr Jordan (Biologist), Luther Burbank (Botanist), and Margaret Sanger (Feminist).
I don't want to say that economists are blameless here. Henry Rogers Seager famously used eugenics as a reason for a minimun wage writing “The operation of the minimum wage requirement would merely extend the definition of defectives to embrace all individuals, who even after having received special training, remain incapable of adequate self-support.”
But overall it seems that when economists disagreed with the predominant intellectual milieu they've mostly been right and they've mostly only been badly wrong when they've followed along with it.
People whose labor is worth less than the minimum wage become unemployable. Being unemployed means you can’t acquire skills or experience and is bad for your mental health and social attachment.
If you want to look at the literature you can start with Card and Krueger, which shows minimal effects for a small minimum wage discontinuity, I believe on the NJ/NY border. The Seattle minimum wage study showed a reduction in hours and benefits and reduced likelihood of new entrants to the labor market. It’s an exciting example of people looking really hard for ways to confirm their priors on both sides.
Or you can look at Europe. Greater employment protections raise the price of employing someone leading to greater unemployment. Minimum wages do the same thing more explicitly. Businesses buy less of things that are more expensive.
Minimum wage may have some complexities to be played out and examined, but to go back to the parent, the net harm here seems to be minimal at best, if not helpful over harmful, quite unlike how most feel about eugenics. That comparison, while criticizing the moral compass of economists generally, is quite something.
Is that article accurate? My understanding was that Seattle commissioned a multi-year study, and then when the results didn't go their way, quickly rushed a study out the door that said what they wanted. I got this from Marginal Revolution, and I can't find the article, but here is the actual study https://evans.uw.edu/policy-impact/minimum-wage-study and here is an MR article summarising the report: https://marginalrevolution.com/marginalrevolution/2017/06/se...
The first two points from MR:
> – The numbers of hours worked by low-wage workers fell by 3.5 million hours per quarter. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.
> – The losses were so dramatic that this increase “reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.”
> My understanding was that Seattle commissioned a multi-year study, and then when the results didn't go their way, quickly rushed a study out the door that said what they wanted.
Do you have any source for that? Because the same author sets are on both studies. The article I linked to is directly criticizing the study you linked to (and also directly links to it).
Admittedly I am not a field expert and I haven't dived into the weeds on these studies. But my points I think aren't reliant on these details. The are simply:
1. There is much debate over if minimum wage laws or even specific implementations do more good or harm, which would seem contrary to the parent appearing to try to claim the harms as facts.
2. All of this seems to make the claim that the harm of eugenics is equal to minimum wage quite egregious.
I'm not trying to start a flame war over the details of viability of minimum wage here - I don't think that will be productive for anyone. I just want to underscore how egregious comparing minimum wage to eugenics is here.
So this is discussing two competing studies done at the same time. I linked to an article about the authors from the original study actually revising their results a year later with new data and basically saying "our previous conclusion was wrong".
The problem with minimum wage is that there is no minimum wage guarantee by the state. The same problem applies to price controls of any kind. If nobody is willing to sell you a product that satisfies the price controls then you go home empty handed. If the rules are too strict and end up preventing the market from working then the government is to blame and the government has to step in and actually provide whatever nonsensical guarantee it made.
If the government wants to prevent you from getting a job that pays less than minimum wage it has to provide you with a job that actually does pay minimum wage.
> If the government wants to prevent you from getting a job that pays less than minimum wage it has to provide you with a job that actually does pay minimum wage.
I like this way of putting it. I'll use it in the future.
Similarly here, if the government wants to make it illegal to sell hand sanitizer at $5/bottle, they should provide hand sanitizer at $1/bottle.
> People whose labor is worth less than the minimum wage become unemployable. Being unemployed means you can’t acquire skills or experience and is bad for your mental health and social attachment.
Could being employed on a low wage also have it's own negative hedonic consequences? I suppose you have answered the question: 'What happens if you change this single lever of minimum wage in terms of employment?' But whether it is harmful also depends upon other government economic policy, specifically welfare. The trade-offs for minimum wage, in this light, don't exactly speak of how it is 'harmful' in an ethical sense, but it's specific effect on unemployment.
In terms of minimum wage and how it harms the economy, it would be interesting to know if a higher minimum wage has as effect on Economic Complexity and whether that would have a net benefit to an economy?
This line of online questioning is the lazy dismissal of the 21st century. This comment has a positive score and even a child that agrees with it and yet it's akin to asking any theorist "do you have sources for that?" in response to them saying something wildly uncontroversial within their domain. It adds nothing to the discussion and only shows that the respondent is so wildly out of touch with the relevant mainstream that they're not worth answering because the challenge is going to be one of persuading them rather than informing them.
Minimum wage is a widely studied issue with well documented pros and cons. It's weaknesses, when addressed in isolation, are so well understood that most discussion at a high level on the topic is not whether it has pros/cons but what instruments it should be combined with to mitigate its cons (the mainstream answer is usually tax breaks of various kinds, often targeting the employee and not the employer.)
Would you ask a Gender Studies professor to defend the assertion that the feminine gender construct is typically defined by its submissive traits or would you ask how these observations are used to make observations and proposals about the real world?
Would you ask a mathematician their sources when they begin to explain linear algebra or would you ask questions that help to understand their perspective on the matter?
Hacker News supposedly has a rule against shallow comments and yet for some reason knee jerk requests for sources with no additional substance to drive the dialogue forward are considered 'reasonable'.
> Hacker News supposedly has a rule against shallow comments and yet for some reason knee jerk requests for sources with no additional substance to drive the dialogue forward are considered 'reasonable'.
Their statement begged the question, and it was asked.
I wasn't asking out of hostility, but out of curiosity. If the point can be made, and as you say, there is overwhelming evidence, I'd like the self-described expert of their field to provide an authoritative source. That's to the benefit of all readers.
Instead, we have a bunch of hand-wavey replies on both sides with dubious back-up, balanced with maybe a more illuminating discussion about the intersection of morality and economics, specifically regarding slavery and minorities - which I feel somewhat swayed by.
> Minimum wage is a widely studied issue with well documented pros and cons.
Throw us a bone then :) There are many countries around the world that do have a minimum wage, surely there's some data out there we can grok. Perhaps a minimum wage to quality-of-life measure? Inform this naive individual.
As far as I can tell from reading the (very well sourced) Wikipedia article on minimum wage, the general consensus amongst economists on the pros and cons is not at all what user "notidentified" to is claiming, and is backed up by plenty of actual studies.
> Hacker News supposedly has a rule against shallow comments and yet for some reason knee jerk requests for sources with no additional substance to drive the dialogue forward are considered 'reasonable'.
There's also a rule that you are aware of, having read the rules, about not creating throwaway accounts routinely. Though to be fair to you, it doesn't specifically say don't create a throwaway because you don't want to abuse other posters under your regular account.
That seems like a strange thing to do, though, when your side of the argument is "wildly uncontroversial".
The parent said unequivocally that minimum wage is a bad idea (and compared it to eugenics of all things), not that it has cons that need to be mitigated.
This is not an uncontroversial opinion, even among economists.
It is though. Most economists will advocate a mix of minimum wage and EITC (Earned income tax credit). Few will say that minimum wage by itself is a good thing and those that do will typically qualify it by saying that it's a good thing if you're only concerned with optimizing particular metrics, the persuit of which will likely have unintended consequences if chased with tunnel vision.
Again: parent said that minimum wage is a bad idea period, compared it with eugenics and added nothing else to clarify. They didn't say it's a bad idea if chased with tunnel vision, or that it's a bad idea if used in isolation (I don't think that statement even makes sense - having a minimum wage is always going to be one decision amongst the context of a lot of other decisions being made).
I am questioning the particular way they worded their comment, I thought I made that obvious.
They didn't actually compare it with eugenics though, they compared the nature of the discourse around eugenics to discourse around minimum wage with the penultimate point of explaining a mix of why/how they distrust economists, specifically economists, to handle discussions about ethics. They weren't making a direct comparison between the topics themselves and yet most of the replies are reacting as if they had, illustrating why these sorts of talks with laymen are bad ideas.
Condescension by experts is one means by which bad ideas can promulgate, and lead to bad policy. Everyone you speak with is a potential voter, and at the end of the day, badly or uninformed voters are bad for democratic outcomes.
To go back to your original criticism, asking for background information is a lazy dismissal wasn't a fair assessment. Is wasn't a dismissal but a request for more information. It's important than when you make an assertion that a lay-person might have some misgivings, that you provide some real evidence, or qualify your statement as opinion. An appeal to one's own authority isn't enough, at least it ought not to be in HN, where it would seem many people really care to know more, and want to engage in real discourse.
This tiresome blatant gish galloping conservative bullshit has been getting more and more common on hacker news lately. I wonder if it's because we're getting close to a US election. I find it deeply concerning because hacker news is generally a bastion of intellectually honest discussion (at least relative to the rest of the internet).
From what I've seen, HN has always been prone to partisanism. However, it is well moderated, and frequented by polymaths and domain experts that can keep in check those arm-chair wannabes (like myself), which is why I keep coming back.
> conservative bullshit
I think it helps to be mindful to not fall prey to ideology through opposition. Visualizing your interlocutor as an enemy gives no room for either you or them to grow in knowledge, and encourages bad faith dialogue... IMHO :)
Minimum wage puts a floor on the amount of value necessary for someone to be employable. Many people, especially those just starting out can't produce that much value.
The irony of this comment is that it is exactly missing the morality in an economic situation, the claim being that if you are capable of work and are trying your best, you deserve to have enough pay to live off of.
Minimum wage does not price people out of jobs, it puts a cap on the profit that a corporation can squeeze out of its workers. Employers who would be paying under it are simply not viable moral businesses, they would be businesses based off the exploitation of its workforce.
Now we can have economic arguments about what is true here, but the purpose of minimum wage today is a moral one and that must be factored in.
Here's a thought experiment for you. Think of college as a job. You go there, you do work, you get paid. The amount you get paid is negative because your productivity to the school is near zero and their cost of "employing" you requires them to have a lot of buildings and faculty etc. Yet people take on a lot of debt to be able to work as a student at a college, so they obviously perceive some value in it.
Should we prohibit colleges as "simply not viable moral businesses"?
Now suppose we have something which is halfway in between. The benefit to the institution is positive but small. You're doing productive work but it's only worth $4/hour. On the other hand, you're learning stuff and that's very valuable to you -- much more valuable than an $8/hour job where you're not learning anything. Should we prohibit this and not the school? Why?
The argument you're making requires that you are making a significant personal investment in yourself at that $4 an hour job, which I have yet to find such an example of. I'd be happy to hear about some.
Internships for lucrative fields where knowledge experience/investment pay off have no issues existing in economies with minimum wages as very clearly demonstrated by the fields of software engineering, businesses, and many other fields. Not to mention that most minimum wage laws make exceptions or reductions for internships, and people do unpaid internships often for things like PolySci students for political campaigns.
So, yes, we should continue to support internships that invest in people and we already regularly make such considerations in minimum wage laws. $4 an hour jobs in a place where $8 an hour is the minimum wage is not an example of an internship where you are going to learn something valuable, though I am open to hearing about these jobs. The cost of an intern is often far less the pay and much more the hours of those senior to them who would be teaching. Minimum wage is not standing in the way there.
Even if these jobs exist, what percentage of $4 jobs will those be? In reality this will be exploited by large corporations every time, pricing as low as the market will let them, irregardless of livability.
How would you expect to you hear of some when they're prohibited by law?
Try it like this. Federal minimum wage comes out to around $15,000/year. This is in the same ballpark as college tuition -- which is generally regarded as costing a lot of money. If you go to an institution where you're a novice and it takes half your hours to learn the trade and the other half is productive but effectively unskilled work for the employer, you would expect these two to net to approximately zero, right? So why is it at all unexpected that it would frequently net to a number which is slightly positive but less than minimum wage?
> Even if these jobs exist, what percentage of $4 job will be those?
Probably the large majority of them, because otherwise why would anybody take those jobs? They wouldn't be paying enough to attract employees unless they were offering something else of value that existing jobs with higher compensation don't have.
Corporations can't just offer to pay $0.25/hour and get a line of workers lining up at the door. They have to outbid other companies for labor. That's why most companies already pay more than minimum wage for most jobs. And it's why most of the jobs that would pay less than minimum wage are ones that offer the workers something else in its place -- education, more flexible hours, a shorter commute etc. Taking those options away makes peoples lives worse, not better.
> Try it like this. Federal minimum wage comes out to around $15,000/year. This is in the same ballpark as college tuition -- which is generally regarded as costing a lot of money. If you go to an institution where you're a novice and it takes half your hours to learn the trade and the other half is productive work for the employer, you would expect these two to net to approximately zero, right? So why is it at all unexpected that it would frequently net to a number which is slightly positive but less than minimum wage?
Again, you are missing the point. Either that job is an internship (non-permanent and I already addressed it) or you will quickly become a fully productive worker (this is literally just training/ramp up and is not a significant cost to employers). These are not the jobs/pay structures minimum wage laws are affecting nor are people discussing, this is just a straw man.
---------------------------------
> How would you expect to you hear of some when they're prohibited by law?
Legality does not define what concepts exist in the world, so let's hear them! You have yet to even mention a single example.
Companies can and do regularly lobby for laws. They don't appear to be using this line of reasoning because if large minimum wage employers like McDonalds or Walmart tried this they would be laughed at even in political spheres.
> Probably the large majority of them
I suspect we're gonna have to agree to disagree here on what's going to happen without a minimum wage.
> because otherwise why would anybody take those jobs?
People take badly paying jobs because if you're faced with bad and really bad, you'll take bad. Companies are free to exploit this without minimum wage laws in place. This type of exploitation only works in a buyers (if we put employees here as "buyers" of jobs) market, and immediately pushes wages significantly lower in a sellers market, which we have seen for quite a good deal of the past few decades. We can't have economics that are only moral when things are going well.
> Taking those options away makes peoples lives worse, not better.
The flaw here is that you're looking at only one side of the equation. You are improving the lives of every job that has a raised salary as a result. Now the calculus on how many jobs that removes vs raises, what kind, and where is a valid debate, but again, this tradeoff is a moral one. Economists are doing studies to get numbers so that then we as a society can make the moral decision on the tradeoff. That moral question however is not one that economists can answer. They can only study and communicate the effects.
> And it's why most of the jobs that would pay less than minimum wage are ones that offer the workers something else in its place -- education, more flexible hours, a shorter commute etc. Taking those options away makes peoples lives worse, not better.
Big citation needed here.
----------------------------
I'm not looking to get into the weeds here frankly, that is not the point of my original comment. There are many studies on both sides of the minimum wage debate, and that's just going to turn into a linking war between people who are not economists and are also not likely to change their minds on the internet. I have my beliefs based on the data I have seen but again, this doesn't seem fruitful to go down this route.
The point I am making here which none of your points address is that minimum wage legislation is very much tied to moral considerations, and economics aids in giving numbers for those. At the end of the day, the viability rests on morality as interpreted based on data produced by economics.
> Either that job is an internship (non-permanent and I already addressed it) or you will quickly become a fully productive worker (this is literally just training/ramp up and is not a significant cost to employers).
You're asking for examples and then pigeonholing any possibilities into one box or the other.
Some occupations take a long time to learn. Years. Particularly if it's effectively half training and half working, because then it takes twice as long to finish the training. If it's the equivalent of four years of undergrad and three years of grad school then it would take fourteen years -- hardly "temporary" but at the end you would be qualified for a six figure job and have no student loans. Is that a sufficient example?
> Companies can and do regularly lobby for laws. They don't appear to be using this line of reasoning because if large minimum wage employers like McDonalds or Walmart tried this they would be laughed at even in political spheres.
The institutions that would lobby for this legitimately don't exist because their structure is prohibited by existing law, so it's chicken and egg.
Existing large minimum wage employers generally don't want to eliminate the minimum wage because it would make it harder for them to retain talent because their prospective employees would have more options.
Suppose you work at McDonalds and have a 30 mile commute. That costs you thousands of dollars a year -- you have to buy, maintain, insure and fuel a vehicle -- and about eight hours a week of sitting in traffic. A job that paid $2/hour less but was close enough for you to walk to work would leave you healthier with more money in your pocket and more free time. McDonalds would have to pay you more in order to get you to not quit and take the other job. Why would they want that?
> People take badly paying jobs because if you're faced with bad and really bad, you'll take bad. Companies are free to exploit this without minimum wage laws in place. This type of exploitation only works in a buyers (if we put employees here as "buyers" of jobs) market, and immediately pushes wages significantly lower in a sellers market, which we have seen for quite a good deal of the past few decades. We can't have economics that are only moral when things are going well.
But that's the whole problem, isn't it? When things are going well it's a seller's market and you don't need a minimum wage. When things are going poorly, the option isn't minimum wage job vs. less than minimum wage job, it's less than minimum wage job vs. unemployment. So then you're prohibiting bad and leaving them with really bad.
> You are improving the lives of every job that has a raised salary as a result.
You're also worsening the lives of every customer who has to pay more for goods and services as a result, and for that matter everyone who makes less on their retirement account. That part of it is a zero sum game. The part that isn't is the part where where the minimum wage prohibits Pareto-optimal alternatives that generate actual surplus.
> Big citation needed here.
If there exist two complex options and you take one away based on a simple factor, there will be some number of people for which the option you took away was the better one. Can you not imagine that some jobs might pay less money but be more flexible or closer to home or less emotionally taxing and thereby preferable despite the lower pay?
> There are many studies on both sides of the minimum wage debate, and that's just going to turn into a linking war between people who are not economists and are also not likely to change their minds on the internet.
All of the studies of this question are inherently politically compromised because it's trivial to design a study to find the outcome you want. If you want to see no increase in unemployment from a minimum wage increase, find one where hardly anyone was making the minimum wage even after the increase to minimize the economic effect. If you want to see a large effect, find a large minimum wage increase in a place with many small businesses that can't absorb the higher costs and few large institutions that can.
The ability to cherry pick data doesn't prove anything. But notice this: Even when a minimum wage does exactly what you want it to, the effect is to transfer money from the large institutions that can absorb the minimum wage increase to the minimum wage workers. But you can get exactly the same desired effect simply by changing their relative tax rates (using negative rates if necessary) without incurring any of the harm caused by constraining anyone's choice of employment.
You say I'm pigeonholing you but you have yet to name a single occupation - what am I pigeonholing? Also, my "pigeonholing" is not arbitrary, it is the breadth of jobs that can exist with a minimum wage enacted...
No, it is not a sufficient example because you haven't said a word about what this person is doing. You can see how this feels like pulling teeth on my end, yes? I just want an actual concrete example of a job that could exist. If there are so many of these that there is a notable economic impact from this, it really isn't unreasonable to ask someone to name one, is it? I can't imagine what the job looks like that you described.
> But that's the whole problem, isn't it? When things are going well it's a seller's market and you don't need a minimum wage. When things are going poorly, the option isn't minimum wage job vs. less than minimum wage job, it's less than minimum wage job vs. unemployment. So then you're prohibiting bad and leaving them with really bad.
My argument is exactly that you need a minimum wage in a sellers market because the market is exceedingly inefficient for workers and allows companies to exploit workers and pass that profit off to already wealthy shareholders and upper management. For non-sellers markets the minimum should be adjusted to match economic times, I'm not saying we set a $25 minimum wage during a recession here. I'd be very happy to pin minimum wage to economic times.
> Can you not imagine that some jobs might pay less money but be more flexible or closer to home or less emotionally taxing and thereby preferable despite the lower pay?
If it is between a job that pays enough to survive vs one that does not? No I can't. Between two jobs that pay enough to survive? Absolutely.
> Even when a minimum wage does exactly what you want it to, the effect is to transfer money from the large institutions that can absorb the minimum wage increase to the minimum wage workers. But you can get exactly the same desired effect simply by changing their relative tax rates (using negative rates if necessary) without incurring any of the harm caused by constraining anyone's choice of employment.
I fully agree that would be a better policy. It has proved much harder to pass through the political system. I have said it in other threads here but I am 100% not saying a higher minimum wage is an ideal economic state, it is simply better than the current point we are at and the seemingly easiest to pass at the moment. In the end, the clear way to do this is through UBI IMO. And I think that is the root of a lot of these threads that I'm not going into responses on - this isn't a one and done policy change, you need others to match it like an increased social safety net to make that "really bad" unemployed scenario not as bad.
Because it isn't in any way specific to an occupation. It's anything where the employee receives a non-monetary benefit from working somewhere that offsets a reduction in monetary compensation. It doesn't matter if what they're teaching you is to be a lawyer or an electrician or an auto worker, what happens is that you receive long-term training in exchange for less pay.
> My argument is exactly that you need a minimum wage in a sellers market because the market is exceedingly inefficient for workers and allows companies to exploit workers and pass that profit off to already wealthy shareholders and upper management.
This is not a description of a seller's market. When labor becomes more scarce or more in demand, the price goes up without need for any special rules.
> If it is between a job that pays enough to survive vs one that does not?
The point is that minimum wage is a garbage metric for this.
Suppose one job requires you to incur $4000/year more in transportation expenses for commuting and then pays $15,000/year instead of $12,000/year. The lower paying job leaves you with $1000 more in your pocket after expenses, but it's prohibited. If either of those jobs doesn't pay enough to live it's the one with the higher nominal pay.
> I fully agree that would be a better policy. It has proved much harder to pass through the political system.
I don't think they've had an easy time raising the minimum wage either (for much more legitimate reasons) and would do better to give up on the worse policy so they can concentrate on the better one.
> Because it isn't in any way specific to an occupation. It's anything where the employee receives a non-monetary benefit from working somewhere that offsets a reduction in monetary compensation. It doesn't matter if what they're teaching you is to be a lawyer or an electrician or an auto worker, what happens is that you receive long-term training in exchange for less pay.
So provide an example of what such a role would be...
You go to work for a law office. You don't know how to be a lawyer, but you know how to make coffee and schedule appointments and read English text, so you make coffee and schedule their appointments and check their briefs for typos and grammatical errors. You learn how to be a lawyer by watching lawyers work all day for several years. They pay you a pittance, have fewer embarrassing errors in their briefs and don't have to make their own coffee or schedule their own appointments.
That's incredibly naive, you don't learn how to be a lawyer by watching lawyers do lawyer things. In the UK - that's what you do as a first year associate... after THREE YEARS OF LAW SCHOOL and their version of the bar exam. It is true that some US states will allow a bar applicant upon the certification of a firm. But there, the firm is essentially certifying that they provided the equivalent education. Have you seen a bar examination? It would not make sense to anyone who hasn't studied law, and even then, everyone taking it pays $4k for a preparation program that only makes sense to someone who has spent three years in law school. I'm not sure how you think that knowledge gap will be closed by somebody who just watches and spell checks.
For example, lawyers write. How is it possible for this person to develop their writing? Typically in law school, you spend an entire school year in one class developing your legal writing. Writing briefs from scratch for your professor, so he can IN DETAIL explain what you did right and wrong. Do you think a firm is going to invest this time in such an individual? I don't think that is a likely circumstance.
Nevertheless, what you describe is essentially an internship, which law students typically do their 1L and 2L summers. Oddly enough - the minimum wage has nothing to do with it. They are jobs where you are either working at a large firm and getting compensated at the same rate you would as a full time(180k a year - not too shabby for a fresh grad), or you are working at a smaller firm and probably for free... Nowhere is the minimum wage getting in the way.
I can see why the other poster kept taking up the issue with you. I can't imagine an actual situation where it's as you describe.
> it puts a cap on the profit that a corporation can squeeze out of its workers.
No, it doesn't. Competition does that. Minimum wage puts a floor on the economic value of labor that can get hired at all.
It might limit value extraction where there is a monopsony purchaser of labor who is not also a monopoly supplier of the good produced with that labor, but that's not actually all that common a situation.
> Employers who would be paying under it are simply not viable moral businesses
If there is work to be done that genuinely has value less than the minimum wage, is it truly better for society that the worker instead has no job prospects and the one who would have the work done instead has no work done? Who benefits from that.
> Now we can have economic arguments about what is true here, but the purpose of minimum wage today is a moral one and that must be factored in.
Any legitimate moral purpose of minimum wage is served better by taxing business income and high-end personal (including capital) income
and providing a UBI as high as economic productivity can bear without out-of-control inflation.
Which is not to say that in practice minimum wage isn't better than nothing, it's just far from the best means of achieving it's legitimate purposes, in large part due to the adverse consequences it has in limiting employability.
Competition can also do it, but idk how that eliminates minimum wage from doing it. Neither raises revenue, both simply put pressure on profit margins. The only difference is one is regulation, the other is market force.
> It might limit value extraction where there is a monopsony purchaser of labor who is not also a monopoly supplier of the good produced with that labor, but that's not actually all that common a situation.
I think that's a very narrow view. If you look at Walmart and the like, these are still huge chunks of the market with low pay precisely because of economies of scale, so they are monopsony purchasers, even without being the only supplier or a product.
Also not covered is that with high unemployment, competition isn't there. People in minimum wage job searches are often picking between a job and no job, not two different jobs. You're assuming that employment markets are both efficient and equally balanced.
> If there is work to be done that genuinely has value less than the minimum wage
I think this is where the moral disagreement comes in. An economy that regularly squeezes people below living wage for work needs to be corrected. Minimum wage is an attempt at that by lowering corporate profit.
> Any legitimate moral purpose of minimum wage is served better by taxing business income and high-end personal (including capital) income and providing a UBI as high as economic productivity can bear without out-of-control inflation.
I would love to see this! But realistically that's not politically possible (though it is looking more so with the pandemic but still, generally speaking) and we can't be idealistically categorical in our policy. Minimum wage is fully pragmatic to me, not an ideal. It's a net positive compared to the current situation.
> Competition can also do it, but idk how that eliminates minimum wage from doing it.
Minimum wage only potentially does it for a narrow range of work with actual economic value that is between the minimum wage and a small multiple of it, and only for jobs where there isn't effective competition for labor (because effective competition for labor already does it as much as is possible, leaving nothing for minimum wage to do), and always has the cost, whether or not the conditions exist to provide the benefits, of making impossible all wage labor with an actual economic value less than the minimum wage, which not only kills jobs, but prevents upward mobility from the experience people would gain in those lower-value jobs.
> Minimum wage is fully pragmatic to me, not an ideal. It's a net positive compared to the current situation.
Minimum wage + means- and behavior-tested public benefit programs is the current situation.
Sorry, to clarify, I mean a minimum wage increase generally as a policy. Specifics needed for nuance of course taking into account COL by location and economic climate. Again, I agree UBI via corporate profit taxation would be much more efficient.
> but prevents upward mobility from the experience people would gain in those lower-value jobs
You can see my other threads here but I would love to hear about these jobs with valuable experience that need to pay under any reasonable minimum wage that would not be already existing internship programs. I just can't imagine what these are.
As to the rest, I just don't believe that area is as narrow as you describe.
> jobs where there isn't effective competition for labor
I really don't think you have experienced/have an idea of what it is like to be anywhere near unemployed and "unskilled". Nearly all of retail/warehouse/gig/delivery jobs experience little to no competition since they all go as low as possible and say "take it or leave it" because they know the alternative in unemployment. Competition only exists today really in skilled job markets.
I think you misunderstand what a minimum wage does. A minimum wage doesn't increase the bargaining power of an employee. It means the employee has to have a minimum amount of bargaining power to get hired in the first place. It doesn't actually prevent any exploitation. Imagine you are an exploited worker. You hate your boss, your job and the pay sucks. Do you really need a minimum wage law to be allowed to leave the job? No, you can just quit at any time. If you already had enough bargaining power you didn't need the minimum wage in the first place.
A minimum wage does absolutely nothing. It's like the British Queen: a political symbol that you can talk about.
If it actually did something then you wouldn't choose a low limit. You'd increase it to $100/hour but then you realize something. Even your well paid software developer job is at risk of being stomped by the minimum wage.
I never said it increased the bargaining power of an employee. A minimum wage ensures that employees are paid enough to survive at a human level.
I think you misunderstand my use of the word "exploit" here. The underpayment is the exploitation, not work conditions here. I'm not sure where someone wanting to quit their job factors into my argument.
Agreed, what harm does a minimum wage cause? We have a reasonable minimum wage in Australia (though I don't think it's been adjusted for inflation for a while) and it facilitates time for education, which in turn facilitates social mobility.
On the other hand, you can have no minimum wage, and end up with a class of working poor who have no time to educate themselves, thus condemning them to a life of constant work with no hope of social mobility.
Australia has relatively high youth unemployement, a predicted effect of a high minimum wage: https://www.statista.com/statistics/811644/youth-unemploymen.... Having difficulty finding work after graduating high school or university is a common complaint among Australian youth, in my experience. The hardest part is getting the first job, getting the foot in the door, and this is because a minimum wage prevents many entry-level jobs from existing, where the value the positions would generate is much less than the minimum wage, so it makes no sense to create the positions.
>On the other hand, you can have no minimum wage, and end up with a class of working poor who have no time to educate themselves, thus condemning them to a life of constant work with no hope of social mobility.
The minimum wage can also create cycles of poverty by pricing people out of work. Some portion of the people who are "least hireable" are unable to get jobs because nobody would pay them $15/hour, so their only option is living permanently on welfare, which has a demoralising effect, and is associated with poor outcomes for their children. Imagine for instance the stereotypical Frankston junkie.
> Imagine for instance the stereotypical Frankston junkie.
I'd like to see data comparing minimum wage to drug abuse, but there's a few problems with trying to make that correlation. E.g., social welfare measures would largely factor in here, but I imagine that both minimum wage and welfare measures typically go hand in hand. But by naive comparison, just this wiki article seems to show that opiates abuse is about 5 times greater in the US vs Australia.
> Having difficulty finding work after graduating high school or university is a common complaint among Australian youth, in my experience.
Those numbers don't look all that different from the US. Are people pursuing minimum wage jobs after graduating high school or university? Even high school graduates with no intention of pursuing higher schooling seem to pursue a vocation at something higher than minimum wage.
Before corona, it was around 12-13% in Australia compared to 8-9% in the US, 3-4% is a non-trivial difference. In rural areas it's worse (https://www.abc.net.au/triplej/programs/hack/youth-unemploym...), which is expected as even if minimum wage is set "properly" for the cities, where most people live, it may be relatively too high for rural areas where cost of living and wages are lower.
>Are people pursuing minimum wage jobs after graduating high school or university? Even high school graduates with no intention of pursuing higher schooling seem to pursue a vocation at something higher than minimum wage.
Not everybody is able to find a higher-paying job, that's why we still see people at age thirty working in checkouts or McDonalds. Try not to think of the average person; instead imagine the worst behaved, most disruptive, academically failing students at your high school, and consider what kind of jobs are available to them. It's the least hireable people that are affected by minimum wage laws, not anybody who's capable of getting a better job.
> Before corona, it was around 12-13% in Australia compared to 8-9% in the US, 3-4% is a non-trivial difference.
I was looking over the past 10-20 years (I have no idea how long Australia has had a high minimum wage...I figured that wasn't a recent development). Around 2008 the discrepancy had the US 10% higher.
> Not everybody is able to find a higher-paying job, that's why we still see people at age thirty working in checkouts or McDonalds.
I agree. What I had (incorrectly) drawn from your statement was graduating implied they were pursuing a field--not the average person. I just saw that the US has 44% working low-wage jobs.
I think most people agree that minimum amount of money should be a basic right of every working person, but a minimum wage isn't the only way of accomplishing this — a guaranteed basic income or a negative income tax are superior alternatives to accomplishing the same goal. The US already has the Earned Income Tax Credit.
When you institute minimum wages (wage floors), businesses pass on those costs to the customer, resulting in inflated prices.
Imagine a pizza maker's market value is (say) $5/hour. They are able to produce (for simplicity's sake) 5 pizza's per hour, or $1/pizza. Including other operating costs + 3-5% profit margin (that's the average for most restaurants), let's say that the pizza sells for $5. Thus the pizza maker can expect to earn $40/day, on the market. Suppose the "livable minimum wage" should be $15/hour, or $120/day. There are 2 ways to guarantee this:
A) The government deposits an extra $80 to the worker, allowing them to make $120 that day. They can buy a pizza for $5, which is about 4% of their daily wage.
B) The government mandates a minimum wage of $15/hour, which means that the labor portion of the pizza cost goes up from $1 to $3 per pizza. The pizza now sells for $7 so that the shop doesn't go out of business. The worker makes $120/day, and can buy a pizza for $7, which is about 6% of their daily wage.
Notice that in (B), the worker is actually worse off, even though they have the same amount of money in their pocket. The worker has to pay a higher percentage of their pay to afford to eat, but this $2 extra means absolutely nothing to a billionaire, it's pennies to a rich person. This is functionally a regressive tax. In scenario (A), the worker is better off, and the welfare system that sustains it can be funded through progressive taxes, which targets rich people.
We as a society (rightly) demand a minimum standard of living for everyone, and we collectively pay for that one way or the other. Either we pay taxes to fund a welfare state, or we pay inflated prices for goods and services to maintain wage floors.
Paying taxes for welfare is more progressive, as the burden falls on richer people. Paying inflated prices for goods and services is regressive as it's a burden that falls equally on the rich and the poor.
I love how the parent stakes out several moral positions but tries to present them as objective truth or just “the way things are” with no evidence presented. Clever.
In my experience, once you get past the basics, economics is largely about dressing up ideology in the trappings of science. More generously, economics seems to be most similar to philosophy with competing schools of thought that differ primarily in what assumptions and axioms they choose when modeling human behavior.
This seems to be a very common tactic with American right wingers (on the internet at least) - speak/write as if the actually controversial/differing parts of your belief are obviously true, and only go into detail on what logically follows from those axioms.
nonidentified says>"As a profession, we have a miserable track record on morality."<
Hah! As a profession, you've had a miserable track record on _economics_! The profession should be academically "tarred, feathered and ridden out of town", departments dismantled and the models handed over to Operations Research departments along with a strong warning.
I wouldn't do that. It's widely accepted among economists that reducing funding for economics departments would be terrible for the university budget as a whole.
"And many modern economists endorse a minimum wage, as eugenicists did then, but with even less regard for the harm it causes."
Come on, you know the idea of a minimum wage is pretty widely accepted as a good idea by a lot of people, including (most? edit: apparently majority, but not by much) economists. You can't just phrase something as if it was widely accepted as true and make it so.
Don't get me wrong, you're absolutely allowed to voice your opinion on this, but the way you've phrased it strikes me as being rather intellectually dishonest.
>Come on, you know the idea of a minimum wage is pretty widely accepted as a good idea by a lot of people, including (most?) economists.
From a recent study https://cei.org/blog/what-do-economists-think-about-minimum-... : "A new poll of professional economists finds 74 percent of respondents opposing a $15 per hour minimum wage—and nearly a mirror image of non-economist public opinion, which is nearly a mirror opposite. 84 percent believe it would have a negative impact on youth employment levels. 43 percent favor eliminating the minimum wage outright. Only 12 percent of respondents identify as Republicans, which is roughly representative of the profession as a whole, with 35 percent identifying as Democratic and 46 percent as independents."
That sounds like it supports my statement? 74% oppose a specific increase, but only 43% oppose having a minimum wage. (That wording is ambiguous as to whether that's 43% of 100% or 43% of 74%, but both are < 50%)
I suppose it's the language: it would support "accepted by a majority of economists", but I don't think 57% support counts as "pretty widely accepted as a good idea by... most economists".
I dunno, we might want to start getting some sources in on this. This is the one article I've seen beforehand that discusses how much economists endorse the idea of a minimum wage ($15/hr specifically) and it casts doubt on your very confident tone. I don't really know what to believe, maybe more polls are necessary.
I don't think I was being very confident - there was a reason I said "most?". However I'm fairly certain enough economists agree with the idea of a minimum wage that stating that it's a bad idea as if that's just accepted to be the truth is a little odd.
I sincerely don't know. I have one economist friend and he's iffy on the subject, claiming that minimum wage helps certain low-income groups and hurts other low-income groups. Based on that I don't even think you could categorize him as thinking it's a good or bad idea. That begins to step beyond the realm of economics and into politics or philosophy.
I agree; to latch onto your comment, the last time (AFAIK, my history is not great) the US made sweeping changes to its production was during WW2, where they changed the economy and shifted the workforce towards the war, producing weapons, ammo, etc.
On the one side it's a testament to the US' potential manufacturing prowess, on the other you have to wonder about the moral justification of it. If you take it out of context, of course, I mean they and the rest of the world were fighting some of the most morally objectionable forces at the time (the nazis and Japanese).
As an aside, the way things are heading now, the world will have to unite against the US. At least for now the US seems to keep to itself for the most part.
> Is there another kind of argument from morality EXCEPT those that go, "We shouldn't do that because it could harm people?"
The argument in this case appears to be exactly that, i.e. we shouldn't do that because those people would make too much money.
> Hard to take someone seriously who blithely compares genocide to a minimum wage....
There was a lot more to dislike about eugenics than genocide. You play the same game from the other side and you get to claim that Stalin's purges are attributable to the minimum wage because minimum wage is a communist policy and therefore responsible for all the things the communists did.
Eugenics is a much more mundane stupidity than that, like purposely trying to breed a lack of genetic diversity independent of "race" -- and we still do this with crops and livestock to our peril -- but back then they did it with people.
This has obvious parallels to minimum wage, where people are messing with something they don't fully understand based on simplistic assumptions. And then you do things like make it harder for young people to get internships because they can't pay a living wage even though that was never their purpose to begin with, or subject desperate people to really terrible jobs with longer commutes or less flexibility or otherwise higher real costs that actually really messes up their lives because you decreed that they couldn't accept a better job that pays less. Which have serious and long-term effects on large numbers of people.
You are comparing adjudicating the worth of a non changeable attribute of a human to the minimum cost of labor. If you can’t see the difference between the two then I don’t know what to do. There slippery slope arguments then there are just silly arguments.
There are many people with disabilities that prevent them from doing ordinary work but who could do certain jobs with lower productivity. A minimum wage is essentially telling these people that they are worthless and should sit in a room doing nothing even though they want to work and feel useful, and in many cases this makes their lives substantially worse because they both feel useless and have less income when they can't work.
That actually sounds kind of a lot like what they did to some of the victims of eugenics.
Right. And there’s no way to have an exception just like there is today. I can’t tell if you’re all be obtuse on purpose. Is this some sort of political movement to equate minimum wage to eugenics? As is now conservatives care about the poor, disabled, and minorities? What’s crazy is that I agree with OP of this thread that economists should refrain from saying what’s moral. But that’s because most economists are just old white men, and I doubt they’re able to judge what’s moral better than others.
Lots of rights enjoyed by all today in th US - the most important being voting - were originally established specifically at the exclusion of people of color and women.
The problem wasn't the rights themselves, it's that they were purposely offered to white men only.
Therefore it's deceptive to attack the minimum wage as being any more racist in origin than the right to vote is. Much of the law has deeply racist origins that has only been reformed in recent decades, and even then not completely.
That's a completely different thing. The minimum wage wasn't originally only offered to white people: it was mandated for everyone, for the purpose of rendering those with lower-paying jobs (people of color, immigrants) unemployed, or preventing them from competing with whites. The briefing paper at https://www.cato.org/sites/cato.org/files/pubs/pdf/bp017.pdf discusses this.
"The law provided that all federal construction contractors with contracts inexcess of $5,000 or more must pay their workers the "prevailing wage," which in practice meant the wages ofunionized labor. The measure passed because Congressmen saw the bill as protection for local, unionized[12] white workers' salaries in the fierce labor market of the Depression.[13] In particular, white union workers were angry that black workers who were barred from unions were migrating to the North in search of jobs in the building trades and undercutting "white" wages.[14] The comments of various congressmen reveal the racial animus that motivated the sponsors and supporters of the bill. In 1930, Representative John J. Cochran of Missouri stated that he had "received numerous complaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South."[15] Representative Clayton Allgood, supporting Davis-Bacon on the floor of the House, complained of "cheap colored labor" that "is in competition with white labor throughout the country."[16]"
> it was mandated for everyone, for the purpose of rendering those with lower-paying jobs (people of color, immigrants) unemployed
So it was mandated for "everyone", but by your own description, not really, because it adjusted another variable - who had a job - by race, which is practically the same thing as being racially exclusionary.
This is not so different to how black people in theory got the right to vote after the Civil War, but practically were excluded from voting in many areas until just 50 years ago.
No, it is very different from that. The right to vote in that case was denied purely based upon racial boundaries - it's not like poor white people couldn't vote in the South.
Minimum wage is much more underhanded than that, because it was passed in the name of fairness but it was really just to protect entrenched workers against an incoming wave of competition.
These labor protections in the US are what initially got so many working-class white Americans on board with the progressive agenda in the first place.
> Minimum wage is much more underhanded than that, because it was passed in the name of fairness but it was really just to protect entrenched workers against an incoming wave of competition.
was much more underhanded, not is.
Who cares how it started? Again, many rights we have today started out either explicitly or implicitly limited by race.
Today, the minimum wage is very much about fairness to low wage workers of any race, but especially low income people of color, who are over-represented at the bottom end of the income ladder.
If you arguing against that, you'd be arguing that today's progressive movement is secretly about preserving jobs only for white people, which would be extremely far fetched. It seems more like you are trying to foist the racist rationale for minimum wage from yesteryear upon the far more equitable purpose it serves today, in an perhaps underhanded attempt to discredit today's version.
If you're going to argue against today's minimum wage, you should use arguments relevant to today, i.e. the usual ones you hear from its opponents about how it will bankrupt businesses, and rob the poor of the incentive to pull themselves up by their bootstraps.
What about the person who wants to sell their services at a rate lower than what the government has deemed allowable? Where are their rights in this scenario?
I don't know about New Zealand, but in 1912 Arthur Holcombe of Harvard University said about Australia's minimum wage:
"[The minimum wage will] protect the white Australian’s standard of living from the invidious competition of the colored races, particularly of the Chinese."
TL;DR: MMT starts by saying that governments that manage their own currencies have unlimited spending ability – they can simply create money when they need it. And that's obviously true, to the extent that people are willing to accept that money in exchange for their goods and services (an extent which is not infinite). Then, building on that premise, MMT basically claims that nobody needs to get hurt when governments create money out of thin air. The explanations for this are pretty wonky and hard to follow, but they amount to saying that the theory generally predicts no harmful inflation of the currency.
Analysis: Hasn't mankind already concluded that governments can't just create and spend money boundlessly without harming the economy and the people who constitute it? I'm looking at Argentina, Venezuela and Zimbabwe right now, where the governments have each created money to finance their spending, and people are truly suffering as a result. And those are just some contemporary examples – human history offers many more, and they're quite consistent. If MMT doesn't predict inflation as a result of arbitrary creation of currency, then it seems we can conclude MMT is incorrect.
Radical alternative theory: Governments should be fiscally responsible, practicing balanced budgets and promoting currency stability. Outlandish, true. But it turns out that historically this has been a very winning formula. More efficient economies, less corrupt governments, fewer innocent people getting hurt.
>>" If MMT doesn't predict inflation as a result of arbitrary creation of currency, then it seems we can conclude MMT is incorrect."
That is not at all what MMT says and I don't understand how an honest reader of the MMT literature would arrive to that conclusion.
What they say is that public debt and public deficits are irrelevant (there goes your "outlandish true" of balanced budgets) but they also say that inflation is the most important constraint in public spending.
>> And that's obviously true, to the extent that people are willing to accept that money in exchange for their goods and services (an extent which is not infinite)
In the MMT framework, there is always demand for the currency in what taxes have to be payed. That's obviously true. That doesn't mean that inflation is not a factor.
Translation: Countries can incur as much debt as they want, because they can "print" their way out of it without harmful consequences.
> inflation is the most important constraint in public spending
Translation: People's economic suffering is the most important constraint in government spending.
> most cases of hyperinflation in history, including the infamous Zimbabwe, are due to a supply shock
Translation: Most cases of hyperinflation in history were due to economic crisis.
Hyperinflation is due to creating far too much new money. Enough to foster price increases of at least 50% per month. Economic crisis does not necessitate doing that.
By the way, in the case of Zimbabwe, it was the government economic mismanagement that created the economic crisis that you blame for the monetary mismanagement. From your article: "From an economic perspective though the [government] farm take over and collapse of food production was catastrophic." Then the government chose to try "printing" its way out of the problem. Hyperinflation wasn't mandatory, it was a consequence of reckless behavior.
> how an honest reader of the MMT literature would arrive to that conclusion
The only substantial concession to inflation risk I've seen in the MMT literature is in conditions of "full employment." Feel free to set me straight if that's not correct.
Empirically speaking, inflation follows injecting money into an economy, and inflation is quite harmful. It seems MMT resists at least the first conclusion, if not both.
While we're on the topic of honesty, doesn't MMT feel like an economic "get rich quick" scheme to you?
> What they say is that public debt and public deficits are irrelevant (there goes your "outlandish true" of balanced budgets) but they also say that inflation is the most important constraint in public spending.
I heard this story in a debate between an MMT economist and an Austrian economist
Imagine a husband and wife having the following conversation :
Husband : Let's go and buy a new mansion, a Lamborghini and a private jet
Wife : Are you sure we have enough money to do all that ?
Husband : Well, if we don't, I can always pick up my shotgun and hold up the nearby bank
Wife : Are you crazy ? You could go to prison. Or get shot by the police
Husband : Well, I know that. But I just wanted to point out that not having enough money was irrelevant. Going to jail or getting shot was the most important constraint from spending all that money.
This misses THE central point of MMT, the fundamental difference between currency issuer (souvereign authority) and currency user (households, firms, regional governments, etc).
Governments have not historically kept balanced budgets more often than not, and when they have it's not a winning formula. Some of the worst economic crises have occurred after some of the most successful runs of 'responsible' Government balanced or surplus budgets, because it saps net financial assets from the private sector, with the only way for growth to happen being private debt (which eventually leads to deleveraging when the private sector can't take on more debt, which pretty much always results in recession). The only way run a Government surplus and avoid this is to run a big trade surplus (like Germany) - but that's a zero sum game so not everyone can.
Argentina, Venezuela and Zimbabwe aren't in any way representative of the results of "printing money". They are much more complicated than that, and MMT actually has much more explanatory power to explain what went wrong (variously - huge supply shocks leading to massive unemployment, attempting to maintain a peg to a foreign currency, and having debt denominated in a foreign currency, etc.).
One of the leading MMT researchers, Prof. Bill Mitchell is especially interested in inflation, and they have actually generated a pretty strong theoretical framework for how it happens that again has better explanatory power than competing theories (i.e. Austrian economics that predicted hyperinflation due to QE, monetarism that can't explain why inflation is so sluggish with such low interest rates, etc.). He publishes a lot of info on this his blog nearly every weekday, it's definitely worth a read.
Any theory of money needs to explain how the US went from subsistence farming in 1800 to superpower in WW1 on the gold standard (which more or less means balanced budgets).
That's definitely in spite of being on the gold standard. Have a look at the history of financial crises in the US [1]. In the time period you mentioned, there were 21 recessions, five 'panics' and three depressions.
If you look at the CPI history, it was largely deflationary (which is good if you do like recessions and depressions), but also times where inflation reached 27% [2]. The gold standard can't stop price inflation, and when inflation takes off it makes currency pegs impossible to hold, which is why pretty much every commodity convertible currency has eventually failed.
A gold standard does not imply currency pegs. I think we can all agree that pegs never work.
As for the panics etc. in the 19th century, yes they happened, and were usually the result of government monkey business with the economy. Note that with fiat money we've still had panics, depressions, and recessions, including the Mother Of All Depressions.
The last one was just 10 years ago.
> The gold standard can't stop price inflation
If it doesn't, then you don't actually have a gold standard. You have pegging a currency to gold, which is something quite different.
> Since the government at the time did pay off the national debt
There was a brief period in the early half of the 19th Century where it paid off the debt, but the
it ramped up beforen the secession crisis, went sky high during the civil war, and was never paid off after that, so, no, in net budgets weren't balanced in the Revolution to WWI period.
Also, other problem with your scenario is that the US didn't start as a subsistence farming economy (which would have made it near worthless as a set of colonies.)
What governments should do is spend appropriately to maximize the welfare of their people which includes not having runaway inflation and also borrowing and spending during economic slumps.
> What governments should do is spend appropriately to maximize the welfare of their people
Are you suggesting that people aren't capable of spending appropriately to maximize their own welfare, and that the government would do a better job of it (after taking a cut of the money)?
> What governments should do is ... borrowing and spending during economic slumps
Even if this were true, and I think global economic malaise since the financial crisis is evidence it's not, it omits the corollary that governments should then repay debt and save during economic booms. You can't responsibly have one without the other, can you?
> balanced budgets [are a bad idea]
So debt is a good idea? We should finance current spending at the cost of future spending? That's a pretty radical statement. The burden of proof is on you.
And that is what MMT actually suggests, when one do not leave out half their argument.
Their argument is that taxation can be used to take money out of the economy while government spending puts it in. Balance the two and you also control inflation.
His however hinges on the economy being largely self-sufficient, or has tight controls on imports.
Across history, the nations that has gotten into trouble over "money printing" have actually run a massive current account deficit, meaning that they are importing way more than they are exporting.
> His however hinges on the economy being largely self-sufficient, or has tight controls on imports.
So, not actually applicable to the US. (Unless you're going to argue that the US's imports aren't enough to matter. If you want to try to make that argument, go ahead, but it's clearly an additional step that's needed before you can argue that we should actually try to apply MMT.)
In MMT, taxation acts as the ultimate sink. It is the combination of taxation and government spending that acts to "balance" the national economy.
This flip the normal budget worries on the head, as taxation comes after spending rather than before.
Note though that unlike your example, MMT requires a nation that is internally self-sufficient when it comes to basic supplies. The problem for both Venezuela and Zimbabwe (i am not up to speed on Argentina) is the amount of imports needed to sustain the population.
When imports overtake exports, the exchange rate suffers, and exchange rates can't be fixed by printing more money.
Venezuela got into the predicament it is in because the government thought they could use oil exports, that were at the time an all time high, to counterbalance the imports used to help the poor. But then the oil price tanked. And Venezuelan oil is a particularly expensive oil to process, so it was the first to go when refineries cut back on production.
> MMT requires a nation that is internally self-sufficient when it comes to basic supplies
To be fair, isn't this a lot like saying, "MMT requires conditions that don't generally exist"? What modern economy isn't shopping internationally for the best prices on basic supplies?
Ultimately this condition seems to imply that MMT requires either 1) a subject economy to be the most efficient producer of all basic supplies (probably impossible, and if achieved then impossible for any other economy) or 2) a prohibition on the import of basic supplies (despotic and economically dysfunctional). Is this correct?
This is making me think of Import Substitution Industrialization (ISI) in Latin America. It was a strategy to become economically self-sufficient, but it didn't work out well.
"A job guarantee (JG) is an economic policy proposal aimed at providing a sustainable solution to the dual problems of inflation and unemployment." However, it is economic consensus that inflation is caused by government monetary policy (the "monetarist" view). It is also economic consensus that inflation is destructive and creates unemployment. So if government policy is creating inflation, and therefore unemployment, why would a government "job guarantee" be a sensible response? More alcohol doesn't sober a drunk man; more intervention doesn't balance an economy.
As the article correctly notes, "When inflationary expectations subside, [unemployed] people will get their jobs back." So isn't the most sensible solution to have the government stop inflating the currency? That would solve the "dual problems" without introducing a third. It would also be a fair and honest thing to do. After all, inflation is the government's way of raising revenue by cheating (it's "the hidden tax").
As a side note, it amazes me these antique economic fallacies consistently appear on HN, of all places. They are worse than nonsense, they're dangerous. When practiced, they really hurt people. Yes, they might help a few people - but they hurt far more than they help, and for far longer. Consider the government make-work programs during the Great Depression, which are now credited for dragging out that misery. Please, enough with the junk economics. There are far more fruitful government policy discussions to occupy intelligent minds - increasing efficiency, reducing deficits and debt, fighting corruption, stopping war, to name a few.
I'm OP. I posted this because I discovered this with relation to an article I read about MMT, and wanted to understand exactly what you explained, from a person with your qualifications. Your response would have been so much better had it not contained the judgmental side-note.
I think debating and dismissing old bad ideas is something that every generation needs to do, lest they reinvent it.
My personal belief is that if we stop inflation, it will eliminate the pressure for continuous "growth", because money can now be a store of wealth that no longer leaks value and therefore there will no longer be a need for continuous investment. Perhaps the pace of society can slow down and people can relax. What would your expert opinion on that be?
When you say economic consensus, do you mean there are testable predictions based on the consensus that have been shown to be reproducible in multiple real world experiments?
Lots of economics seems to me like it's models that appear to work but don't generate testable predictions that turn out to be accurate.
>So if government policy is creating inflation, and therefore unemployment, why would a government "job guarantee" be a sensible response? More alcohol doesn't sober a drunk man; more intervention doesn't balance an economy.
What is the argument you're making here? That if one particular policy causes a problem, then every policy will cause problems?
Your idea is interesting, but there are plenty of justifications given for governments setting positive inflation targets. Assuming they can control e.g. public sector wages and export competitiveness by another means, how do you prevent people being disincentived to spend or borrow money?
Have you considered that people (1) need and want to consume and (2) want to invest into things that bring in more money, and/or other goods?
Forcing people to consume and invest, because else the money will expire, leads to mindless consumption, reckless unwise investment, and the lack of safety nets provided by savings.
After two degrees in economics, my perception is that monetary policy is definitely considered a primary driver of inflation, probably THE primary driver. But this is probably irrelevant - see below.
> In this case, the inflation comes from increases demand on a portion of the food supply chain (shipping services).
Yes, for example: "in North America... a shortage of both shipping containers and truck drivers".
> The alarmism in the comment section largely comes from people misreading the headline.
To me, it feels alarmist for Bloomberg to consistently say "inflation" instead of "price increases" throughout the article. A temporary problem with supply/demand is not the same as inflation. Food prices will almost certainly fall back to their normal trajectory within a year or two, once supply/demand normalizes, whereas if there was truly inflation that would almost certainly NOT occur.