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July 31, 2006

Comments

The plausible explanation for what will happen when you raise the price of something is that you will get less demand for it; that's probably the most basic tenet of economics, and it seems to work out pretty well. The fact unemployment doesn't spike upwards when the minimum wage is increased is not evidence that the theory is wrong, it's evidence that in a complex system like the economy, it's tough to determine just what the effect may be.

Surely it's evidence that whatever the effect is, it's not increased unemployment. You can use theory to predict effects, and then check for them by looking at what happens in reality, but in the absence of any particular demonstrated bad effect, saying that theory shows that raising the minimum wage will have some effect doesn't appear to be an argument against it.

Can I mention again what I think is one of the great evils of our system? Unrelated bills should be separate bills.

Surely it's evidence that whatever the effect is, it's not increased unemployment.

If you mean that this is evidence that increasing the minimum wage won't always result in an actual increase in unemployment, then that's true; if you mean that this is evidence that increasing the minimum wage ceteris paribus doesn't increase unemployment, then that's not true at all.

Yet again I shake my head in amazement at the system of bill proposals in the US. So I'll not comment on the feature of combined bills either.

But about minimum wage: if nearly half of it is pinmoney for youngsters the impact on the economy is small: they will not work full time, will they?
It's the other half you are discussing, the part that works full time and might well have to support a family.

Lizardbreath is correct of course. I recall reading Cowen's post (and commenting on it) and being amazed at the implication that theory trumps evidence. (That's overstating Cowen's point a bit, but not too much). Given ambiguous evidence about all the complex interactions, maybe the smartest thing to do is raise the wage, recognizing that the one concrete effect we can be sure of is that some low-income workers will get a raise out of it.

I personally am fascinated by the obsessiveness with which Republicans attack the estate tax, using almost totally spurious arguments. To link it with a minimum wage increase is grotesque. (On preview I see Sebastian's comment, and agree). It has now gone beyond the "we think this is a good idea" stage to becoming a core item of their agenda. Bush even raised it at the NAACP convention as a potential huge benefit to minority business owners. It is hard to imagine a more insignicant concern faced by minorities.

Can I mention again what I think is one of the great evils of our system? Unrelated bills should be separate bills.

Amen. I've gotten to the point of thinking we need a Constitutional amendment on this one. It drives me nuts.

I'm baffled by all the energy put into the estate tax legislation, too. There's really a lot more huffing and puffing than there is actual case-making that there's some giant inequity that needs to be righted. Throw all the tomatoes you want at that last.

The minimum wage issue I'm less confused by; I doubt half a million people would, for example, be affected by any proposed changes to the estate tax law. I would, though, want to see something a little more than conversational arguments for it to have my opinion flipped.

if you mean that this is evidence that increasing the minimum wage ceteris paribus doesn't increase unemployment, then that's not true at all.

It's not absolutely conclusive, but it's evidence supporting that conclusion. And it's much stronger evidence that, even ceteris paribus, any unemployment increasing effect is unlikely to be large, given that if it exists it is easily hidden by confounding factors.

Amen. I've gotten to the point of thinking we need a Constitutional amendment on this one. It drives me nuts.

Me, too. Although I think this will happen sometime after I train my pet rock to fart on command.

Although, on the bright side, he's already got "stay" down pat.

But seriously, I thought perhaps something like this would have been the obvious course, after the line-item veto went into the dumpster.

Sebastian and LizardBreath -- how would you formalize the notion of "relatedness"? Like you, I think bills should be factored into semantically related components....but I can't imagine how that requirement could be expressed in law, let alone a Constitutional amendment.

That would be difficult, especially in budget legislation.

"The plausible explanation for what will happen when you raise the price of something is that you will get less demand for it."

My demand seems to have lessened for housing, gasoline, hotdogs at ballgames, plumbers, medical care, and the bacon on that Wendy's cheeseburger. And yet the price keeps going up. Since .... forever.

And those fancy coffees at Starbucks? Raising the price for a latte seems to have worked wonders for them. So, if the college students can now better afford a latte, more power to them.

Also, if we lessen the price of government by lowering taxes like the Estate Tax (I sincerely thank you, Andrew, for calling it by its name. I have noticed that calling it by the new name -- the Death Tax -- has not lessened the death rate -- people still seem to line up to die at the old rates despite the incentive not to), won't people demand more government? Seems like we should raise the cost by raising taxes and then folks would want less of it. If things work the way economists say they do.

I notice firefighters are now paid enough to afford two jobs, in separate cities.

Sebastian: "Can I mention again what I think is one of the great evils of our system? Unrelated bills should be separate bills."

Your system would be better. But then we wouldn't have "sausage". I think what has happened is that throwing extraneous stuff into bills is now less of a way of building concensus and incentivizing support for the main thrust of a bill, and more of a way of taking it right into the face of the political opponents.

I can't think who started it, but I can guess who made it into a reality show.

I don't think I've ever seen a price elasticity curve for low-wage labor based on actual data, as opposed to calcified theory.

Also, the move from "people under 25" to "high school and college students" strikes as both indefensible and pretty much the point of using 25 as the cutoff for this analysis, as so many minimum wage opponents do. There are many life situations other than those two for people under 25, so that figure alone gives us no clue about how "sizable" the fraction of minimum wage earners who don't need the money really is. As with the unemployment question, I await, without much hope, a finer analysis of the data.

Ditto about unrelated bills. That they aren't allowed to do that is not only the best thing, but the only good thing I can say about the Pennsylvania state legislature.

I've read many arguments from people who oppose raising the minimum wage because most minimum wage workers are young and employed part-time. The problem I have with these analyses is that they focus only on workers at the current minimum wage and do not (from what I have seen) include all workers likely to be affected by the change. If the current minimum wage is $5.15 and they are considering raising it to $7.25, then they need to look at everyone currently making between $5.15 and $7.25 in their studies, since the ones on the higher end of that are not going to just sit still and continue taking $7.25 an hour when new hires are being brought in for the same amount.

If I had to guess, I'd say that raising the minimum wage would have some upward effect on the wages of anyone making less than $10, once the new wage structures settled out. I'm fairly certain that those numbers would include a lot more than just high school kids working part time.

Andrew writes: "The plausible explanation for what will happen when you raise the price of something is that you will get less demand for it; that's probably the most basic tenet of economics, and it seems to work out pretty well."

Demand for gasoline hasn't responded that way despite a significant increase in price. People bitch and moan, but for the most part haven't stopped driving.

(They have, however, cut down on SUV purchases, which shows they feel the pinch enough to not seek out more pain.)

Sebastian and LizardBreath -- how would you formalize the notion of "relatedness"?

I have actually tried to do this, and failed. My best attempt was to just use the words 'reasonably related' and figure that it would help some.

A couple of other blogs recently linked to a news report on the city of Chicago telling Walmart they would have to pay their employees reasonable rates with reasonable benefits or get lost.

One interesting aspect of this immediately occurred to me (well, when I say "immediately", it suggested itself and I did some fact-checking on xe.com and on minimum wage sites to prove the suggestion correct):

Walmart in the UK trades as Asda. Asda is doing pretty well in the UK (around 15% market share).

The minimum wage required in the UK for workers aged 18-21 ("developing workers") is more than the starting wage Walmart pays any employee - Walmart's starting wage isn't much more than the minimum amount an employer has to pay a 16-17 year old. The wage the City of Chicago says is fair for the minimum wage an employer has to pay is just about the same as the minimum wage that the UK government sets for workers over 21.

So, the wages Walmart claims it can't afford to pay in the US to Americans, it can afford to pay in the UK to Brits.

Basically, a minimum wage levels the playing-field and requires all employers - large and small - to treat all workers decently. Decently means, at minimum, paying a wage that employees can afford to live on. Walmart prefers to let the taxpayers help pay their employees, and for some reason, conservatives seem to support Walmart in that endeavor, which always seems a little counterintuitive to me.

"Like you, I think bills should be factored into semantically related components....but I can't imagine how that requirement could be expressed in law, let alone a Constitutional amendment."

I think it would be best enforced as a customary measure. (I'm not saying that it ever was a custom, so far as I know it wasn't. I'm saying it would be a good custom to have). The fact that we have to talk about it from a legal (or Constitutional) perspective reflects an unhealthy preoccupation with legalism as a solution to problems. Codifying such things as "relatedness" is almost impossible. Nevertheless, the idea is almost instantly recognizeable.

BTW, this isn't an attack on Vance's question. At this point, to make something like that stick it would almost certainly take a law. I just think that fact is lamentable.

I think that the idea of repealing the estate tax is odious and horrid. I would much rather have my Senators vote against the whole package and try again on the minimum wage after November than have them vote for it and then have to get charged with "raising taxes" for putting the estate tax back in place in the interests of fiscal sanity.

About the minimum wage, some relevant data:

"Not surprisingly, a significant share of low-wage workers had low family incomes in 2002.2 Nationally, 38% of workers who earned between $5.15 and $7.99 in March 2003 had low incomes in the previous calendar year (Figure 2A). (Low income is defined here as income below twice the poverty line, a commonly used measure for the level at which the costs of basic needs start to be provided for. As noted above, for a family of three this is less than $29,000 per year.) For these low-wage, low-income, workers:

• On average, their earnings contributed 68% of their total family income in 2002.

• Almost half (47%) were married or had children.

• Eighty-seven percent were 20 years of age or older.

The remainder of low-wage workers lived above the low-income line. Yet these workers are hardly the wealthy teenage caricatures invoked by minimum wage opponents (Figure 2B):

• Forty-five percent of the low-wage workers living above the low-income line were married or had children, and for many of them their earnings were essential to their families' economic well-being. On average, these workers' earnings contributed 37% of their families' incomes in 2002. Thirty-five percent of these workers would have been in families with incomes below the low-income line without their earnings.

• Thirty percent of low-wage workers living above the low-income line are un-married adults without children living with their families or relatives.3 They are predominantly young adults living at home. In some cases the income of these workers was important to their families16% of them would have had family incomes below the low-income line if it weren't for their earnings, and, on average, they provided about one of every six dollars of their family's income in 2002. Another indicator that these workers are struggling to meet their basic needs, even though they are not living in poverty, is that about one-third did not have health insurance during the entire year of 2002. Also, a large group of these workers (42%) were enrolled in college. Thus, this appears to be a group dealing with the expense of education or unable to afford to move out of the family home because of low personal income.

• Fourteen percent of those with low wages and incomes of more than twice-poverty were adults living alone. These adults had average annual earnings in 2002 of just over $26,000. About a third of these workers did not have health insurance.4

• Eleven percent of those with low wages and incomes of more than twice-poverty were children.

Thus, the picture of low-wage workers is not the one of undeserving well-off families that minimum wage opponents would like the public and policy makers to imagine, but is, for the most part, one of struggling families and individualswhether officially impoverished or not. In fact, 1.4 million families that weren't categorized as low income in 2002 would have been if it weren't for the earnings of the low-wage workers in their families (Figure 3)."

The number of workers making the minimum wage is not high, and nearly half of them are 25 or younger, which suggests that a sizable fraction of any minimum wage increase is going to go into the pockets of high school and college students working a job for pin money.

This seems to be the standard argument against the minimum wage these days since the economic freedom and higher unemployment arguments are non-starters. It is wrong on many many levels.

First of all, you have no idea how many of those 25 and unders are high school and college kids working for "pin money". In poorer families, high school kids may well be working for "food money" and college kids could easily be working for "rent money" or "book money", since Uncle Sugar and institutions of higher learning aren't always so generous with the financial aid.

And what about those 23-25 year olds? How many of them are working for "pin money"? When I was 25 I was married and had a wife and newborn son to support.

Not to mention that half of the minimum wage earners are over 25. Don't these people deserve a raise? Should we not pass legislation to help the working poor because some of the benefit will accrue to to kids working to buy CDs or accessories for Hot Topic?

And finally, a real increase in the minimum wage is going to help more than just the people currently making the minimum. The current proposal will raise the floor from $5.15 to $7.25 over three years, which will give all workers making under $7.25 a bump as well as putting upward pressure on wages on the low end of the pay scale.

Hogan writes,

Ditto about unrelated bills. That they aren't allowed to do that is not only the best thing, but the only good thing I can say about the Pennsylvania state legislature.

How is the prohibition expressed? Is it a matter of custom (Sebastian), or a vague statute (LB)?

Perhaps it would be possible to define broad categories of law -- for example, however it is that we define the scope of the various legislative committees -- and then require each bill to fall in exactly one. (Of course, every program needs money, so this would immediately have to be qualified.)

kenB: "If you mean that this is evidence that increasing the minimum wage won't always result in an actual increase in unemployment, then that's true; if you mean that this is evidence that increasing the minimum wage ceteris paribus doesn't increase unemployment, then that's not true at all."

I don't know many people who accept you second claim. Our arguments would be: first, that raising the cost of something tends, ceterus paribus, to decrease demand for it is true, but by itself it tells you nothing about the magnitude of this change. To know whether an increase in the minimum wage will lead to massive unemployment among low-wage workers or to, say, one worker somewhere in central Missouri will not get hired because of an increase in the minimum wage, you need to know the demand curve, which is (one of the places) where the evidence comes it.

Second, we only grant the 'ceterus paribus' part if it's understood to exclude not just unrelated other stuff, but also the possibility that the minimum wage might have other effects, e.g. by increasing the amount of money that low-income workers have at their disposal, thereby increasing demand in low-income neighborhoods, etc. (I just made that up; the general idea is just that increasing the min. wage could have other effects that outweigh any drop in demand.)

This is why we grant the general point about the law of supply and demand, but think that (on this issue) it shows nothing of importance in the absence of evidence on the size of the reduction in demand, and other effects of increasing the minimum wage.

Vance,

"How is the prohibition expressed? Is it a matter of custom (Sebastian), or a vague statute (LB)?"

It's part of the state Constitution, actually. It also is difficult to enforce at best, as I recall very few, if any, successful challenges to legislation on these grounds. Hogan, do you know of any?

Also, I thought the best thing about the PA Legislature was that it is a good idea to group together people paid $70,000 for a part time job who need a raise due to their bad credit ratings (as the Speaker of the State House recently claimed as a justification for last year's midnight pay raise). That way, there should be a presumption that any state legislator does not know how to budget money (now if we could only keep them from passing one...)

since the economic freedom and higher unemployment arguments are non-starters.

Wow. Economic freedom just isn't an issue, huh?

Don't these people deserve a raise?

Their employers apparently don't think so. I'm not of the opinion it's the duty of the government to say that they do. What makes you think they 'deserve' a raise? What have they done that demonstrates to you they deserve a raise? As it seems unlikely that you actually know what they've done, I presume your definition of deserve is markedly different from mine.

As far as how many people making minimum wage are not students or retired people working for spending money, I would ask that people examine the entirety of the argument: that the minimum wage is a broad brush when a more targeted program (like EITC) would affect the people that I presume we're looking to help more effectively.

Andrew--a more targeted program (like EITC) would affect the people that I presume we're looking to help more effectively.

When I was in my 20s and working low-wage jobs (for rent and food), I would rather have had $10 a week more to spend than an EITC that I got once a year. I needed more to meet the weekly/monthly expenses like food and medical costs. It would be years before I could think about savings and equity. I had to worry about keeping an apartment and a working car and food, and there wasn't any slack in my budget that would allow for me to wait for my EITC to pay back those expenses.

The language from the PA Constitution (Article III, Section 3), reads:

Form of Bills
Section 3. No bill shall be passed containing more than one subject, which shall be clearly expressed in its title, except a
general appropriation bill or a bill codifying or compiling the law or a part thereof.

Not a lot of guidance there.

nous,

It is possible to get the EITC throughout the year, rather than as a lump sum. Publicizing that (and making it simple) might be a valuable reform as well.

Andrew writes: "As far as how many people making minimum wage are not students or retired people working for spending money, I would ask that people examine the entirety of the argument: that the minimum wage is a broad brush when a more targeted program (like EITC) would affect the people that I presume we're looking to help more effectively."

The military uses cash incentives to attract recruits, largely in the under-25 age group - are these people enlisting just to earn "pin money"?

Also, note that retired people probably aren't working for "spending money", they're probably working for money for necessities like food, medicine, and utilities.

Jon h,

I'm not sure I understand your point. Is your argument that because some people below 25 and retirees require a certain wage, that the people who are working for spending money don't exist?

Why don't liberals name any bill that calls for the repeal of the Estate Tax the Paris Hilton Relief Act?

Would that work politically?

Andrew: I'm not of the opinion it's the duty of the government to say that they do. What makes you think they 'deserve' a raise? What have they done that demonstrates to you they deserve a raise?

They've had to claim food stamps.

My feeling is that if someone's working full time, they should at least be earning enough that they can afford to buy food for themselves and their family. And if their employer purposefully pays them so little that the taxpayer has to take up the slack to prevent them starving, then I think it is the duty of government to say "No, you must, at minimum, pay all your employees a living wage: the ones that do better, you can pay more."

"I'm not sure I understand your point. Is your argument that because some people below 25 and retirees require a certain wage, that the people who are working for spending money don't exist?"

I'm saying that one shouldn't dismiss an entire class of people as being worthy of a wage increase because a small subset may only use their earnings for purposes you deem frivolous.

Nobody calls for cuts in military enlistment bonuses and pay because "they're just going to drink it or spend it on whores and XBox games."

Furthermore, the military recognizes that young people have a need for money, for college and other self-improving purposes, to the extent that they will put their lives at risk in exchange for those funds.

Note that the military doesn't bother offering Hot Topic gift cards as a recruiting incentive. The military knows what the under-25s need money for.

" . . . but I tend to cast my lot with Tyler Cowen, who notes that "[w]hen the evidence is unclear, or points in multiple directions, I favor the most plausible explanation." The plausible explanation for what will happen when you raise the price of something is that you will get less demand for it . . "

Andrew-- I think you're making a dangerous leap in your argument here. Not that I disagree about the basic relationship of supply and demand: the problem is that you're assuming high elasticity when it's not necessarily the case. As others have noted, there may be other factors that tend to lower elasticity. That's the specific instance of your assuming what is the "most plausible explanation" without identifying your postulates. What makes it most plausible? In complex questions, there are usually many ways of shaving with Occam's razor. I have to say I think it's a bad idea to take this kind of step in argument without elaborating on it.

Unrelated bills should be separate bills.

Nice idea, but as you say not terribly practical. I say we go straight for the jugular: each chamber has to make the final form of a bill freely accessible to the public for a minimum of (say) one calendar month, either prior to the third reading (if there is one), or prior to being signed/certified for delivery to the WH (for bills that pass on second reading). Exception for bills that pass with 2/3 supermajority in both chambers (even if they go through a conference committee). No "emergency legislation" nonsense either -- if it doesn't get 2/3 on both votes there's a waiting period, period.

Enough with all this after-midnight poop-through-a-goose, calvinball stuff...

JakeB,

I'm not sure I'm assuming high elasticity. If the price goes up, but demand is relatively inelastic, businesses will find ways to absorb the costs, but that doesn't mean the costs disappear. Either they get more out of their employees, they raise their prices, they cut their profit margins...something. That money doesn't just appear.

I'm saying that one shouldn't dismiss an entire class of people as being worthy of a wage increase because a small subset may only use their earnings for purposes you deem frivolous.

I am not dismissing people as unworthy of a wage increase. I am suggesting that there are better ways to help the working poor than increasing the minimum wage.

Nor did I ever say a word about what I think of what people spend their money on. My point in referring to spending money is that a non-trivial number of people receiving the minimum wage do not need that money to survive. I'm curious why they 'deserve' a higher wage than the market will bear.

You do seem to ignore elasticity, Andrew, but there's two more things you're ignoring: there's slack available in the market to pay for these wage increases (e.g., corporate profits, EO pay, and so on). I think it was at Angry Bear just recently where it was pointed out the assumption many people make with regard to capital's divine right to sit atop the market. (If a minimum wage is established for every firm capital is likely to invest in, it's simply a floor on the labor costs. There's already a lot cheaper labor overseas, which suggests to me that investors ultra-sensitive to wages are investing elsewhere already).

But in addition, there's some second order effects. New entrepreneurs trying to establish new markets are a great way to grow an economy -- new markets can have a multiplicative effect on money. But in order to build new markets, you need spare cash on hand for people to try it out and get it started.

No, you must, at minimum, pay all your employees a living wage: the ones that do better, you can pay more.

This isn't how the minimum wage law works, just to be clear. You appear to be advocating a wider scope of application than the law currently supports.

"New entrepreneurs trying to establish new markets are a great way to grow an economy -- new markets can have a multiplicative effect on money."

Of course you apparently are thinking that these entrepreneurs aren't hiring people at first.

I would ask that people examine the entirety of the argument: that the minimum wage is a broad brush when a more targeted program (like EITC) would affect the people that I presume we're looking to help more effectively.

Andrew,

It may be that EITC improvements would be better that a minimum wage increase. But I ask you to take your own advice and look at the entirety of the situation. How likely is an increase in the EITC?

The fact unemployment doesn't spike upwards when the minimum wage is increased is not evidence that the theory is wrong, it's evidence that in a complex system like the economy, it's tough to determine just what the effect may be.

You appear to be confomtable with the idea of economics as a science, to the point of having relatively strong opinions (formed by study of both theory and evidence)- yet suddenly, it all becomes too complex to really be understood. Conveniently, this occurs when evidence for a theory you appear to like is nonexistent.
Bluntly, it is evidence that the theory (ie raising the minimum wage reduces supply of employment) is wrong. It doesn't have to be taken as conclusive evidence, but to fail to concede that the case is weaker bc of the lack of observed effect is to move from the world of scientific observation and into the world of theology.

"The plausible explanation for what will happen when you raise the price of something is that you will get less demand for it; that's probably the most basic tenet of economics, and it seems to work out pretty well."

Except when maybe it doesn't (eg Giffen goods, Veblen goods). It's not a very good basic tenet if it allows itself to be violated...
Im confused by your position here- you seem to claiming simultaneously that
1)the economy's behavior is too complex to be understood well, even with the advanced tools brought to bear by professional economists yet
2)we can basically understand the economy's behavior using stuff from Econ 101, if we feel comfortable with an "understanding" that doesn't have any empirical support.

I'm not sure I'm assuming high elasticity. If the price goes up, but demand is relatively inelastic, businesses will find ways to absorb the costs, but that doesn't mean the costs disappear. Either they get more out of their employees, they raise their prices, they cut their profit margins...something. That money doesn't just appear.

I think that's a micro approach to a macro problem. For example, when to the right of the peak on the Laffer curve, a reduction in taxes should increase government revenue (and GDP and private sector profits). Money just appears.
Which isn't to say that increasing the minimum wage will have such an effect, just that (as hilzoy pointed out) the effects are likely to be very complex, and positive (ie wealth-producing) effects could easily swamp any negative effects.

At first you argue that price increases necessarily drive demand reductions, and that we can thefore deduce that employment will fall. But since there is no evidence of this, you then argue that the complexity of the economy could be hiding other bad effects. Yet, if you invoke this complexity, you must also accept this complexity could be hiding good effects as well, and that the net effect on the economy cannot be judged from simple theories.
So, we're left with the empirical evidence (despite your discounting), which strongly suggests that raising the minimum wage doesn't cause any significant harm to the economy as a whole or to the population working at or near that wage.

The EITC is a good way to help the working poor, but it's no substitute for a decent minimum wage. Many of the working poor don't know if they qualify for it, how to apply for it or even that it exists at all. You only get it once a year and, while I'm sure that money does come in handy, it doesn't help much with the rent or the grocery bill.

Also, the EITC is more a less a subsidy of companies that don't pay their worker enough to live on. Why should my taxes go to prop up freeloaders like Wal-Mart instead of simply making pay the true cost of their labor?

As for the market price of labor, I'm all in favor or markets and market-driven solutions, but they don't always work. In the "market" for labor, especially low-income, low-cost labor, employers have an overwhelming advantage. Low-income workers have a very weak bargaining position. They don't have the flexibility to be out of work while they try and get paid what their work is worth. Generally, an employer can deal with being short-staffed more easily than a low-income worker can deal with being without a paycheck.

That's why I don't find the economic freedom argument all that compelling. It's really only freedom for one side.

"Also, the EITC is more a less a subsidy of companies that don't pay their worker enough to live on. Why should my taxes go to prop up freeloaders like Wal-Mart instead of simply making pay the true cost of their labor?"

Depending on how you approach it, this is either a circular argument or a moving the goalposts argument. "Enough to live on" is a poverty-based argument. The EITC is much better at targeting poor people without pricing students and entry-level employees out of the market. If you want to analyze it on a "true cost of their labor" analysis, you aren't approaching it from the anti-poverty side of things, and the students/non-primary wage earners issue comes up again.

"Many of the working poor don't know if they qualify for it, how to apply for it or even that it exists at all. You only get it once a year and, while I'm sure that money does come in handy, it doesn't help much with the rent or the grocery bill."

Well let's hear it for an education program!

Also, as noted above, there is an advance payment option that allows monthly payments.

Re PA Constitution, Article III, Section 3:

Someone with Westlaw access could tell you much more about this, but my glance at Purdon's Pennsylvania Statutes Annotated showed many pages of references to case law dealing with particular aspects of this section. There's something to be said for having a rule about this that isn't presumed to be self-enforcing, and it helps to have another branch of government looking on. There's also something to be said for not having a supreme court spend time forcing state legislators to be grownups.

I'm going to have to stop at the state liquor store before I think about this any more.

Chuchundra,

The EITC is a good way to help the working poor, but it's no substitute for a decent minimum wage. Many of the working poor don't know if they qualify for it, how to apply for it or even that it exists at all.

Then we make enrollment automatic, problem solved.

You only get it once a year and, while I'm sure that money does come in handy, it doesn't help much with the rent or the grocery bill.

As Andrew mentioned, there are ways to make it weekly, and we could make that automatic as well.

Also, the EITC is more a less a subsidy of companies that don't pay their worker enough to live on. Why should my taxes go to prop up freeloaders like Wal-Mart instead of simply making pay the true cost of their labor?

You presume to know the "true cost of labor" nationwide!?

I can understand the concept of a living wage, and I think the EITC should do it. But I don't think its particularly sound to make claims of objective "true costs."

Low-income workers have a very weak bargaining position. They don't have the flexibility to be out of work while they try and get paid what their work is worth.

They don't have the flexibility to wait around for the now more expensive minimum-wage jobs to show up either. But they'll be forced to wait this way too.

Generally, an employer can deal with being short-staffed more easily than a low-income worker can deal with being without a paycheck.

What about all the low-skill workers without a paycheck now - who no one wants to hire at the current total costs of $11-13/hour? Oh, we'll let illegal immigrants do those jobs I guess.

That's why I don't find the economic freedom argument all that compelling. It's really only freedom for one side.

Except you just took away someones freedom to do a job at a low wage. Which I know I'd resent.

Hogan,

I don't have a copy of Purdon's handy, as its use for me (as an in-house counsel focusing on commercial leases) is distinctly limited. However, I seem to recall that the vast majority of those cases end up holding that the law was not going to be struck on the ground that it contained more than one subject.

Jonas: Except you just took away someones freedom to do a job at a low wage. Which I know I'd resent.

You'd resent being forced to accept a higher rate of pay rather than a rate of pay that forces you to apply for food stamps, Medicare, and accept subsidized housing? How odd: I thought conservatives were opposed to welfare systems, not supportive of them.

What about all the low-skill workers without a paycheck now - who no one wants to hire at the current total costs of $11-13/hour? Oh, we'll let illegal immigrants do those jobs I guess.

This includes two muddles. One is the notion that the jobs that were being paid for at $5.25 an hour weren't necessary jobs - the employers didn't need to hire anyone to do them, and now they're required to pay a decent minimum wage, they'll just do without. Doubtful: employers don't, in my experience, hire people out of sweet charity. They hire people to do the work they need to get done: and if all companies are required to pay a decent wage to all employees, necessarily, no company is disadvantaged because they pay more and their competitor pays less.

The other is the notion that illegal immigrants undercut a living wage: so they do, if there's no effective legal sanction to stop companies from employing them at a lower wage. Why aren't conservatives in favor of tough fines for paying below the minimum wage - whatever the legal status of the employee receiving the lower rate?

I am, Jesurgislac. I think I said a couple of months ago that I thought the illegal immigrant "crisis" should be attacked at the employer.

But, again, minimum wage means something different from everyone getting paid more than X.

Vance: I wonder if using the committee system is one way to reduce but not eliminate unrelated provisions. If the rule was that bills could only be considered in one commmittee, and that that committee had to refer the bill to the full chamber in its final form, then the scope to add truly extraneous provisions would be lessened. The advantage as I see it would be that enforcement would come from the other committees trying to protect their turf, which is far more effective than an appeal to an abstract rule. Of course, this could never be more than a rule of Congress since the committee system itself isn't defined in the Constitution.

Dantheman,

The Duquesne Law School's PA Constitution site shows three decisions since 2000 dealing with Article III, Section 3. Two of them overturned legislation, one upheld it.

Overturning:

City of Philadelphia v. Commonwealth (838 A. 2d 566)

DeWeese v. Weaver (880 A. 2d 54)

Upholding:

North Central Trial Lawyers Association v. Weaver (827 A. 2d 550)

Not much of a data set, but all I can easily find. I offer it for what it's worth.


Slarti: But, again, minimum wage means something different from everyone getting paid more than X.

You keep saying this, Slarti, and I have no idea what point you're trying to make by it: perhaps you should expand.

Sebastian and Jonas, please share with any data or studies that you have seen that show low-income employent decreases to any significant degree when the minimum wage is raised. There is no evidence that raising the minimum wage increases unemployment. Frankly, your arguments about "the low-skill workers...who no one wants to hire at the current total costs of $11-13/hour" or "pricing students and entry-level employees out of the market" are specious.

As for the EITC, it is based on the both the size of your family and your yearly income. There's no way to enroll people "automatically" unless you make major changes to the way the program works.

Lastly, when I talk about the "true cost" of labor, I'm talking about the cost to minimally house, clothe, feed and pay for the medical care of the human being who is doing the work. That's the cost of the labor.

Freeloaders like Wal-Mart aren't paying the full cost. Their "low low prices" are being subsidized by the taxpayers.

Freeloaders like Wal-Mart aren't paying the full cost. Their "low low prices" are being subsidized by the taxpayers.

Oooh, I know a way to fix that!

Andrew: Oooh, I know a way to fix that!

Yeah: force WalMart to pay a reasonable wage. That fixes it.

You'd resent being forced to accept a higher rate of pay rather than a rate of pay that forces you to apply for food stamps, Medicare, and accept subsidized housing? How odd: I thought conservatives were opposed to welfare systems, not supportive of them.

For the billionth time, Jes, I'm not a conservative! ;-)

So, yes, people will have to apply for food stamps, Medicare and subsidized housing - all of which they'd be doing anyway waiting around for higher-paying, raised minimum-wage job.

One is the notion that the jobs that were being paid for at $5.25 an hour weren't necessary jobs - the employers didn't need to hire anyone to do them, and now they're required to pay a decent minimum wage, they'll just do without. Doubtful: employers don't, in my experience, hire people out of sweet charity.

No they don't, but they definitely get more aggressive about labor saving devices and processes, which I've actually heard people endorse as yet another good reason for the minimum wage. Me, I'd rather see more people at work and not cause distortions.

And if all companies are required to pay a decent wage to all employees, necessarily, no company is disadvantaged because they pay more and their competitor pays less.

All companies are disadvantaged equally; but this reduces the yield of capital therefore making investment less attractive. Nothing is happening here for "free."

The other is the notion that illegal immigrants undercut a living wage: so they do, if there's no effective legal sanction to stop companies from employing them at a lower wage. Why aren't conservatives in favor of tough fines for paying below the minimum wage - whatever the legal status of the employee receiving the lower rate?

I'll rely on the pro-immigration argument "because it will completely screw up the economy." I don't want to see all these increased costs reflected in prices - which is yet another regressive way to stick to low-wage workers.

Meanwhile, immigrants can be paid $10/hour and get $10/hour; an American costs twice as much, or could be paid the minimum wage and the cost to the employer is the same. I wager that the immigrants are the more grateful employees in the latter example.

Hee hee. Suddenly I see there's a corollary to Clarke's law: To a certain fraction of any population, any government action is indistinguishable from magic.

Jonas: So, yes, people will have to apply for food stamps, Medicare and subsidized housing - all of which they'd be doing anyway waiting around for higher-paying, raised minimum-wage job.

So your argument is that employers only hire people out of sweet charity, not because they need the labor?

No they don't, but they definitely get more aggressive about labor saving devices and processes, which I've actually heard people endorse as yet another good reason for the minimum wage.

Really? Where? Again, do you actually have any evidence of this? My observations tend to show that employers who can make use of labor-saving devices and processes to cut staff do so - regardless of what wage they're paying their staff.

All companies are disadvantaged equally; but this reduces the yield of capital therefore making investment less attractive.

Ah: the theory that investors will naturally go outside the country to invest in cheap labor elsewhere. The "trickle-away" theory of economics. Again, do you have any evidence of this? Wal-mart was quite anxious to gain a market share in the UK, despite knowing they'd be forced to pay higher wages to their employees than they could get away with in the US.

Andrew: Hee hee. Suddenly I see there's a corollary to Clarke's law: To a certain fraction of any population, any government action is indistinguishable from magic.

Yes, I've noticed that; and for some reason, the presumption is that it's evil magic. It would be okay if a company decided to pay decent wages/benefits: but if it's a government (nation, state, or city) that's somehow, magically, going to go wrong...

I confess, I almost wish that Congress would pass a living wage bill, just to see what would happen.

Chuchundra,

There is no evidence that raising the minimum wage increases unemployment. Frankly, your arguments about "the low-skill workers...who no one wants to hire at the current total costs of $11-13/hour" or "pricing students and entry-level employees out of the market" are specious.

No, the idea that you can raise the price of something and nothing happens economically is specious.

If the price of labor outpaces productivity -

1. You get price inflation if the jobs can not be eliminated;

2. Or the jobs are eliminated.

There's no such thing as a free lunch. Given no one believes the minimum wage can be $100/hour, this is non-controversial. I think that a progressive tax to fund the EITC would be the least disruptive means of achieving what we'd all like to see - working people making a living.

As for the EITC, it is based on the both the size of your family and your yearly income. There's no way to enroll people "automatically" unless you make major changes to the way the program works.

Much of this information is already on your W-2. It's not some crazy, impossible dream.

Lastly, when I talk about the "true cost" of labor, I'm talking about the cost to minimally house, clothe, feed and pay for the medical care of the human being who is doing the work. That's the cost of the labor.

Why does everyone everywhere have to make that much? Does the slacker living in his parents basement? With the EITC, we can provide that wage to those who need it, without depriving others of economic opportunities.

Jonas: Why does everyone everywhere have to make that much?

Because unless you are willing to have people (who are working full-time, note, Jonas: not "slackers") dressing in rags, starving, and dying of treatable diseases, then someone will have to pay for their clothing, food, and medical bills.

Either force employers to pay a living wage, or accept a welfare state that props up corporations by supporting their employees on the pittance the corporations pay.

Bernard,

Sorry I missed your question earlier. I don't know what chances passage of the EITC are, because people don't push for it the way they do for the minimum wage. If the Democrats pushed the EITC as hard as they push for a minimum wage increase, I'd guess the chances for an EITC increase would be at least as good as the chances of increasing the minimum wage. I just don't understand why the Democrats refuse to put any attention on that route.

Either force employers to pay a living wage, or accept a welfare state that props up corporations by supporting their employees on the pittance the corporations pay.

Not much gray in your world, is there?

Jesurgislac,

So your argument is that employers only hire people out of sweet charity, not because they need the labor?

What about the employers that don't even exist because the numbers won't work with the minimum wage? What about those who raise prices and go out of business?

And like I said, they'll raise prices, cut costs, improve processes, whatever. So, no charity involved here.

My observations tend to show that employers who can make use of labor-saving devices and processes to cut staff do so - regardless of what wage they're paying their staff.

True, but there's no reason I can see to further increase demand for such labor-saving devices and processes, which you do when you raise the minimum wage.

Ah: the theory that investors will naturally go outside the country to invest in cheap labor elsewhere. The "trickle-away" theory of economics. Again, do you have any evidence of this?

Not necessarily outside of the country, no. But there are many other types of investment opportunities, and the less return on capital, the less capital investment. If you need evidence despite this happening every single time (i.e. a stock market crash) I don't think I can explain this to you economically.

Either force employers to pay a living wage, or accept a welfare state that props up corporations by supporting their employees on the pittance the corporations pay.

I do accept a welfare state that does just that! I've made my choice - why do you want to both at the same time!?

"Either force employers to pay a living wage, or accept a welfare state that props up corporations by supporting their employees on the pittance the corporations pay."

That's either/or? You initially sounded like it was an AND.

If the price of labor outpaces productivity -

Of course, as we've seen in recent decades, increases in productivity aren't naturally or automatically passed on as increases in compensation. One mechanism for forcing that reallocation to happen is increasing the minimum wage.


My question is what the students are doing with all those pins.

I hear the kids are all into voodoo these days.

"Pins" is also slang for "legs", but I have no idea how that could apply. Maybe it's short for pinball?

Hee hee. Suddenly I see there's a corollary to Clarke's law: To a certain fraction of any population, any government action is indistinguishable from magic.

Round these parts yer gonna hafta marry that strawman after what you jes did to her. Hee hee.

No, the idea that you can raise the price of something and nothing happens economically is specious.

Meanwhile, implication that the preponderence of the empirical evidence supports any significant harm from minimum-wage laws is also specious.
Again, there are two possibilities:
1)we follow the existing evidence, and conclude that these laws are not particularly harmful OR
2)we conclude that the economy is too complex to know the possible outcomes

Are you claiming to know the real impacts of a minimum wage law? Or are you just claiming that something has to happen (without worrying about whether that something is significant or not, or whether that something is positive or not, or a wash).

Like a lot of issues related to legislation, the real problem is in the rules that congress uses do decide how votes are conducted and the like. The multiple issues in a single bill problem could easily be dealt with by a rule which allowed a bill to be split into separate bills with a 30% vote (or something similar). If you can't get 30% of representatives to go along with a split, then it simply isn't needed. While the rules are being jiggered, might as well make it explicit that judicial nominations can be filibustered. If a lifetime appointee can't muster a significant supermajority, nominate someone who can, damnit.

Yeah and they are mostly sticking those pins in vaguely-boss-shaped dolls.

Oh, and most of the time I was a "slacker" in my parents'/brother's basement I would have much preferred being a slacker in my own apartment eating my own food. Either way, I was working 40 hours a week while "slacking" and trying to figure out ways to save up the cash I needed to get back into college.

Bad me for wasting all of it on pins.

"Pins" is also slang for "legs", but I have no idea how that could apply. Maybe it's short for pinball?

'Pins', and sewing supplies generally, were the manufactured goods that farm women needed to buy because there was no practical way to make them at home. Hence, 'pin money'.

Carleton Wu,

Meanwhile, implication that the preponderence of the empirical evidence supports any significant harm from minimum-wage laws is also specious.

To be truly empirical, we do need an alternate universe with no increase in the minimum wage to determine the effects. If there is no change in employment after raising the minimum, that does not mean that there was "no effect," because we do not what the rate of employment would have been otherwise. I'm sure there's a way get closer to the answer as to what the effects are - but I haven't seen an economic study yet that does.

There's nothing magical about wages in comparison to other business costs - if the price of steel goes up, Ford does something. If the price of labor goes up, Ford does something. There is simply is no good explanation as to why labor has an exception is to basic supply and demand forces.

I'd merely like to do a nice, simple direct transfer payment from the rich to the poor, and make it cheaper for businesses to employ people.

Again, there are two possibilities: 1)we follow the existing evidence, and conclude that these laws are not particularly harmful OR 2)we conclude that the economy is too complex to know the possible outcomes

"Not particularly harmful" is not the same as "Not harmful" - which most people seem to be arguing in effect. I want to make employment cheap enough at the entry-level because these jobs are the on-ramp to a career for those who are starting their careers without a good education. The minimum wage makes entry level employment more expensive to businesses; the EITC does not. That's why I'm sold. (I'd also be eliminating taxes at the bottom as well.)

Or are you just claiming that something has to happen (without worrying about whether that something is significant or not, or whether that something is positive or not, or a wash).

Something does have to happen. I think that since we are taking increased employment as a postive "happening," making employment cheaper is the most effective means of doing this, not making it more expensive.

Togolosh, the flaw in your proposal is that being able to get 30% to go along with a split doesn't mean it is needed. This Congress has certainly shown us that far more than 30% can be persuaded to go along with any sort of twisting of the rules, with no concern for principle, honesty, or rationality.

Jonas, the problem with alternate universes is all those goatees messing up the results.

Hence, 'pin money'.

I was kidding, Liz. Reminder to self: maybe emoticons aren't completely evil.

Jonas, the problem with alternate universes is all those goatees messing up the results.

Not to mention the bare midriffs of the women...

"No, the idea that you can raise the price of something and nothing happens economically is specious."

As I said above, I don't know anyone who claims this. The claim is rather that the effect might be either minute or swamped by other effects. This is different, and it's where the evidence comes in.

Oh, sorry. Seriously, it's the sort of phrase that I could see not knowing the origins of, and I have an explaining-things tic. To quote Emily Litella, 'Never mind!'

To be truly empirical, we do need an alternate universe with no increase in the minimum wage to determine the effects.

Yes, and evolution isn't an empirical scientific theory because we cannot replicate it from the beginning of life on earth. Likewise, we'll need to junk all of those pesky medical trials for new medicines, since individuals are all different & therefore are not perfect controls...
Or perhaps you're setting the bar absurdly high for rhetorical purposes?

Admittedly, it's a bit harder to demonstrate things when using these nonidentical systems, but there are dozens (perhaps hundreds) of minimum wage 'experiments' in American history, and I don't know of a modern example where a minimum wage law caused signicant harm. Local minimum wage laws are perfect for this sort of thing since there are usually nearby areas that can function as controls.
http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=4335
has some interesting stuff to say, and cites a paper which uses such a local law to demonstrate a lack of significant impact (in that particular case).

There's nothing magical about wages in comparison to other business costs...

Well, there is to economists. In the sense that they understand that labor has to be treated very differently than other inputs. See, for example,
http://en.wikipedia.org/wiki/Labor_economics
(increasing wages can rationally cause workers to work less, or more, depending on their circumstances and desires).

"Not particularly harmful" is not the same as "Not harmful" - which most people seem to be arguing in effect.

I'd say that the two are close enough for government work, as they say- close enough to make policy by. And I don't see anyone arguing that there is no effect, just that the effect hasn't been shown to be harmful to either the economy as a whole or to the particular subgroup in question.
On the whole, it isn't clear to me whether your arguing that minimum wage laws are actually significantly harmful, or that they might be, or just that you prefer the EIC bc it's targeted.If it's the latter, I don't know enough about the EIC to have a strong opinion- although one possible counterargument to the EIC case is that it entails a great deal more bureaucratic overhead than the minimum wage solution.

Conversely, most rights do not follow us into the grave, so an estate tax is hardly an onerous burden on the relatively small number of people whose estates are large enough to face the tax.

Actually, it's no frigging burden whatsoever. They're dead, Jim, dead.

I say, tax 95% of all estates and use the revenue to lower income taxes.

Carleton Wu,

Or perhaps you're setting the bar absurdly high for rhetorical purposes?

I'm setting the bar high for those who maintain that is "proven" that there is no significant effect - the bar should be pretty darn high given their levels of certainty, and how dismissive they are of the very fundamental problem of increasing labor costs.

Local minimum wage laws are perfect for this sort of thing since there are usually nearby areas that can function as controls.

You're talking about Card & Krueger, who did phone surveys of fast food restaurants - which has not only problems of scope but of reliability - which was shown when the reported levels of employment did not match local employment tax records. (I'll try to dig this up.) But no, I don't think their study is rigorous enough to give us the certainty that we need to ignore costs.

increasing wages can rationally cause workers to work less, or more, depending on their circumstances and desires.

Sure, but that doesn't indicate to me that you can just start paying people more and they'll work more and so everything works out dandy. On the flip side, it seems like you can be pricing out the lazier workers.

And I don't see anyone arguing that there is no effect, just that the effect hasn't been shown to be harmful to either the economy as a whole or to the particular subgroup in question.

Labor force participation does correlate to a decline amongst young people with minimum wage raises, and given that the younger you are employed, the more likely you're able to establish a good paying career absent college. I started working at 15 and have a career today because of it.

On the whole, it isn't clear to me whether your arguing that minimum wage laws are actually significantly harmful, or that they might be, or just that you prefer the EIC bc it's targeted.

I prefer not only that the EITC because it is targeted, but that it also reduces the cost of employment which is a common-sense way to increase the amount of it.

I don't know enough about the EIC to have a strong opinion- although one possible counterargument to the EIC case is that it entails a great deal more bureaucratic overhead than the minimum wage solution.

Again, I'd rather progressive income taxes paid for it than businesses. Wal-Mart is a red herring; it doesn't pay the minimum wage and most minimum wage jobs are in very small mom-and-pop businesses.

Besides, cost of labor increases are inflationary upon prices (minimum wage); I'm fairly sure taxing the rich is not (EITC).

your underlying assumption that the majority of minimum wage workers are under 25 is irrelevant and erroneous.

In fact, more and more people, unskilled and former professionals, are finding themselves working for minimum wage as their industries, professions, trades and manufacturing jobs are shipped to Bumfuck.

Welcome to the world of living on $2 a day.

Jonas, the problem with alternate universes is all those goatees messing up the results.
and
Not to mention the bare midriffs of the women...
not to mention
They're dead, Jim, dead.

I attribute this to Andrew's B5 onslaught and foresee a long period of conflict and strife as B5 and ST references are brought to bear, possibly pulling in other series as well.

lj,

I'm confident that B5 can withstand the onslaught.

You are an inferior lifeform. You must be exterminated. Exterminate! Exterminate!

"Welcome to the world of living on $2 a day."

Once again, if you want an anti-poverty program based on the idea that if you are willing to work you should get a certain amount of money, we can use the EITC and avoid many of the problems mentioned above. This is a recurring problem when talking about entitlements--the justification for them shifts back and forth in interlocking ways. (The most classic example being Social Security. It is forced retirement savings. What? An awful return? It is really an anti-poverty program. What? You want to phase out payments to the rich? You can't do that, it is a society-wide insurance program. What? It is tough to give affordable insurance for something that is almost certain to happen? It must be a retirement program. Repeat as needed.)

The EITC is a big deal, and understanding it will help young people make better economic decisions. Why not put knowledge of it into the testing mandated by No Child Left Behind?

For the purposes of speeding this up a bit, I suggest with just insert generic references. So in response to Andrew, I would just write

[Borg reference]

Jonas: I'm setting the bar high for those who maintain that is "proven" that there is no significant effect - the bar should be pretty darn high given their levels of certainty, and how dismissive they are of the very fundamental problem of increasing labor costs.

Okay, Jonas: using your theory that employers won't want to invest in an area with high labor costs, please explain why WalMart's largest overseas investment is in the UK... a country which (the year WalMart bought Asda) had a legally-binding minimum wage that was, in 1999, worth more than what WalMart pays new employees in the US today.

You need to show why your theory of "trickle away" economics works to show why WalMart wanted to move into the UK market despite the known higher labor costs.

What a warped political discussion the US leads. Increasing the minimun wage is mostly compensation for past inflation (see below), repealing the estate tax shifts the tax burden from the wealthy to the average tax payer. Repeal is a nice (economically unsound) idea, but you are already running an enormous deficit. There is no free lunch.

It is not that difficult to understand. I find it quite troubling that a decent fellow like Andrew even tries to defend these strange Republican positions. This is just bad economics and bad politics (given a marginally competent opposition, unfortunately an unrealistic assumption).

Hey, these minimum wage earners are your fellow citizens. You should care for them, as they cannot care for themselves. Escaping poverty is difficult in the US. It is unfortunate that most poor people have been politically disenfranchised.

--
When was the minimun wage last adjusted? Wikipedia says: "The minimum wage was re-established in the United States in 1938 (pursuant to the Fair Labor Standards Act), once again at $.25 per hour ($3.22 in 2005 dollars.) It had its highest purchasing value ever in 1968, when it was $1.60/hour ($9.12 in 2005 dollars.) The current federal minimum wage is $5.15 and has not been increased since 1997."

Jan 1997, the CPI was at 159. in Jun 06 it stands at 202. So, a large part of the increase is just (and overdue) compensation for past inflation.

LJ: but that takes the fun out of it :)

About minimum wage: I think getting more wage is better than paying less tax. Less tax is a 'gift' from government/society whilst wage is earned.

Also: tax is a means to enforce policy. You cannot steer the low educated worker very much, as a government. But you *can* steer companies and have much more effect because it influences a group, not an individual. So if raising the minimum wage causes trouble for companies you can compensate the companies via tax. Which gives you an instrument to make employing specific groups more attractive, or implementing other changes that might you'd want to stimulate for the greater good.

Jes,

Okay, Jonas: using your theory that employers won't want to invest in an area with high labor costs, please explain why WalMart's largest overseas investment is in the UK... a country which (the year WalMart bought Asda) had a legally-binding minimum wage that was, in 1999, worth more than what WalMart pays new employees in the US today.

Are you holding up WalMart as some sort of beacon of economic rationality? I certainly don't, as if I was running Wal-Mart, I'd be far more concerned with the happiness of my employees than they are.

(Wal-Mart recently determined that pissing off customers who decide not to come back costs them $200K in the long term. Yet they aren't willing to pay more for employees who deal with the public? What the hell?)

And I have a hard time - having lived in the UK for a while - believing that while Wal-Mart's prices may be below other UK retailers, that they are on par with the prices in the US. So, I'd say, that's why - UK Walmart prices do not exchange 1:1 with the US because of increased labor cost, amongst other things. They just high-tailed it out of Germany because their strategy didn't work. (They were selling pillowcases sized for American pillows as opposed to the German standard. They are not as sharp as they think they are.) I think their foreign strategy may just be hype.

You need to show why your theory of "trickle away" economics works to show why WalMart wanted to move into the UK market despite the known higher labor costs.

I've given you my guess, any detailed study of Wal-Mart prices around the world and labor costs is welcomed.

Jaywalker,

Hey, these minimum wage earners are your fellow citizens. You should care for them, as they cannot care for themselves. Escaping poverty is difficult in the US. It is unfortunate that most poor people have been politically disenfranchised.

Every American here is interested in caring for our fellow citizens - the only disagreement is about whether it through the EITC (funded by progressive taxes on the rich) or through the Minimum Wage (funded by businesses.)

dutchmarbel,

Also: tax is a means to enforce policy. You cannot steer the low educated worker very much, as a government.

What steering are we looking to do? I'm genuinely confused. Is the government able to steer high-educated workers? What does the government know that the high-educated workers don't?

But you *can* steer companies and have much more effect because it influences a group, not an individual. So if raising the minimum wage causes trouble for companies you can compensate the companies via tax.

No such tax compensation exists in the U.S. (with the possible exception of ex-welfare recipients.) And I have no idea why we should be steering companies as opposed to just handing cash to hard working Americans.

Which gives you an instrument to make employing specific groups more attractive, or implementing other changes that might you'd want to stimulate for the greater good.

I think the more detailed we make this, the less likely it is to be successful. The political process is completely unable to deal with complicated issues in a sophisticated way. One of the many appeals of the EITC is it's simplicity - making it way cheaper to employ those at the bottom. That has a chance of happening politically; a technocratic masterpiece of detailed tax incentives and disincentives to achieve a more palatable economy - is neither like to be conceived by the government, never mind implemented.

I meant to say at the end, "Is neither likely to be."

Also I meant to say that B5 sucks and most Trek is good or at least okay.

Video Toasters? Bruce Boxleitner? Come on now.

I appreciate Jonas coming in and batting for the other side. I have to admit, I feel, in my heart of hearts, that economic reasons for the minimum wage are not as important as the notion that the minimum wage provide some level of dignity and stands as a sort of committment to the notion that even pimply faced high school kids deserve a semi-decent wage (you deserve a break today, eh?). Here in Japan, the minimum wage is dictated by region and by industry, which probably would irk free market types, but seems reasonable here, especially when there are such massive differences in the cost of living from place to place.

Jonas: the low educated individual can work or not work but usually does not have a lot of other choices. His or her impact on society is tiny. We seem to agree that low educated people might need more money in order to be able to provide for themselves and their families, we are just discussing wether tax returns would be better than raising the minimum wage.

I think raising the minimum wage is more direct, psychologically more rewarding, and does not depend on things like knowledge of tax procedures and literacy. Depending on those skills puts low educated people at a disadvantage.

You propose to lower certain income-taxes to provide the people with more income without burdening companies economically. For the above reasons I think raising the minimum wage works better. If you *do* want to use lower taxes to protect companies from a negative economic effect, you are better of lowering the taxes of companies who provide many jobs for low-educated people.

A company has much more impact. So if you want to steer towards certain policies you'd rather steer companies that individuals. It also is less complex, because there are less entities. And it might be easier to implement related policies about jobs for the low-educated if you allready have a tax instrument.

Hogan,

Thanks for the cites.

LJ,

I have to admit, I feel, in my heart of hearts, that economic reasons for the minimum wage are not as important as the notion that the minimum wage provide some level of dignity and stands as a sort of committment to the notion that even pimply faced high school kids deserve a semi-decent wage (you deserve a break today, eh?).

I'm coming from the opposite direction - it's the cash, not the dignity. In fact, it irks me because it strikes me as a "mandatory dignity program." There was a used bookstore in my neighborhood growing up, and everyone who worked there made the minimum wage. These were educated people, who were writers or just book dorks, and liked doing it for extra money. When the minimum wage went up, the guy who owned it had to shut the store down and went internet only. I'd rather take care of poor people, and leave everyone else alone to figure out what their dignity requires.

Dutchmarbel,

I think raising the minimum wage is more direct, psychologically more rewarding, and does not depend on things like knowledge of tax procedures and literacy. Depending on those skills puts low educated people at a disadvantage.

It could be made automatic, and people can get the extra money every week, so I don't really see this as a problem.

If you *do* want to use lower taxes to protect companies from a negative economic effect, you are better of lowering the taxes of companies who provide many jobs for low-educated people.

I think it would be harder, given the information available for taxes, to determine whether or not a person is low-educated as opposed to just knowing they're not being paid much and supporting a family, which would already be indicated on their tax paperwork for employment.

A company has much more impact. So if you want to steer towards certain policies you'd rather steer companies that individuals.

The companies will automatically enroll their low-wage workers in the program. I'm glad we agree ;-)

No, Jonas, I wasn't holding up Walmart/Asda as a beacon of rationality: I was offering it as a factual counter-example to your claim that companies just won't want to invest in areas where they have to pay high wages.

I really wish you could understand that it doesn't do anything for the economy to pay people so little they can't afford to shop: but I suspect your early experience with the bookshop owner who claimed he couldn't afford to pay a higher minimum-wage to his employees and blamed the raise in minimum-wage for his folding has soured you. (I doubt if that was the reason: when bookshops fold, there is seldom only one reason.)

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