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Comment by vezzy-fnord | Hacker News Reader

increasing the minimum wage

Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how...

legislation increasing entitlements such as social security

Expected to run structural deficits by a certain point. Theoretically speaking, an endogenously determined fiat money system doesn't really have "government debt" what with it being the sovereign issuer of debt to begin with, but in reality politics and the economy don't exist in frictionless vacuums and there are political costs to pork barreling, logrolling, unsound investments and so forth.

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>Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how....

tl;dr if you raise the minimum wage imperceptibly, poverty reduction is affected imperceptibly and prices are affected imperceptibly.

In general if something will have a negative effect on corporate profits (minimum wage hikes have an outsized effect on corporate profits) you will be able to find a legion of economists who will lie to you about what it really does.

The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic.

For instance, here's a case for the minimum wage presented by an (otherwise very knowledgeable, I'll grant) Post-Keynesian economist: http://socialdemocracy21stcentury.blogspot.com/2013/02/the-e...

It's pretty weak. The first two are very flimsy normative/moral arguments that, even if true, do not at all imply minimum wage is the solution over say, basic income, unionization, community-based mutual credit or a variety of other initiatives.

The third one is a can opener assumption. "Oh, minimum wage might work, but only in the case of Post-Keynesian full employment with buffer stocks of labor." You might as well speak of spherical cows in a vacuum. Followed by an unsourced claim about post-WWII prosperity being strictly due to Keynesian policies, when there's no consensus what factors exactly caused it.

> The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic.

All policy arguments are moral. Economics (to the extent it is a useful, predictive, empirical science) can tell you what outcomes to expect from what actions, but not tell which actions should be preferred, without first assuming some moral values.

(OTOH, some of what passes for economics is itself not a predictive, empirical science but a form of moral advocacy in itself; but in that sense, you can't distinguish "moral" from "economic".)

Your first sentence is phrased too extreme :)

People who agree about objectives can still have (non-moral) policy arguments. That may be due to a misunderstanding or a lack of knowledge by some of the parties, or simply because society (and hence the economy as part of it) is an extremely complex dynamic system that we only understand in broad strokes. That's when the good kind of economics happens. (Unfortunately, most economics that you see in public is the bad kind perpetuated by "think tanks".)

All policy arguments are political, but not necessarily emanating from a moral philosophy. To the extent morality can be reduced to cause-effect propositions, it can also be subject to analysis.

> All policy arguments are political, but not necessarily emanating from a moral philosophy.

Insofar as they can be called arguments at all, they rest on moral -- or at least, "subjective value", which some would see "moral" as a subset of, with other subsets including "aesthetic" and probably some others; these distinctions are not well-defined and, ultimately, I don't think actually meaningful -- bases.

> To the extent morality can be reduced to cause-effect propositions, it can also be subject to analysis

To the extent something can be reduced to cause-effect proposition, it is a fact question, not a value question. Morality consists of the space of value questions. It may be necessary to answer a fact question to address a value question in a particular value framework, but ultimately a question that can be reduced to cause-effect propositions is not a moral question, but a fact question (which may also have utility in addressing a moral question.)

I agree that they should not tell what outcomes should be preferred, but they absolutely should tell what policies should be preferred in order to achieve a given outcome.

I'm not at all concerned about economists who are "for" or "against" the minimum wage. They can hold whatever opinions they want if they don't lie.

It's the economists who poorly design studies with the intent of demonstrating that it either causes prices to rise uncontrollably (which it doesn't), causes unemployment to rise (which it also doesn't) and who pointedly never, ever, ever look at the effect it has on profits (it is savage towards profits, which is why the marketing budgets for stuff like this gets approved: http://kron4.com/2014/07/18/new-sf-billboard-says-workers-wi...).

They all know where the money is in their profession: it's at ideological corporate think tanks. If you can tread the fine line between not lying and saying things which they really like you've got a good career ahead of you.

As it happens, 'moral' arguments that say that you shouldn't raise the minimum wage work better when you can claim that it will hurt the people it is designed to help. Those arguments fall flat on their face when it becomes apparent that raising the minimum wage just transfers profits into workers' pockets directly.

It sounds like you've dismissed any economist who doesn't agree with you.

You claim raising the minimum wage would never raise prices nor cause unemployment to rise. Ok, let's set it to $1000 a hr. Do you really think that would have no effect on either of those? Maybe there's some range on increase where the effects are offset by other effects but it's not lying to believe those effects will become real at some point.

It hits profits first and hardest. Raise it significantly and it also causes prices to rise. Raise it to stupendous levels (in the US probably > $40-50 hr) and it eventually causes unemployment.

Realistically speaking, though, most arguments are over minimum wage hikes that only affect profits and won't even have a minimal effect on prices. $10 -> $12 isn't even going to cause prices to rise, let alone have an effect on employment. It'll go straight from profits to paychecks.

I can think of only one instance where raising the minimum wage actually affected employment, actually, and that was because it was set at first world levels in a third world environment.

If something is going to have an effect on profits, you can bet on the fact that a company will fight against it, hard. Because SHOCKER the point of a business is to generate PROFITS.

I think you're wrong in thinking that businesses will just give up, and take lower profits. No. They're going to cut hours, fire anyone they can, etc. to maintain their existing profit levels.

If you have a laser like focus on maximizing profit (and supposedly most businesses do), you've already fired everybody you can and cut all the hours you're able to already.

But no, they don't just sit there and take it. They pile money into think tanks and advertising campaigns in order to try to sway public opinion (see above).

One of my favorite tactics is when they pretend that robots that do minimum wage jobs all cost $minimum wage + $1 and raising wages is simply going to make them all go out and buy those magical robots.

Economists are agents of bourgeoisie capitalism, then. Alright, I'll end here.

Well, we shouldn't pretend that they don't respond to incentives.

A well-sourced argument you've got there.

What else is there to say about the GP's blanket assertions of opinion being bought out by corporate think tanks and a link to an article about labor-related strife? It's a predetermined conclusion.

Please read this: https://www.reddit.com/r/explainlikeimfive/comments/3ulzdy/e...

Raising the minimum wage WILL increase unemployment. That's Economics 101. Companies are going to find ways to fire people, or give them fewer hours. Raising the minimum wage to something like $15 would be ludicrous.

> Raising the minimum wage WILL increase unemployment.

Reality disagrees :) Germany introduced minimum wage recently and the opposite of your prediction happened.

The argument didn't match reality because it completely ignores the growth of purchasing power that is a consequence of higer wages.

Econ 101 is "look at what happened in Australia". The commenter addresses that actually but his response is really lame. "Things are just different there". Uh huh.

Actually this is pretty much a model for what would happen to McDonalds in the US:

http://uk.businessinsider.com/mcdonalds-in-australia-vs-amer...

Nonsense. That's simply wrong.

And if Econ 101 states it's true, then Econ 101 is wrong too.

Here's a more fact-based explanation, with links to studies and comments by economists:

http://www.dol.gov/minwage/mythbuster.htm

"agents of bourgeoisie capitalists"

I don't wonder about the sincerity of most economists

I do wonder if there are selection pressures to becoming an economist that prevent a diversity of viewpoints on certain issues

sometimes those neatly line up with the bourgeoisie capitalists (who just coincidentally disproportionately have their names on university building and have levers on which university departments get generous funding)

Would you like a socialist society? Do you want a welfare state? I don't. Why shouldn't some people be able to afford luxuries like names on buildings?

> Would you like a socialist society? Do you want a welfare state? I don't.

I do. And I spend time and money on the political process.

> Why shouldn't some people be able to afford luxuries like names on buildings?

Let's talk about everyone being fed, clothed, and sheltered before you bring your straw man out.

Minimum wage has been around for a long time, and there are plenty of counter examples like restaurant workers and soldiers who could be studied who often get paid less than the minimum wage that has been around for decades.

You also cannot ignore that when the social safety net exceeds the value of working wages, particularly for women, there's a strong incentive to not work. Given the unavailability or high cost of health insurance, Medicaid makes that a no brainier for any woman with one or more children.

> You also cannot ignore that when the social safety net exceeds the value of working wages, particularly for women, there's a strong incentive to not work. Given the unavailability or high cost of health insurance, Medicaid makes that a no brainier for any woman with one or more children.

Which is why basic income, single-payer health insurance, and free college are such compelling ideas.

There is obviously an economic impact from not paying workers a living wage, irrespective of how certain arguments can be parsed. There is also obviously an economic cost associated with paying a living wage.

The alternatives to the minimum wage that you listed are pretty much variations on the mimimum wage in that they seek to achieve the same goals and also have attendant costs. They are, essentially, no more or less moral vs. economic in nature than is the minimum wage, though their invocation may be less charged at present.

The latter point is evidenced by your juxtaposition of the "moral" minimum wage with its presumably amoral (and thus economics-based) alternatives. But, in truth, if any of these have valid economic arguments, then so does the minimum wage.

Form the linked article:

> allocates benefits as higher earnings nearly evenly across the income distribution

OK by me. Note that it doesn't allocate benefit to idle owners f investment income.

> Even after taxes, 27.6 percent of increased earnings go to families in the top 40 percent of the income distribution.

"top 40%" is rather silly bucket. That includes basically the median family, all the way to billionaires.

> Over 25 percent of the increased earnings are collected back as income and payroll taxes

(aka effectively a tax on businesses that pay the minimum wage)

It takes massive concern trolling to argue that this effect is worst than not raising the minimum wage

Pardon me if I overlooked the anti-minimum-wage camp yelling "lower taxes on the working poor!"

> "top 40%" is rather silly bucket. That includes basically the median family

No, top 40% does not include "basically the median", by any remotely reasonable standard.

That's why he said basically, it's pretty much the upper half which yes, includes middle class families and billionaires and is a silly bucket to put in one group.

> "increasing the minimum wage

Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... "

Let's look at what is being said:

"Unlike most public income support programs, increased earnings from the minimum wage are taxable. Over 25 percent of the increased earnings are collected back as income and payroll taxes"

Is that a problem? The minimum wage should be the minimum needed to live on, that includes taking taxes into consideration.

" Adopting this empirical scenario, the analysis demonstrates that an increase in the national minimum wage produces a value-added tax effect on consumer prices that is more regressive than a typical state sales tax and allocates benefits as higher earnings nearly evenly across the income distribution."

So the argument is that raising the minimum wage increases prices, thereby negating the potential benefits. Here's the thing, competition drives prices down, but if low wage earners have limited options to shop around (because they look towards the big chains to get low prices), then competition can't fulfil this function. This quote would seem to support this view:

"Even after taxes, 27.6 percent of increased earnings go to families in the top 40 percent of the income distribution."

Competition drives prices down, but chances are people with limited options to shop around and who disproportionately head towards mass retailers already, by example, live in areas with imperfect competition and in the worst case, food deserts. As such, a minimum wage would seem to negate itself again.

You've missed the point of what I'm saying. I'm suggesting that minimum wage increases aren't detrimental on their own, they're detrimental when combined with reduced competition. A minimum wage increase in an area with strong competition for consumers is likely to be a net win.

Be aware: Right wing thinkers don't believe food deserts exist.

Right wing thinkers don't believe reality exists for the most part. We've come into an age where we can't agree on basic facts; in that environment, there is no real thinking.

> Competition drives prices down, [...]

Tell that to Google and Facebook bidding on programmers.. Or people trying to buy real estate in London.

The competition in Google and Facebook's case isn't "programmers", but "exceptionally skilled programmers," which is a different good, a much scarcer one and with less diminishing returns than the former.

I'm not aware of the real estate situation in London to make a comment.

London's planning process is dysfunctional, and the housing supply is nowhere near keeping up with demand.

Yes. And in this case, competition (on the demand side) drives up prices.

I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up.

Japan's been running structural deficits for decades, and still has a very high quality of life.

> but in reality politics and the economy don't exist in frictionless vacuums and there are political costs to pork barreling, logrolling, unsound investments and so forth.

As basic minimum income solves this without the messy politics surrounding it.

I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up.

Given that the AI community's prediction making skills have been just slightly better than those of Nostradamus, that's a very tough gambit to rely on.

Japan's been running structural deficits for decades, and still has a very high quality of life.

Except for the aftermath of the whole Lost Decade thing and aging population taking tolls on aggregate productivity. I'm not qualified enough to say whether causes were monetary, fiscal, sociological or some combination thereof, but listing Japan as a positive example here doesn't strike me as wise.

As basic minimum income solves this without the messy politics surrounding it.

UBI would theoretically handle a minimum transfer of purchasing power for every individual. We're talking about public programs and initiatives unrelated to that.

Though, if you're idealistic enough to think the UBI is a prospect soon realizable, I wonder why you're advocating minimum wage increases over say, stronger collective bargaining? Denmark for instance has never had a minimum wage law.

> > I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up.

> Given that the AI community's prediction making skills have been just slightly better than those of Nostradamus, that's a very tough gambit to rely on.

That's a weird comment; "technology" is a lot broader than "AI".

I made some perhaps overly hasty generalizations. HN is a community that is heavily skewed towards a belief in transhumanism (especially that AGI will be coming very soon) and moreover that high rates of technological unemployment are upon us, necessitating a UBI or stronger reforms to make sure the general-purpose labor saving of AGI doesn't cause social unrest from crowding humans out of the labor market.

I can't imagine what else could the GP have been referring to other than mass automatized labor for most sectors, hence either AGI or lots of narrow AI.

I think you accurately characterize a fringe of HN, but I think support for UBI, etc., isn't all (or even mostly) about imminent AI singularity (though certainly some is based in that belief), much of it is a belief that the Band-Aid over traditional capitalist economic relations provided by the modern mixed economy, particularly as implemented in the US, which remains heavily based on the assumption of steady wage labor with one primary employer (which, itself, is almost a pre-capitalist, feudal/manorial model) as the normal means for people to earn income, is fraying given present levels of automation and preferences for ad hoc interactions, necessitating a more efficient model of support to cushion the blows of long-term and short-term dislocation in an increasingly automated and increasingly fluid market, a need which will only get more acute with increasing automation (even fairly mundane automation that falls well short of AGI.)

> I can't imagine what else could the GP have been referring to other than mass automatized labor for most sectors, hence either AGI or lots of narrow AI.

* Renewables generating the majority of power consumed world wide

* Self driving electric vehicles

* Universal basic income

Nothing outlandish like transhumanism.

Second is a real possibility during the next 20-30 years. First and third are significantly more doubtful.

Even assuming all three come in place soon, I don't understand how they'll fix public choice. If anything, at least autonomous electric vehicles will be a boon on private enterprise, which I don't think is what you had in mind.

I have made a comment or two recently about how unlikely AGI/superintelligence is in the next 50+ years. Those comments received a net positive response. I don't think HN is as biased toward AGI as you might think. Then again automation in labor tasks doesn't require AGI --just specialized programs that work well. Advanced automation is very likely to have an impact in the next 5-10 years.

Advancing automation in labor has been having a progressive effect for several decades, and will to all evidence keep doing so for the foreseeable future.

That's a good point. I should have said "a more significant impact". It could be argued that the impact of the last decades were offset by increased support role and tech jobs. I think in 5-10 will be when a lot of the current tech and support jobs also get filled by automation. Or where its an "automation of creativity" where you don't have a broad general intelligence, but you do have programs that present a few good options that could be considered creative depending on the domain.

As someone who has lived in Japan for 6 of the last 8 years (with 2 in the UK in the middle) -- I'll take Japan any day. Especially when I compare what's happening in real estate in Japan vs what's happening in the UK, I've got a pretty good feeling that one of the two has got it right (hint: not the UK).

However, not sure if Japan will survive "Abenomics" (just as sensible as Reaganomics, but with a dash added corruption ;-) ).

> Though, if you're idealistic enough to think the UBI is a prospect soon realizable, I wonder why you're advocating minimum wage increases over say, stronger collective bargaining?

Why not both? Seriously I am very much in favour of e.g. working time restrictions, but "union" is a dirty word in the US (indeed you carefully avoided saying it), so I don't think advocating stronger collective bargaining rights would help me achieve my policy goals.

So, the alternative is what? Allow wages to move toward zero? Then what?

A global minimum income. Or the strictly-superior-to-a-minimum-wage Earned Income Tax Credit [1].

[1] https://en.wikipedia.org/wiki/Earned_income_tax_credit

Why is it superior? That looks a lot like making the government subsidize worker exploitation.

How does a negative income tax subsidize any of that? If anything, it's much more neutral regarding wage labor (since it's based on the broader definition of income in tax codes) than, obviously, minimum wage mandates.

http://www.wsj.com/articles/better-than-raising-the-minimum-...

Allow competetion to set the wages, just like all other prices.

Singapore doesn't have a minimum, and wages there are not zero. (Neither did Germany until recently.)

Not all other prices are set by competition. There's much manipulation through things like subsidies, tariffs, tax incentives, and bailouts.

Also, having lived in Singapore for years, it's a wonderful city and I love it, but the wage story isn't necessarily one to mimic. It might look grand as a foreigner, but your cleaning lady is probably sharing a 3 bedroom apartment with 16+ other women and doesn't see her family more than a few times a year.

And, yet, she still makes more money than in her home country.

And spends almost all of it on rent.

At least they are building up like crazy. No NIMBYs there.

Singapore wages aren't zero but they are really low for the non-managerial classes (i.e. the people who do all the work) and oversized for the managerial classes.

It's about 3x the size of San Francisco and clearly has aspirations of becoming a similar center for startups but with the prevailing wages for the people who do all the actual work so low the quality of what is produced is usually shitty.

It's not a place you'd want to emulate.

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