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Comment by moorhosj | Hacker News Reader

This paper finds that the change in wage distribution in the US over the past 40 years has been more similar to China than France. This implies policy may be playing a large factor. How many times has the highest tax rate been cut in the past 40 years? How many states have enacted right-to-work laws? How have special tax rates for carried interest, long term capitals gains and dividends impacted business decisions?

https://www.economist.com/news/finance-and-economics/2171710...

France and Germany have works council that gives labor a voice in business decisions (a seat on the board). Maybe the solution is as easy as giving workers a voice.

View on HN

Tax burden shifted from Capital to Labor. Corporate profits increased, wages stagnated.

Pretty simple, really.

And yet. While mega corps (FANG et al) horde cash, and management & bankders gets their cheddar, Joe Average investors are getting screwed, and no one's freaking out.

Distract from the class war by focusing on immigrants, terrorism, russia investigation, war on drugs, etc etc

I really don't see how you can include the Russia investigation on that list. The rest is raw fear-mongering.

The Russia stuff has always seemed like fear mongering to me. It’s a big scary enemy messing with our political system. But is what’s happening actually new? And is what’s happening as significant as the news makes it out to be? Or is it another distraction with all the rest?

China previously bought its way into several of our Presidential elections. There was a small fraction of media obsession with that story compared to Russia now, for obvious reasons.

2007 LA Times: "Dishwashers, waiters and others whose jobs and dilapidated home addresses seem to make them unpromising targets for political fundraisers are pouring $1,000 and $2,000 contributions into Clinton's campaign treasury. In April, a single fundraiser in an area long known for its gritty urban poverty yielded a whopping $380,000. When Sen. John F. Kerry (D-Mass.) ran for president in 2004, he received $24,000 from Chinatown."

http://www.latimes.com/la-na-donors19oct19-story.html

https://en.wikipedia.org/wiki/1996_United_States_campaign_fi...

https://www.nationalreview.com/2017/07/chinese-illegally-don...

The obvious reasons being “it was not really much of a story”, FYI

"But is what’s happening actually new? And is what’s happening as significant as the news makes it out to be?"

I mean, you should be able to answer those questions, otherwise you've put yourself into a tautilogical little bubble ("There is nothing new/just fearmongering, so I don't need to pay attention to it. I didn't pay attention to it, so I didn't hear anything new". Return to step 1)

"The Russia stuff has always seemed like fear mongering to me. It’s a big scary enemy messing with our political system."

Are you saying that countries don't really mess with other countries political systems? Because they do it all the time (including and maybe especially the US).

This basically reads like you saying that "bad/scary news isn't real, because I've decided that bad/scary news sounds like 'fear mongering' and couldn't possibly affect me". I mean, war is a thing. People and countries do hostile things to each all the time, often disastrously. Reporting on this isn't fear mongering.

I don’t think they are trying to delegitimize it. They questioned if we can even consider it new, and if it’s the problem we should be prioritizing. Both good questions, but either way, cleaning up our government and economy is the most important step in reforming our vulnerable campaign system and electoral process. I can’t tell what it is you propose but let’s discuss it later.

> Are you saying that countries don't really mess with other countries political systems? Because they do it all the time (including and maybe especially the US).

The interference that Russia has done is unprecedented in the modern era. There are dozens of election every year. Please provide some evidence of that extent of interfence happening "all the time".

Well, just in regards to Russia, the US managed to get a $10 billion lifeline to Yeltsin's government at a VERY convenient moment just months before the 1996 election.

Please elaborate on your meaning, here.

> The interference that Russia has done is unprecedented in the modern era.

https://en.wikipedia.org/wiki/United_States_involvement_in_r...

Interference that Russia has done with its internet trolls is nothing compared to bombings and assassinations that US has been doing. If you look at South America you'd have to apply blacklist filter to see which countries US didn't mess with.

Fallacy: whataboutism.

I don't think this was whataboutism... The previous comment made a claim and he showed concrete evidence going against that claim.

Fallacy: metawhataboutism

metawhataboutism: when hypocrisy is pointed out scream "whataboutism". It sounds like a fancy term and shuts down the other side pretty well.

Ive slowly lost faith in the mainstream news over the last few years, and so have subsequently tuned it out.

It started when I noticed that the news barely covered the US bombings of hospitals and funerals overseas. There was very little coverage of the US supported war in Yemen where thousands of innocent civilians were being killed.

At some point CNN went crazy over MH370 and gave an uneventful search for the plane wall to wall coverage while US weapons killed people overseas.

I had to go to The Intercept to learn about drone killings in any real detail.

And then I remember in particular when Bernie Sanders had just had his largest rally yet, the PBS newshour failed to mention it while devoting 8 minutes to Donald Trumps twitter comments.

So when the media that hated Trump (a position I am not criticizing) started talking about allegations of Russian interference with the elections, I waited for the evidence. But after a couple of months of anonymous officials making this claim and that claim but no hard evidence in the matter, I tuned it out.

I’ve since stopped following mainstream news, so if they’ve come up with genuine evidence by now then I’m just out of the loop. It’s fair to say I’m uninformed here but I do recall that for some time at the beginning, no evidence was presented.

Lately I use my time to educate myself in other ways. I’m 10 hours in to PBS’s 18 hour documentary on the Vietnam war. I’ve never learned so much about that conflict. I’ve been watching some John Pilger documentaries on YouTube, and trying to understand why people all over the world still live in destitute poverty even in the outskirts of wealthy cities. I’m trying to understand my libertarian friends who say that broad social programs are unfair, while I see images of people with nothing dying from poisoned water or preventable disease. But I’m also trying to understand why socialism was unfair (John Pilgers documentary about Japan was enlightening there). I’m trying to find a way to care for the poor and give them more power without giving power to despotic governments that will siphon aid money into their personal accounts (as in the IMF funded nuclear power plant in the Philippines that was never finished, but poor local tax payers are still paying off). I’m also working on a week long robotics course to teach to some university students in Africa, and the associated robot I built as a teaching aid. I leave in less than a month and it’s been a busy time.

So when I see news that sounds like baseless claims about “The Russians” on channels that don’t cover the murder of children but do feast on images of a bare ocean where a missing airliner hasn’t been found, I just tune it out.

My life has improved since I stopped using Facebook and removed the normal political feeds from my reddit. I’ve been political my whole life and to this day I focus heavily on politics, but the information I want is scarcely carried on those normal news feeds.

“Main stream news doesn’t cover everything I think they should, therefore I will get revenge by staying as uninformed as possible.”

Mueller laid out very specific evidence in publicly available indictments. It’s published on government website, you can read the whole thing for yourself.

In what way are my actions “revenge” rather than simply a choice to find a better use of my time? How is my choice to be informed in different ways the same as being “as uninformed as possible”?

"So when the media that hated Trump (a position I am not criticizing) started talking about allegations of Russian interference with the elections, I waited for the evidence. But after a couple of months of anonymous officials making this claim and that claim but no hard evidence in the matter, I tuned it out."

Another indictment filed today:

https://www.politico.com/f/?id=00000161-bf68-da6b-ade9-fffc2...

The tone of your statement suggests you don't have any way to know the facts of the Russia investigation, or what to believe.

That's bullshit. Mueller is gathering the facts and hard evidence in a very methodical, professional manner, and laying them out in criminal indictments, citing the relevant facts and evidence. You don't need the "mainstream media" to be informed on this subject. There are now direct sources you can go to.

Obviously, not everything is out yet, there is more to come. But what Mueller has already produced is very enlightening.

And your "couple of months" quip rubbed me the wrong way, too. How long did you expect an investigation of this scope to take? Did you expect Mueller to publish every single fact and testimony as he received it? Questioning the people involved, without necessarily letting them know what you already know, is a good way to quickly find out who is being honest with you.

Muller assumed office in May 2017. The allegations of Russian interference we’re going on in summer 2016, and at the time there seemed to be nothing of substance to them. I’m thrilled that 18 months later there are concrete claims being made, but can you not understand why I might have stopped caring in the interim?

There’s lots happening in the world. The mainstream news media wants to focus on a few pet issues and I just don’t feel well informed when I listen to repeated hand wringing about the same subject. Today I’ve been spending most of my work day listening to the political debates in South Africa after their state of the union. It’s a fascinating subject and one that I feel comfortable assuming is not well covered by US news outlets.

You obviously care about the Russia investigation. Great! But you accuse me of being generally uninformed just because I don’t follow this issue. Please. I don’t care about every twist and turn of this investigation. If they can convict somebody great, but I don’t see the value in following all this when so much else is going on in the world.

> Muller assumed office in May 2017. The allegations of Russian interference we’re going on in summer 2016, and at the time there seemed to be nothing of substance to them.

I understand a certain degree of skepticism around the conclusions of national intelligence services, especially on topics directly related to government, but the fact that such services do not immediately release the information underlying their conclusions is not unusual even in cases that have the strongest support; about the only time they’ll publicly release detailed evidence is if action is being sought by some body like the UNSC, or to the extent necessary after the matter moves from intelligence to law enforcement to the courts.

+1 For tuning out corporate media. I see HFCS and outrage the same way: addictive and unhealthy, profiteering at my expense.

> So when the media that hated Trump (a position I am not criticizing) started talking about allegations of Russian interference with the elections, I waited for the evidence. But after a couple of months of anonymous officials making this claim and that claim but no hard evidence in the matter, I tuned it out.

> I’ve since stopped following mainstream news, so if they’ve come up with genuine evidence by now then I’m just out of the loop. It’s fair to say I’m uninformed here but I do recall that for some time at the beginning, no evidence was presented.

National security officials don't generally present the support behind their conclusions to the public, and even when it became a law enforcement case, the evidence is only sparingly provided before a trial. There are pretty good reasons news media does report on announced intelligence and law enforcement positions before those agencies provide detailed support; blaming the media for the underlying evidence not being immediately presented is, well, somewhat naive.

OTOH, since then, while still little evidence has been directly provided to the public (because criminal investigations are ongoing and investigators are reluctant to tip their hand), we do actually have both the confession of an attempted colluder and a pile of indictments (which are grand jury findings of evidence providing probable cause to believe particular persons committed particular crimes.)

Of course it is significant.

There is the real possibility that if Russia didn't interfere in the Brexit referendum and the US election that alternative outcomes could've happened. Both decisions were down to single percentage points.

If Trump isn't elected then you have the possiblity of the US joining the TPP, taking a leadership role with the Paris climate change accord, no massively expensive tax cuts etc. Those are fundamental decisions that effect every single American.

I'm for climate agreements when everyone carries a relative burden, but no way would I support the TPP or anything like it. That's just a continuation of the WTO but on a bigger more nefarious scale (corps having say in local laws.)

Globalization has already done quite enough hollowing out and selling out our blue collar workers. We don't need the same with more vigor.

You had a presidential election where the populist favorite candidates were Donald Trump and Bernie Sanders. Short of Kardashian candidates, that’s about as whacked as you get.

The “Russia Stuff” fits right into the class war.

US placed sanctions on wealthy Russians through Magnitsky act, which they didn’t like, so Putin ran an intelligence operation to get someone elected more likely to overturn it. This is still about putting the interests of the wealthy first. They see each other as peers and allies regardless of nationality.

> I really don't see how you can include the Russia investigation on that list.

I really don't see how you wouldn't. "Russia" investigation I think includes not just the investigation itself but the insinuations and rumors around it. The time and money spent talking about it, writing about it and so on.

It started with the Russians hacked our elections idea. As in KGB agents in the bushes in Wisconsin with laptops twiddling bits on voting machines. Remember the Stein's recount. /r/politics was abuzz with everyone sure how it will be discovered and Trump will swap places with Hillary next Tuesday. https://patch.com/michigan/detroit/hillary-clinton-could-sti... except in the end it gave Trump 3 more votes.

Then it went to Trump colluded with Putin. And how at the G20 they were exchanging secret coded hand gestures between them: https://www.cnn.com/videos/politics/2017/07/20/trump-appears...

Then Comey's hearing. People took the day off to watch Trump's collusion being exposed. /r/politics talked about him being impeached next Tuesday again. It turns out that Trump was mean to Comey and nothing else happened.

Then it was the piss "dossier". That surely would impeach him next Tuesday after it came out. Except that it didn't.

Notice how the goal post keeps moving every time and how it's always "next Tuesday" when the impeachment is coming. This is not unlike the doomsday cults where the day comes and then you'd think, finally the followers will see it was a scam and go home. But in a counter-intuitive way many stay and become even more zealous.

In the end some Russians were indicted because they were internet trolls. Half supported Trump while others supported BLM, Muslims for America, Bernie Sanders and Hillary. Even organized an anti-Trump protest in New York. I was invited and almost attended that one. It's sure good thing to catch those and worth a few weeks of reporting, but not a whole a year of hysteria? Didn't all the media companies, the blogs and the journalists who should have known better play into the Russians plan to destabilize and demoralize the country. It looks like they did. Did they "collude" as well perhaps? Are they secret agents, maybe? (/s)

The saddest part is really the opportunity cost. Some were working on fixing the DNC, there is effort in flipping some legislative seats in Congress with good results. But a lot more could have been done had the effort not been wasted on the "Russians".

Mass immigration and drugs are the class war

How does that jive with several of the most prosperous nations on earth having similarly low corporate income tax rates? Such as Sweden and Finland for example. Even Norway is at 27%. Denmark is 24.5%.

Those rates have very clearly not impeded their exceptionally high standards of living.

Maybe you should be comparing effective tax rates and not statutory rates.

> "Comparisons of corporate tax rates should focus on the measures that reflect what companies actually pay, not the top statutory rate. Proponents of slashing the corporate tax rate often note the U.S. statutory tax rate is the highest among developed countries. But many U.S. companies use an array of targeted tax breaks and loopholes to significantly lower the taxes they pay. These include tax subsidies for certain types of investments (such as in research and development) and for particular industries (such as oil and gas).

The Joint Committee on Taxation estimates that in 2016, while the corporate income tax raised $300 billion in revenues, targeted subsidies delivered to companies through the corporate tax code cost about $270 billion. As a result of these subsidies and other tax avoidance measures, many large U.S. companies pay very low rates. For example, Pfizer paid a rate of about 7.5 percent on its $12 billion in worldwide pre-tax income in 2014. Studies generally also find that U.S. companies’ tax rates vary widely by industry and type of investment."

https://www.cbpp.org/research/federal-tax/actual-us-corporat...

I was basing my comment on the (former) effective tax rate of the US, which was previously high across the board.

The former effective US corporate income tax rate, for all corporations, was higher than Finland, Sweden, Norway and Denmark's statutory rate.

The effective rate for the S&P 500 was higher than the statutory rate for Finland, Sweden, and comparable to Denmark. And that's for the elite of the elite of tax avoiding companies. eg:

"The average effective tax rate among S&P companies that had posted calendar fourth-quarter results as of Friday was 24.11 percent"

https://www.cnbc.com/2017/02/13/tax-cuts-sp-500-may-not-get-...

"The United States’ corporate tax ranks relatively high on all three measures [among the G20]. The U.S. has the highest statutory rate (39.1 percent), the third highest average effective tax rate (29 percent), and the fourth highest marginal effective tax rate (18.6 percent)."

https://taxfoundation.org/cbo-report-compares-us-corporate-t...

Talking about "effective tax rate" with regards to multinational tax-avoiding corporations is basically gibberish.

You can't use taxes paid as a percentage of revenue because it's meaningless. A retailer with a 3% profit margin would have a ~1% effective tax rate because 97% of their revenue goes to tax-deductible expenses.

But if you use taxes paid as a percentage of profit then you're not counting any of the tax avoidance, because the way international tax avoidance works is to shift profits to sister companies in other countries instead of the one with a high nominal tax rate.

Effective tax rate on capital in the USA is much lower.

FANG pays ~10% on income.

Our official capital gains is 20%; I have no idea what the effective rate is.

But I still regret attributing low wages solely to shifting tax burden. Labor glut is probably the biggest factor.

Though I do think automation will be biggest factor in the near future.

I attribute a lot of the stagnating wages (and the median net wealth levels) the last few decades, to rising costs in housing, healthcare and education.

Healthcare is obviously dramatically expensive in the US, with per capita costs about twice that of the next highest spending nations. For most employed Americans, that ends up becoming a $5,000 to $10,000 'perk' in their compensation (which isn't counted in wage figures). If you make $50,000 at a full-time job (the median figure for full-time), you're liking getting a health insurance plan that is worth upwards of 10% of your salary.

Buffett likened healthcare costs to a monster that is eating the US economy. It's spot on. There's a trillion dollars per year there in excess costs, that if even half went into labor competition, would do wonders for giving wages a jolt at the median.

I don't have a handy link, but I recall a while back seeing a graph that showed the total value of compensation (wages + benefits) steadily increasing while base wages stagnated. Almost all the increase was due to the increasing value of employer provided health insurance.

It might be this:

https://i.imgur.com/rNa2smF.gif

Which can be lined up with this chart, showing the extreme cost inflation in healthcare:

https://kaiserfamilyfoundation.files.wordpress.com/2015/08/8...

>Joe Average investors

Not if Joe Average invested on FANG stock.

If the company is hoarding cash, it's not paying dividends. (Sure, perceived value is high, but future cashflow at some point must reconcile this. Of course, the market can remain irrational as long as it pleases. After all, it's peopleware.)

Stock buybacks are seemingly more efficient way to distribute value to shareholders (capital gains tax is less than dividends)

That's completely backwards. Dividends are the only distribution to shareholders. Stock buybacks look great for Executives trying to inflate share price and earn bonuses tied to Earnings Per Share (EPS).

> That's completely backwards. Dividends are the only distribution to shareholders. Stock buybacks look great for Executives trying to inflate share price and earn bonuses tied to Earnings Per Share (EPS).

Argh.

Suppose you have a company with a business worth a billion dollars. The company makes $200 million in profits, so now they have a business worth a billion dollars and $200 million in cash, so now the total of the company's shares are worth $1.2 billion.

Suppose they have a million shares. When they make the money the price per share goes from $1000 to $1200. If they pay the dividend the share price goes back to $1000, but each shareholder now has a $1000 share and $200 in cash, so they still have $1200 in value.

If, instead of paying a dividend, they pay $200 million to buy back a sixth of their shares and each shareholder tenders a sixth of their shares in the buyback, then at the end of it for each original share the shareholders now have... wait for it... $1000 in shares and $200 in cash. Or, in particular, for every six shares they had they now have $6000 in shares (5 x $1200) and $1200 in cash. Which is basically the same thing.

But then the taxes are due on the ~17% profit from share price appreciation instead of on 100% of the dividend. And the shareholders who would have reinvested the dividend back in the company simply don't tender any shares and don't realize any taxable gains at all.

And then if the price per share gets too high they can have a stock split.

Of course, you also get almost the same effect by leaving the cash inside the company and letting shareholders who want immediate returns sell that percentage of their shares on the market, and if the cash is inside the company then it can be inside a foreign subsidiary in a jurisdiction with lower corporate income tax rates. Which is how the tax code encourages multinational corporations to hoard huge piles of cash.

Dividends and stock buybacks both distribute value to shareholders. Dividends distribute cash, and stock buybacks distribute value by increasing the price of shares. In a rational market, distributing an $X dividend or buying back $X worth of shares will both have the same result for shareholder value. See the sibling comment for details.

People who are investing with a long-term view in mind might prefer stock buybacks because it defers the taxable event until sale. I prefer stock buybacks when I'm planning to hold my shares. With a dividend, I have to pay taxes on the dividend before I can reinvest that cash by buying more shares; with stock buybacks, the share price just increases by that amount over time instead.

Not really (besides excellent answers from: AnthonyMouse,Pyxl101) share buybacks also shows the company's long term intention to give stockholders more value.

Or a retirement or pension fund that owns FANG stocks.

My completely unscientific theory is that all the money that would otherwise have been allocated to wage increases has been eaten up by skyrocketing healthcare costs.

I haven't actually looked at whether this is true though.

You're generally right. Total comp has increased, not stagnated, but only because employers have shifted compensation from wages to benefits (like healthcare). Companies don't pay payroll taxes on those, so I assume they like this arrangement, even though it causes all sorts of problems when you couple job + healthcare.

Healthcare is the new company car.

Total compensation (including non-wage benefits): http://research.stlouisfed.org/fred2/series/RCPHBS

Cost index (attempts to control for composition changes): http://research.stlouisfed.org/fred2/series/ECICOM

Meanwhile, corporate profits as % of GDP are historically high: https://fred.stlouisfed.org/graph/?g=fPLQ

This can explained by the fact that US companies are doing an increasing share of their business in non-US countries.

Is the inverse of this not true? Are non-US companies doing more of their business in the US?

There's plenty of evidence to suggest it's a contributor:

https://www.bloomberg.com/news/articles/2017-09-19/rising-he...

Though given the extraordinary profitability of companies right now, surely not the only factor. Some of those profits could be redistributed to workers. Not sure how to do that without potentially causing damage though.

Can you explain what "damage" it might cause? Giving labor a seat on the board seems like a logical, small step in this direction. Maybe a lower tax rate for Employee Owned Companies (ESOP's) would incentivize owners to spread some of these record profits.

Why should the government take the ideological view of favoring one type of company over another?

> Why should the government take the ideological view of favoring one type of company over another?

Because it does that inherently when it decides what form of business organization to allow in the first place. Corporations are creatures of government, not nature, by creating them and setting standards for what the rules are for governing them it is favoring a particular type of company. But taxing them and then creating a variety of more-or-less tax exempt categories with different behavioral restrictions it is favoring one type of company over others.

Even if it chose not to charter corporations (or similar, newer types like LLCs) and only to allow sole proprietorships and partnerships, that would be favoring one type of company over others.

The question is not whether the government should favor certain forms of business organizations -- there is no way that it can avoid that. The question is what forms it should favor and how.

Fair. I should have asked why the government should favor employee owned corporations over the more common structures.

I think you're right, these are good ideas. My concern for damage has to do with the ratio between production and wage. Obviously wage earners should keep more than they currently keep, but the amount they keep needs to be flexible. If the economy tanks or there's a shift in the market, the wage needs to be flexible. I merely advocate for an approach with the necessary responsiveness to a dynamic economy while still improving wages.

Minimum wage hikes are typically a pretty direct transfer from profits to wages, with a minor increase in prices:

https://www.researchgate.net/publication/30522170_The_Impact...

As "minimum wages across state borders using contiguous counties" (Dube, Lester, Reich) demonstrates (confirmed by Seattle's recent experience), it doesn't cut employment:

https://escholarship.org/uc/item/86w5m90m

In spite of this, an association of restaurant owners in California spent a lot of their own money on these billboards to express touching concern for the employment prospects of their employees:

http://kron4.com/2014/07/18/new-sf-billboard-says-workers-wi...

It's now 4 years later and sadly, their predictions were startlingly accurate. Nearly every restaurant server in San Francisco and Seattle is now an app.

Labor costs are typically consume 30% of a restaurant's revenue. Increasing those costs by 50% and not expecting major consequences is a unrealistic.

Which parts of the studies above did you disagree with? What major consequences did you think Seattle suffered from?

Major consequences to the restaurants. As for the city as a whole, I'd expect to see no new businesses such as light manufacturing locating there unless they have to be there.

And Amazon announced they were locating a second headquarters elsewhere. You could argue that has nothing to do with minimum wage, and probably not since Amazon doesn't have their minimum wage operations in Seattle. But Seattle has done things like passing an unconstitutional income tax targeted at Amazon (now winding its way through the courts) that likely factor in to such decisions. Along with other heavy tax increases, like sales taxes, property taxes, and a proposed "head tax" that appears to be targeted at Amazon.

What are you suggesting those consequences would be?

Higher prices, fewer customers, more automation, fewer restaurants, less willingness to take a chance on marginal employees. More mom&pop restaurants with no employees. More off the books and illegal employees.

Personally, I don't go out to eat in Seattle anymore. Too expensive.

Meanwhile, Seattle Food Services and Drinking employment is at an all-time high.

April 1, 2015 - 135,100 employed

December 2017 - 149,600 employed https://fred.stlouisfed.org/series/SMU53426607072200001SA

The trouble with most such statistics is context. How much has Seattle's population grown in the same time period? Are there more or less restaurant employees as a percent of the population? Does Amazon's huge hiring surge of highly paid employees skew the results?

Nothing is ever static in economics, it's very hard to do A-B experiments.

Oddly, I didn’t find any of that nuance or context in your original comment. You presented absolutes and the data proved you wrong. Maybe the population has grown by more than 10% in 2.5 years like food service employment. At the same time, the overall unemployment rate has fallen since the wage hikes started.

> You presented absolutes and the data proved you wrong.

I could say an absolute statement that throwing more wood on the fire would make it hotter. If it also happens to drop into the lake, that doesn't prove me wrong. In any such statements, there's an implicit assumption that other effects stay the same, that I am not dropping the fire in the lake.

Seattle has undergone enormous change in the last 5 years due to Amazon. Ignoring that in any cause/effect analysis of the overall city invalidates the analysis.

No, the "trouble" is that exactly the opposite of what you warned would happen actually happened.

What happened was exactly in line with the papers I cited predicted. 1. Large profit hit, 2. small price hike, 3. no effect on employment (employment actually went up, possibly for other reasons).

The reason you believe what you believe is because you swallowed a lot of kool aid. The people concerned about 1 happening want us to think will 3 happen. In Seattle it didn't. In well run studies it didn't.

In propaganda and poorly run economic studies it does.

The title of the paper is: "All Employees: Food Services and Drinking Places in Seattle-Tacoma-Bellevue, WA"

The minimum wage hike to $15 was only in Seattle.

> In Seattle it didn't.

The cite did not break out Seattle data from the region.

> In propaganda

It's propaganda to cite statistics for a region when only one part of the region is being discussed.

>The title of the paper is

Yeah, not that one. The one I cited by the UK low pay commission where it found a minimum wage hike was accompanied by a 11% drop in profits and a slight increase in prices (and even then only in the food service industry).

I doubt that anybody has studied the profit drop in Seattle. As an economist, it pays not to look too closely at certain topics and that is definitely one of those topics. It would not help your employability to study that topic at all.

Your employability goes up, however, if your research helps to find results that restaurant associations or "walmarts" with a bit of cash to splash around might find useful.

David Neumark and William Wascher are keenly aware of this, which is probably why they took Card and Krueger's landmark study and twisted it until it showed employment going down after a minimum wage hike.

Your cited numbers include the cities of Tacoma and Bellevue, which did not have the minimum wage hike. You cannot attribute them to Seattle.

>Minimum wage hikes are typically a pretty direct transfer from profits to wages, with a minor increase in prices:

This sentiment has always bothered me. It assume that whatever "profit" exists, must continue to exist, nay increase, and that it is a zero-sum game. One could argue that paying your workers more make them eligible to purchase your products ala Henry Ford and the Model T.

That wasn't sentiment it was just fact.

Henry Ford raised wages because his staff turnover was killing productivity and because he fell out with his shareholders and decided to spite them. The man wasn't an angel. He was an anti Semite and a Nazi sympathiser ffs.

All worker benefits and protections, legally mandated or not, come out of the worker's takehome pay, one way or another.

I think that has face validity. However I don't think that those who pay wages allocate a certain amount, pay benefits and then pay the rest as wages. More likely they pay a little as possible (both wages and benefits) to fill the jobs. (Econ 101...)

I think a more likely factor is that automation has reduced the number of jobs relative to the size of the labor pool. In that situation more workers chasing fewer jobs will tend to drive wages down. (Again, elementary economics.)

Another factor may be that large employers that dominate a labor market can exert downward pressure on wages that workers are not able to resist if there are not other jobs available. (Not IMO elementary economics.)

Almost like health insurance is some kind of Giffen good, or like some other economic sink, gobbling up alternative destinations for resources.

Here's some random critical analysis on the topic: https://randomcriticalanalysis.wordpress.com/2016/09/25/high...

Mark Warshawsky of George Mason University's Mercatus Center was on Econtalk and had the same theory and numbers to back it: http://www.econtalk.org/archives/2017/01/mark_warshawsky.htm...

Edit: also interesting point Mark Andreesen made: we don't have too much automation, we have too little at least in some sectors. If things keep going as they are now, a TV will cost $10 and health insurance and college $1,000,000.

> Maybe the solution is as easy as giving workers a voice.

Maybe you should give the guy you paid to paint your garage a voice in your management of your home.

On the face of it, your reductio ad absurdum is perfectly reasonable. Employees do their job, get their money, end of story. Right?

In continental Europe, nobody expects it to work like that. It's a different mindset. If you work in a large firm, the works council has a say (to some degree) in management decisions. It's not always perfect – politics are everywhere – but it is completely normal and expected by bosses and workers alike that employment is a relationship, not a transaction. And for the most part, it seems to be working.

To someone who grew up in that culture, your wild-west thinking seems a bit, well, primitive? Or uncivilized?

> primitive? uncivilized?

Nice dismissal with the logical fallacy of appeal to emotion!

> In continental Europe, nobody expects it to work like that. ... To someone who grew up in that culture, your wild-west thinking seems a bit, well, primitive? Or uncivilized?

One should challenge that setup by asking the question: has contintental Europe's policies resulted in high wages?

France has far lower wages than the US, with 1/4 to 1/5 the wage growth rate of the US over the last two decades. Germany, Britain, Spain, Portugal, Greece, Italy, Austria, Belgium, all have considerably lower wages than the US.

Continental Europe also includes dozens of nations that are dramatically poorer than the US, both in terms of median income and median household net worth.

Wouldn't it be more primitive or uncivilized to be using the French approach, since it has resulted in dramatically lower wage growth for decades now? Wage growth in France averaged 0.5% annually the prior two decades. In the US, 2.5% wage growth is considered very slow, with 3.5% to 4% being average in the 1999-2009 time frame. If their system works so well, where's the wage growth (and we're talking about the last 20 years, not a blip of time)?

But digging deeper, Europe has a bigger middle class than the US, and the US has the largest lower class and upper class, the latter which pulls up the overall average.

So is the average citizen is probably better off in Europe than in the US.

Data: https://www.citylab.com/life/2017/04/euro-vs-american-middle...

Also, Europe is catching up on the US average income too, which is really more relevant than what the past or current average is. It means that recent US policy is not working in favour of the average citizen.

> Europe is catching up on the US average income too ... It means that recent US policy is not working in favour of the average citizen.

Western Europe isn't seeing faster wage growth than the US. Economically the US is pulling away from Germany, Britain, Italy and France. US income and GDP growth rates have been far higher the last 10 and 20 years than most of its peers.

Economically speaking, Germany's GDP hasn't net expanded since 2007, when it was $3.44 trillion (it was $3.46 trillion for 2016). France and Britain are similar. French GDP was $2.66 trillion in 2007, it was $2.46 trillion in 2016.

In that time, 2007 to 2016, the US added GDP larger than the entire German economy (about $4.5 trillion).

It's practically impossible to generate broad wage gains if you don't grow the whole economic pie. That's why French wages have been so stagnant for so long, despite all the supposedly labor friendly approaches there.

The US middle class has contracted because more people have moved up and out of the middle class and into the upper classes, than have moved down and out (that's true over 10, 20, 30 years of time):

https://www.washingtonpost.com/opinions/is-the-middle-class-...

https://www.forbes.com/sites/timworstall/2016/06/21/sure-the...

The formerly extremely poor 1/2 of Europe in the East has seen dramatic improvement since the end of the USSR. You can see that dramatic improvement in several countries like Czech, Slovakia, Romania (more recently), etc. Many are still doing very poorly at growing their economies, including Bulgaria, Moldova, Hungary, Belarus, Macedonia, Albania, Ukraine, Croatia, Bosnia.

The median incomes of Latvia and Lithuania are still around 1/4 that of the US, Estonia is closer to 1/3 that of the US.

US real median income growth does not look nearly as nice as the picture you paint.

http://www.multpl.com/us-median-real-income-growth

https://www.nytimes.com/2014/04/23/upshot/the-american-middl...

The second link you reference, exists solely due to the extreme representation of the housing bubble in Canada versus their GDP:

https://i.imgur.com/55Y0vZQ.png

Are you suggesting you think that kind of housing valuation in relation to the size of the economy, is sustainable? The gap between US housing vs Canadian housing vs economic size, is not subtle, it's extreme. The same kind of housing debt vs economic size representation, is why Sweden's median net wealth level is lower than the US median. Having housing be such an extreme share of the economy, usually has predictable consequences (which the US previously took a hit for).

You'll also need to adjust that 2014 middle class story, for the fact that Canada hit an economic skid shortly thereafter when oil imploded, and the dollar went up a lot (as have most US assets). That occurred almost immediately after that story. The dollar going up a lot by itself is enough to have dramatically altered the wealth balance in question. The Canadian Dollar was around 0.95 to 1 at that time, it's now at 0.78.

> The US middle class has contracted because more people have moved up and out of the middle class and into the upper classes, than have moved down and out

The study cited directly in the Washington Post opinion piece (and indirectly, by way of a WSJ opinion piece, in the Forbes piece -- good effort there passing off the same underlying study as if it were two independent sources) excludes adult children living with parents from the analysis, which makes it completely broken, since that's a living pattern that is known to be more common among adults with lower income relative to the cost of living, and which has been observed to increase over the time period the study addresses. [0]

So, yeah, if you ignore a growing share of young adults that are unable to afford to live independently, the share of the remaining population that is in higher economic strata by income is greater.

Clever spin, but not really a good representation of the reality.

[0] See, e.g., http://www.fanniemae.com/resources/file/research/housingsurv...

Would you go ahead and break out the the impact you're claiming as it pertains to adult children living with their parents? I disagree that it makes it completely broken, the effects shown in the study are dramatic, rather than subtle. You'll need to show an equally dramatic impact from adult children living with their parents having a counter effect.

That study also makes adjustments for household size. Further, average household sizes are smaller today than they were in 1980, by about 10%. That trend has been persistent, with household sizes shrinking considerably since the 1950s/1960s.

The upper middle class expanding from 12.9% of households to 29.4% of households, cannot be explained by your premise.

The change in adult children living with their parents between 1994 and 2016, is a mere 4%. From 27.5% to about 31.5%. And most likely that figure is set to decline a bit from here given the very low unemployment rate.

That 4% change, for example, could explain some of the drop in the poor and near poor, from 24.3% of households to 19.8%; and the lower middle class falling from 23.9% to 17.1% of households. However it very obviously fails to explain the change on those two combined. And it entirely fails to explain the epic increase in the upper middle class.

> Would you go ahead and break out the the impact you're claiming as it pertains to adult children living with their parents?

No, barring a grant to do so, I'm not going to dig into the paper’s source data and rerun the analysis without the methodological errors, of which the treatment of the demographic noted is just the most glaring, should be obvious to even a layman at the time who had been basically attentive to the news, much less anyone seriously trying to do honest analysis. Among the other methodological errors (and this is not intended to be an exhaustive list):

(1) The paper commendably recognized that current money income is a different thing than class, which “knits together multiple factors such as income, wealth, education, prestige, and cultural sophistication”, and then proceeded to use money income alone to measure class mobility on the assertion that it “current income is closely related to all the factors associated with social class and because data on current income are readily available.” While prestige and cultural sophistication are clearly hard to get annual statistics for, education and wealth distribution are not; there is no excuse for not including these of the intent to is assess a feature which includes them.

(2) Related to #1, Rose does not justify his thresholds as meaningful class thresholds,

(3) Also related to the use of money income as a proxy for class, Rose justifies using fixed real income thresholds (which mean that changes in the median inflation-adjusted income with even with no distribution change within the non-excluded population will result in upward “class” mobility, which, even to the extent that money income correlates to class, doesn't seem to correlate with how it usually correlated with that concept) with the only justification being that that's how the federal poverty line works (which is true, but it's worth noting that this is both a controversial thing about the federal poverty line, and dubious in relation to class generally even if it is appropriate to the purpose of the FPL; there's probably a good reason to think that what is right for the FPL corresponds in some ratio to the boundary for the lower class, but that with successively higher classes income mapping to the class is not simply a constant multiple of the poverty line.)

(4) No justification is given for the method of calculating “family of three equivalents” (using the square root of the ratio of the actual household size to 3 as an income divisor to get the “family of 3” equivalent income.) Note that if one views the FPL as having a reasonably constant relationship to class boundaries as Rose suggests in his justification of the use of constant real-income thresholds, this method of size adjustment is tolerably close for families under 3 (though off in different directions for size 1 vs. size 2) but artificially pushes families over three upward in “class” because it understates the additional income needed to stay at the same level with more family members.

> The US middle class has contracted because more people have moved up and out of the middle class and into the upper classes, than have moved down and out (that's true over 10, 20, 30 years of time)

I think this is a super interesting phenomenon, and I honestly don't understand how the migration from middle to upper class works in practice, particularly in the face of technological un(der)employment. (And nobody has been able to explain it to me.)

However, the exact same is happening in the EU as well (graph: http://slatestarcodex.com/blog_images/techun_polarization.pn...) so it's not like it's some libertarian US-only miracle (or that labour-friendly rules would prevent it from happening for that matter).

> However, the exact same is happening in the EU as well (graph: http://slatestarcodex.com/blog_images/techun_polarization.pn...)

I've responded to the GP about how the US study cited is misleading, but the graph here seems to be worse, as it seems to simply misrepresent the data in the cited source, "Goos, Manning, Salomons (2014; Table 2)". Looking in the paper that it appears to be referencing [0], Table 2 shows -- instead of the across the board decreases in share of jobs in the low wage sector with increases in the middle and high wage sectors shown on the graph -- increases in most countries in both the low (Finland and Luxembourg being exceptions) and high (all countries) sectors, and decreases in the middle wage sector (again, all countries.) The first sentence of the conclusion of the paper states: "The employment structure in Western Europe has been polarizing with rising employment shares for high-paid professionals and managers as well as low-paid personal service workers and falling employment shares of manufacturing and routine office workers."

[0] http://personal.lse.ac.uk/manning/work/ExplainingJobPolariza...

I am not incorporated as a business and the guy painting my garage is not my employee. Otherwise, a spot on analogy.

Most people consider their homes an investment, so it is (economically speaking) a business. You're paying the guy for his labor.

Your distinctions between an investment and a business, a contractor and an employee, are arbitrary legal definitions. They aren't economic ones.

>Your distinctions between [...] a contractor and an employee, are arbitrary legal definitions. They aren't economic ones.

I would argue that not only are these definitions not arbitrary but they meaningfully reflect the differences in the relationship across legal, ethical and economic spheres based on the length and type of the business relationship. For instance there are very meaningful legal, economic and ethical differences in responsibilities for the seller and the buyer when leasing a house (long term) vs booking of a hotel room (short term).

Isn't it tautological to claim that legal definitions are not arbitrary because of legal spheres? As to ethics, people often invent ethics that coincidentally benefit themselves. I'm talking about economic definitions.

I thought a bit more about your ethics argument.

If you agree to provide X labor for Y $, and later say you are "ethically" entitled to Y*2, how is that ethical? Ethically, you should stick to what you agreed upon.

The ethics are about how you construct laws around employment based on the sorts of employment relationships the society considers just or ethical. For instance in many states there are regulations around workplace safety. Given the power differential between the employer and employed and general human stupidity it is understood that there are certain limitations that must be placed on an employer to protect the employed. This similar to how society recognizes certain obvious limitations to transactions such as purchasing food, medicine or the construction of Opera houses.

How does that fit in with a worker not keeping his word about what he is to be paid?

Legal definitions drive economic reality, the results of which we are discussing in this thread. What is the tax rate other than an "arbitrary legal definition"?

I consider my education an investment, by your logic that makes it a business.

Your education most definitely is an investment, and various economists have indeed calculated the returns on such investments. The ROI certainly affects students' choice of major, as well as the decision to even go to college.

Economically speaking, making an investment and expecting a return on that investment, makes it a de facto business. This is even recognized by the courts, as they've decided that a partner who supports the other going through college, is entitled to a share of the others' earnings afterwards.

You keep ignoring the primary point in order to argue semantics. Laws impact the economics of businesses operation, no matter how you define a business. The data tells us that our laws are maximizing wages for a small subset of the population. Other countries are not seeing this same divergence.

The laws in those countries are more similar to a time in the US where income was much more evenly distributed than today’s US laws. For those of us interested in improving the wage distribution for those in the bottom half, this is worth discussing. If you don’t think there is a problem, no need to comment.

> Laws impact the economics of businesses operation

Absolutely, they do. That does not imply the laws are not arbitrary.

> If you don’t think there is a problem

The US remains a country where poor people want to immigrate to in enormous numbers. Maybe they see something you don't.

Also, the share of GDP spent by the government has gone up, up, up along with increasing inequality. Maybe you should look at that? Somebody is paying for that. I suspect it is a cause of increasing inequality. The spending is so enormous that to ignore it when discussing other economic trends seems unrealistic.

Oh that’s a very different thing. You’re comparing a one-off job with a job where two parties have decided to share a decent amount of their life time together. That’s a whole different story, more like you’re consulting with your au pair on the children’s room paint color

Are you suggesting the au pair you hired has a voice in your decisions on how you raise your children?

An au pair usually lives in your home and takes care of the children for 6-8 hours a day, for 6-12 months. Are you suggesting she shouldn’t have a voice?

> Are you suggesting she shouldn’t have a voice?

Yes. The parents can choose to listen to the au pair's opinions, or not, but the decisions are made by the parents.

Being able to voice an opinion and have it be heard, although not necessarily followed, is kind of the definition of "having a voice" in this context.

Being seated on the board was mentioned as "having a voice", and that is a powerful position.

Yes, but the actual education is carried out by the au pair. Like it or not, if she doesn't like your decision, she may act otherwise. Execution is more important than decision.

She can make suggestions, but at the end of the day, the children are the parents' long-term responsibility, not the au pair's.

>> Maybe the solution is as easy as giving workers a voice.

>Maybe you should give the guy you paid to paint your garage a voice in your management of your home.

Probably not. Managing my home far exceeds the responsibility to paint my garage. However it would be wise for me to give that guy a voice in how best to paint the garage. He is, after all, a professional and knows more about painting garages than me.

Asking someone's opinion is not at all the same thing as giving them a say.

That doesn't make any sense because neither labor nor management live at work. The workplace is not a home.

I actually do this, but not in the dramatic fashion that you suggest.

If I want my house painted (or a similar task), I go to a good professional. He asks me what I want. I usually give broad instructions like “I want it to look good” or “I want a good quality to price ratio” or something like that. Then I ask what he suggests and/or what he would do if he were in my shoes.

I usually get a pretty damn good answer. At “worst”, I am presented with some trade offs, and I pick my poison.

If I don’t trust the painter (or other specialist), then I probably have not done enough due diligence.

You're not giving him a say, though. You, and you alone, make the decisions.

The guy that I pay to paint my garage most certainly has a voice in how he is managed. If I want him to paint the garage on Sunday at 23:00, he will most certainly refuse to do so (or impose extra charges).

Policy determines that there can be only 19 jobs for every 20 people. That's what 'full employment' means under neoliberalism.

How can work councils help that.

Nothing will change until the Beveridge condition is restored - more jobs than people that want them.

> How many times has the highest tax rate been cut in the past 40 years.

How few times has the lowest tax rate been cut?

Could you expand on your point? I'm not really following the answering of one question with another question.

You can't cut from 0%, unless you're talking about expanding earned income tax credits or something.

Even so, the problem outlined isn't after-tax earnings, it is wages. Lower tax rates don't solve that fundamental economic issue.

In the past twelve months, the unemployment rate has fallen, from 4.8% to 4.1%. Meanwhile, the laborforce participation rate has also fallen, from 62.9% to 62.7%. This is not easily explained by traditional labor economics. It seems like there is a broken link somewhere in the chain.

Why haven't we seen wages rise with the falling unemployment rate? Why aren't discouraged workers moving back into a labor market with 4.1% unemployment?

data source: https://www.bls.gov/news.release/empsit.a.htm

I'm not sure how these are a mystery.

Wages aren't going up because there is nothing forcing them to go up. The upper class just takes their rents and insists paying more wages would tank the economy.

Participation is going down because there's little reason to seek employment if you know the employer is just attempting to shaft you. You produce $40/hr, but they'll pay you $8/hr. You can't negotiate, they'll just find someone who is desperate.

I largely agree with you, it was more of a question for those who believe labor economics should act like traditional market economics. You have pointed out the key difference as there isn't perfect information in labor economics like there is in market economics.

I think the decline in the labor rate isn't as much of a mystery as some people think. Baby boomers are definitely retiring. For the last 10 years we've had two demographic bubbles (baby boomers and millenials) in the job market at the same time, and now that is shifting. Obviously there is more at play when you look at certain demographics in certain regions, but a lot of this can be explained by the number of older people who are choosing to retire or being forced to retire by medical issues.

I believe HN misses this issue sometimes because on average tech workers are pretty young. However, anecdotally, in my last office (in the same organization) we had a team of 10. 5 of my coworkers there were over 60 years old... Those people are going to retire soon and hopefully live good long lives outside of the labor pool.

Even more proof that wages should be rising as the labor market thins out and the economy grows.

Looking at the federal income tax rate is only a small part of the picture. There are a lot of other taxes everyone pays, payroll taxes / fica, sales taxes, etc.; most of which are highly regressive. You could cut those for lower income brackets.

When you include these tax categories you will also note that there was a shift to these regressive taxes at the same time the highest income tax rates were cut. And to further reinforce this feedback loop there was also a move to reclassify income to long term capital gains profit which is taxed even lower than the highest income tax.

All of these policy shifts combined to create greater wealth inequality, and wage stagnation.

You have to look for cuts to regressive taxes.

California, New Jersey, Florida, and Missouri have all recently reduced sales taxes. Tobacco and gasoline taxes have generally increased, however.

It's supply and demand 101. We've allowed 15-20 million illegal immigrants into our country who have no labor protection under federal law because they don't exist. End result is depressed wages up the chain.

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