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Comment by areyouseriousxx | Hacker News Reader

Are you aware that the Federal Reserve intentionally sets rates as a function of US economic policy to have a slight scarcity of employment? This is not a conspiracy theory. It is part of the defined terms of the Fed.

With this is mind, workers at the low end of the pay scale will, by result of US policy, never have significant negotiating power.

To me at least, its feels reasonable that if the government is intentionally preventing low wage workers from having a reasonable ability to negotiate, then the government should also provide minimal protections for those workers.

Would you instead prefer that the Federal Reserve be instructed to allow for a scacity of workers, causing significant inflation, in order to give all workers at all levels significant negotiating power?

The situation is intentional. It is either A or B. Either you have workers at the low end with little negotiating power, or you have high inflation.

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This is an interesting perspective I had never considered. Are there similar implications for other levers of adjusting low-wage bargaining power like when a neighboring city raises its minimum wage?

Inflation happens when the money supply increase faster than the wealth in the economy.

In the century before the Fed controlled the money supply, there was zero net inflation. There was no US government economic policy, either.

There was a different kind of inflation, which is also real, before central banks, so no.

Explain, please. Net inflation 1800-1914 was zero.

(The gold rushes produced inflation, for the same reason that the Fed printing money does.)

WRT your first graph: the mandate of the fed is to "maximize employment". So no.

There are lots of reasons low-wage workers are at a disadvantage in our political and economic system, but central banks are not one of them.

> In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate. [1]

Employment is maximized within the limitations of excessive inflation and vice versa. It is well established that a scarcity of workers has a direct, measurable effect on inflation. Therefore, one could conclude that it would be impossible for the Fedral Reserve to allow for a significant scarcity of workers, which is required for low wage workers to have meaningful leverage in negotiations, as it would voilate the mandate to maintain stable prices(inflation) as set forth in the Federal Reserve Act of 1913 [2]

To elaborate on this a bit. This it not so much a direct action of the Federal Reserve to create a scarcity of workers, as much as it is a result of a scarcity of workers causing inflation. That inflation would force the Fed to raise interest rates. Those rate hikes would slow the economy and would result in there no longer being a scarcity of workers.

The balance of the Federal Reserves two manadates, maximum employment and stable prices, results in about 4.25% unemployment(a slight scarcity) and 2% inflation(stable enough prices).[3] That is our current comporomise between stable prices and maximum employment.

[1] https://www.federalreserve.gov/faqs/money_12848.htm

[2] https://en.wikipedia.org/wiki/Federal_Reserve_Act

[3] https://www.chicagofed.org/research/dual-mandate/dual-mandat...