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Comment by puzzledobserver | Hacker News Reader

I think something similar has happened with minimum wages. It appears to me that the natural next step is to make the minimum wage grow with inflation.

Unfortunately, this hasn't happened, so we're stuck with various government-mandated minimum wage levels that are tied to the value of money from several years before.

Companies can now point to the law, and use this obsolete number as a metric by which to set their own salaries. What was intended to protect the laborer is therefore perversely being used to protect their corporate employer.

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> It appears to me that the natural next step is to make the minimum wage grow with inflation.

I feel that way too, but remember that indexing wages to inflation made the stagflation of the 70s significantly worse (I don't believe it was the cause, though it is often blamed). That doesn't mean it's not a good idea, in particular for the minimum wage, but some further thought is required.

Make them grow with productivity.

This destroys incentive to invest in productivity improvements, because the gains are eaten by wages. Most productivity gains in the economic sense don't come from people working smarter/harder, they come from investment in better machines and technology (capital). If you took the most productive worker today back two thousand years, their productivity would be massively reduced without access to any modern tools or equipment.

That is only true if your only expense is labour, something that's true out-call prostitution and little else.

Productivity is defined as output per unit labour. This means any profitable investment the firm makes will increase productivity (assuming the number of employees remains the same). If the minimum wage was indexed to productivity, then any such investment would increase labour costs.

Yes, so the only way to increase profits is to increase automation. A much better use of human brains then using them to flip burgers.

So automate away all the jobs? What are people supposed to do then?

The sewers have put all the nightsoil men out business, yet I say society is better for automated toilets.

It remains to be seen whether we will really have enough "creative" work for people to do.

Enjoy themselves.

Live humbly on UBI, grow vegetables in your yard and invent a better method of automation in your garage. If you succeed at the latter, who knows? To me the point of UBI+Automation is that we unlock the potential of more people following a muse without needing to spend too much time surviving.

Latte art and craft brewing.

Funnily enough, Australia employs more barristas than coal miners, but the coal mining sector gets more government subsidies than the latte industry.

Indexing doesn’t have to be 1:1; the goal is to ensure some of the productivity gains go to the workforce, but that can be done while still allowing improvements to be a net benefit to the company.

> This destroys incentive to invest in productivity improvements, because the gains are eaten by wages.

No, the share of returns that go to labor is constant, so productivity gains are split between labor and capital the same as returns prior to the gains are.

In the alternative, capital captures an ever greater share of the returns over time because they are incentivized to invest in those areas that creates the most return to capital.

Minimum wage doesn't grow with inflation because the point of inflation is to steal wealth from the working class:

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

That's not the point of inflation, and I don't think that article backs what you're saying up.

It absolutely does. Krugman comes out and says that it's a way to use policy to cut the wages of the working class. Read it carefully.

inflation is used to keep the "time value of money" working so that capital is incentivized to be reinvested, lest it lose all its value over time. this impetus leads capital to relentlessly seek returns, which over time compresses returns to labor in favor of capital.

so suppressing labor is certainly a consequence of our positive inflation policy. the intention can be debated, but note that various govermental units tolerated prejudiced efforts like mccarthyism and redlining too.

I think the intent is to 'keep employment numbers up at any cost'. But that there is a (predictable, and evidenced) unintended consequence to the prescribed method of attaining that objective is an indictment of the class-blindness of the liberal economic polity, and, secondarily, the brokenness of modern 'science' and 'scientistic' pursuits. (not saying the right is much better on that front)

i'm sympathetic to the original indictment that capital holders (like many hbs grads) realized, and then moved to solidify, this tilting of the board in their favor by supporting inflationary policy.

i'm not sure that the liberal economic polity is a distinct class from those same capital holders (but i generally disfavor left-right political framing anyways).

Yeah sorry to make it seem too much like a left versus right issue, I hate both sides, I just specifically pointed out "left" because the left purports to care about the "little people" (see Krugman) while very much actively pursing policies that are great for capital holders and rhetorically espousing policies tantamount to throwing bones to everyone else.

Inflation is a tax on wealth, not on labor.

It's a tax on wealth, but as the Krugman article points out it also allows real wage cuts without the psychological barrier facing nominal wage cuts, which facilitates corrections when wages have overshot their sustainable levels, assisting in reaching full employment (unsustainably high wages necessarily reduce employment levels.)

This is related to why minimum wage is inferior to UBI as a basic support: minimum wage is in tension with employment, especially at the low end, in a fairly direct way. UBI, while it had to be supported somehow, isn't directly in tension with employment specifically at the bottom.

I'd like to see minimum wage tied to inflation but UBI tied to a funding stream that grows with output, so that per capita benefits grow (over the long term) with per capita output. And I'd like to see minimum wage decreased from the level it is calculated at with inflation adjustments by the hourly wage equivalent of UBI (for simplicity, annual UBI/2000, so that a $12,000 annual UBI would reduce minimum wage by $6/hr from it's pre-UBI level.)

The prices of real things change in response to inflation. Inflation is only a tax on cash wealth.

And which social class has relatively more of their wealth tied up in cash versus investments?

I don't get it. Asset prices track inflation like clockwork. What's even funnier to me is that taxes on wealth rarely raise as fast as asset prices!

If anything it's a tax on income.

Wealth is accumulated income which is subject to income tax so wealth a different dimension, so even if you expect an additional tax that grows at the same rate? The units are incoherent.

  Wealth is accumulated income tax

That's only valid if you think "wealth" can only be a bunch of cash in a bank account you saved. You may own a piece of land that could even predate the government in some places. Or you may own a patent. That's "wealth" which is subject to different taxes to "income".

  so even if you expect an additional tax that grows at the same rate?

I don't expect, anything I was just pointing a fact.

I live in a country that has experienced inflation over the last ten years and the reality is that income taxes have followed inflation but property taxes not, because the government doesn't update property book values as often. The result is that you can hold very expensive property while paying very low taxes. But this also happens in lots of other places: California and Proposition 13 come to mind.

And the point of COLA is to give it back. You can't look at half a system in isolation.

You can't pretend a discontinuous system in continuous.

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