For unskilled labor jobs like the service industry, lockdowns are devastating which has fueled the inequality fire in 2020. Now, talks for a massive federal minimum wage increase means further sending people into poverty by destroying the value of what small savings anyone on the bottom might have.
This statement is only true, and then only formally, if you limit yourself to considering first order effects. The distributive effects of minimum wage policies will alter final consumer demand, which will have an impact on capital structure and demand for labor. Formally speaking, the overall effect on any given worker depends logically on elasticities of demand for different consumer goods and labor.
But most people don't care about the "Econ 101" model because they (rightly) suspect that it covers a special case that isn't relevant to real-world decision making. Econometric research paints a much more complicated picture.
https://www.theatlantic.com/business/archive/2017/01/economi...
That would also help out the middle class, rather than trying to lift the tide without building more high-ground docks.
are you suggesting the newly-proposed $15 minimum wage will cause inflation so bad it will destroy people's savings?
Another potential mechanism would be if unemployment went up high enough due to a minimum wage increase that productivity decreases so much that the same number to dollars are chasing the results of less workers.
That said, with the exception of very rural areas the wage floor for most moderately skilled or unpleasant work is above $15 an hour already, so this will probably not have much of a impact on poverty or inflation.
OK ... but if the money supply stays the same, then all you're doing is just shifting the demand curves from one set of products (stocks) to another (TVs?). Put anther way, some things will go up, and some things will go down because spending habits changed. This happens now. It's not inflation just because the price of roses goes up in February.
A thought experiment, if I printed up a dollar for each one in circulation then put them in a vault that shouldn't cause inflation even though the money supply has doubled, similarly if in a thousand years someone opens the vault and puts those dollars into circulation inflation happens even though the money supply has unchanged.
My thesis is dollars that go between hedge fund to hedge fund are "in a vault" compared to dollars that are buying food at the local Walmart. If some of those hedge fund dollars ends up in the hands of a individual (say a minimum wage increase causes firms to halt buybacks and direct that money toward payroll) that would cause inflation of consumer goods as now we have more dollars chasing the same output.
Since 2009 people on the Internet have been prophesizing about massive inflation and inflation has been extremely low.
Maybe they will one day be right, but like the boy who cried wolf nobody should be listening to warnings about inflation from people on the internet, as a class they don't have any idea what they are talking about.
I'd estimate about a 50% increase in food prices in about the last decade.
I'd also estimate that the asking price of a house was completely out of whack even post the recession in 2008; it _never_ corrected in any of the west coast areas I live in. Still even that price has continued to go up due to inelastic supply and ever growing demand.
It's certainly possible that your expenses went up 50% in your presumably super-affluent area of the U.S. It wouldn't surprise me if booming tech companies in certain regions have caused this- but it is not the effect of monetary policy or government minimum wage policy- and my expenses have not gone up much in the last 10 years in my wealthy-but-not super-affluent east coast suburb.
https://www.bls.gov/cpi/questions-and-answers.htm#Question_3
So if families are buying in lower quantities then yes it would be accounted for.
In other words, the whole point of minimum wage laws is really just grandstanding by politicians?
If someone earns less it should be considered gig not work and basically non even taxed.
B does not follow from A if demand is elastic. Minimum wage proponents assume enough labor demand is elastic.
Inflation is a boogeyman. I heard a friend of mine not wanting any sort of covid stimulus checks because it would make his and his family's savings depreciate.
You don't want cashiers, wait staff, grocery baggers or call center staff? All of these jobs are generally minimum wage.
Low skill call centers are total waste of human time, that's why most of it is outsourced. UX just can get improved instead.
What if they are willing to work for less because it serves their purpose (like a foot in the door in the industry, or something else that you and I can't even think of). For example, we allow unpaid internships because we see the value of it. What about an internship that pays a little? Isn't that better for all?
The problem is you're taking choice away from people who may want it or need it. Why do you think you know better what's good for them than they do?
Basically min wage should be defined as basic needs for individual. I don't think that many people will chose to go for lower than that for future personal gain.
Anyway that's what democracy is for :)
EDIT: example: you don't provide living wage so some/more ppl will chose to steal. This might destroy their family, so social worker is needed, you also need more police, judges, prisons etc. All of them are employed, happily contributing to GDP. Success! Is it better world? I don't think so. It's much cheaper if with offering living wage. (as global optimisation, company owners and individuals do local optimisations)
Just because a few people are willing to work for less - or for free - to get in the door doesn't mean it is just to take advantage of them and pay them less than a living wage. Not everyone will be working x job for opportunity. Some folks need to eat. And yes, it is taking advantage of people - artists and musicians get offers to get paid in Exposure all the time. Which is really, "please work for free!".
The only real exception to this is, perhaps, when the work is actually part of schooling, and that should be limited. Teachers, doctors, and pharmacists come to mind, though we do treat the doctor interns quite horribly. (some pharmacist interns get a bit of pay).
If you want labor, pay a decent wage.
Even after a minimum wage increase, the school will still have to vacuum the floor. I'm guessing it'll just have the other staff do this now, who aren't children.
I can't verify they feel good about getting a paycheck. I have generally been happy to have a bit of money, but I've never cared that it came from a paycheck and realistically, despised that I had to work while going to school (mine was later, in college). I'd have went without if it were a reasonable option.
I realize that folks are different. However, In a lot of places and situations, child labor is illegal - and 14 is considered child labor in so many situations. When they do work, it comes with massive restrictions. This is soley because we, as a society, generally feel that the focus should be on school instead of work. If we cannot pay young folks on par with adults, we shouldn't hire them.
As a sidenote: I'm guessing that the real reason the school hired them is because they are cheap labor - soft exploitation - and so long as their rate is less than paying a member of the custodial staff (who would have to pick up the slack), they won't be out of a job.
I assure you that these teenagers are not being mistreated, and there are adults doing this same job with them. Our society has come a long way. No teen spends 100% of their time on school work. Like anyone, they have a price they are willing to trade their time and labor for. Why should they, or anyone not be allowed to make that trade?
And yes, it is an emotional argument. We are emotional beings. Doing a useful job and being rewarded for it satisfies those emotions immensely.
In addition to that, it teaches things in ways that a classroom simply cannot. In a very real way it is paying them to get some education, as you suggested.
Nitpick. We have no evidence minimum wage increases are inflationary. (We have evidence it is not [1][2].) But something doesn't have to create new money to be inflationary.
Increasing money velocity causes inflation as much as printing bills. The poor spend their dollars in the real economy (as opposed to the wealthy, who buy GameStock calls). That increases demand for those goods and services, which can result in a price spike.
Again, we don't have evidence of this happening. But theoretically, it's sound. (And less theoretically, it's why central banks can print pots of money while still fighting deflation.)
[1] https://mpra.ub.uni-muenchen.de/36750/1/MPRA_paper_36750.pdf
[2] https://www.econstor.eu/bitstream/10419/20104/1/dp861.pdf
No. Inflation is a "a general rise in the price level in an economy over a period of time" [1]. A single product pricing up is not a "general rise," and a temporary spike before Valentine's Day isn't "over a period of time."
Eg: $15K per month for staffing translates to $3750 per week, which translates to $125 per hour at 30 hours per week on average, which translates to ~10 staff at $12 per hour.
At $15 per hour that is reduced to 8 staff. Alternatively the hours for 10 staff would be reduced from 30 hours per week to 24 hours per week.
The money doesn't come from thin air, raising minimum wage for 10 staff at $12 per hour to $15 doesn't mean there will be no layoffs or reduction in hours.
Increasing prices of products sold or services rendered would result in a reduction in products sold or services rendered. Again, the money doesn't come from thin air -- either prices are raised or staff costing is reduced through cut hours or cut headcount.
Who gets cut is another question too -- more than likely it is tied to appearance, education, likeability, or seniority. Who gets hired is another question too -- if the bar is too high for an uneducated black youth then they will simply not get hired. An increase in the minimum wage can result (and has historically resulted in) in higher unemployment among black youth.
There are some industries where it might have an effect, restaurants/coffee shops in particular. But I wouldn't expect mass produced goods/foodstuffs to increase much if at all, simply because of how efficiently the labour is utilised.
There are also be potential productivity gains from having workers in a more financially stable position.
Amazon. Enjoy your monoculture.
My first job I got as a poor student is now illegal. Had a chat with that business owner (we still keep in touch) and he only can only afford to hire experienced people now. That job pretty much launched my career and life. I was woefully unprepared for it, but I was cheap.
Instead, the people with power and influence, like us, felt minimal pain compared to the working classes, and marched on with our policies in bliss.
Meanwhile, my family (I grew up in a working class rural family) has suffered tremendously back "home". I'm ok with what's necessary, but deeply resent the politically safe strategy of overreacting by default.
If you live in California, you may be interested to learn that elementary schools are open in states like Colorado, and these states universally have lower rates of infection than CA. You may also be interested to know that a study published by the American Academy of Pediatrics (those quacks!), conducted jointly by Duke/UNC, following 100,000 students and faculty in North Carolina public schools, conclusively determined that schools can be opened safely with basic PPE and adjustments in scheduling. https://www.aappublications.org/news/2021/01/08/covid-north-...
From the study: "During the nine-week study period, the 11 districts reported 773 community-acquired infections. Typically, people in North Carolina who are infected have infected slightly more than one other person, meaning there was the potential for 800 to 900 secondary infections within the schools. However, local public health officials found only 32 in-school transmissions, according to the study.
Of those 32 cases, six were in pre-kindergarten, 11 were in elementary schools, six were in middle schools, five were in high schools and four were in schools that included kindergarten through 12th grade. None of the cases involved a child infecting an adult."
My daughter and son are both enrolled and attending in-person school here in Colorado, and it's gone smoothly. I'm curious as to what dynamics exist in California school buildings that would be different than my kid's school buildings, and can't think of any. Which makes me strongly suspect that California and certain other places have schools closed out of an overabundance of caution that doesn't take into account the holistic costs of keeping them closed.
I'm not from US but IMO federal wage is stupid but on state lvl I would urge you to implement it. I'm from Poland and I think that keeping our own currency was good for staying competitive. If we had federal EU minimum wage we would be in ruin. Actually EU mandated minimum wage recently but it's defined as 50% of average salary which we have in our country already. Gemany has min at 41% or something like that for example.
However, I doubt the politicians will do it as it's harder to explain.
There are ways to live below your means under even extreme situations.
Poor people aren't idiots. They think about the future. They plan for the future. If they need to save, they will save.
It's the paradox of thrift.
To note, it has been economic policy to not have Americans save up.
If the cost of living is equal or greater than your income, saving is impossible.
There are ways to live below your means in America. You may need social assistance if you're in hard times (and that's OK, that's what it's there for), but there is. If you say otherwise, you're just making things up.
I said this in another post, but I can guarantee you that even in places like North Korea, people are squirreling away the little they have, just as my grandmother did. It's possible to save even under poverty and/or extreme situations. And America isn't North Korea.
I’m in Canada, where I think the social safety net is slightly better than America, and I personally live this existence, it’s not a hypothetical for me that I spend over 50% of my income on a studio apartment.
But you need to want to have those savings. Most of the people I know living day to day spend beyond their means (like buying the BMW instead of the reliable Honda) or waste their time watching tv, drinking with friends or getting high.
Consider just transportation for a minute. The options are fairly simple; walk, bike, public transit or a car. [0] The first two take a while and are very weather dependent so if you live in some parts of the country they're not really options year round and even where they are they take time out of other activities like childcare and cooking (and cooking is one place you can save money but doing so often takes time the one or two shitty low wage jobs don't give you). Public transit is a mess in the US outside of a few cities. For cars cheap means older and by extension more maintenance costs from regular break downs, buying a slightly better more reliable but more expensive car is difficult because you always need a car and the one you have keeps breaking down or other things you similarly had to buy a cheaper but less resilient version of keeps breaking.
[0] For where I live those would take 3.25 hrs, 50 minutes, ~1.5 hr, and 20 minutes respectively.
I mean... There are billions of dollars in remittances being sent by immigrants (of all income levels) working legally and illegally back to their families in their home countries. How are immigrants able to save? And yes, it should be an obvious statement that people, even poor people, in poor countries, find ways to save as well.
How much time per week would you find acceptable to spend on these activities? I refuse to believe that number is "0 hours", that would be an inhuman (without an 'e') expectation.
Time to decompress is super important, and frankly, it is the very essence of living. It is not at all a waste of time - it's their time anyways, who are you to judge? To anyone reading this: The attitude displayed above is toxic and actively harmful. Please ignore what they've said; you can be successful AND drink with friends or get high, even a lot.
Balance is important, but you are not obliged to work on self-improvement at all times (or at ANY TIME - full stop). This insinuation smacks of victim blaming and a superiority complex. The concept that you're 'wasting time' by spending it enjoying yourself is absolutely absurd, insidious, offensive, and IMO just plain mean.
I am entirely convinced that an increase to the minimum wage (perhaps not as high as $15/hr) will have no major effect on employment. That idea is contradicted by all the empirical evidence we have. I have not seen enough evidence to draw a conclusion on inflation.