Comment by nimbius | Hacker News Reader

Comment by nimbius | Hacker News Reader

"The rich world is used to wages and prices growing slowly. "

the minimum wage has not increased in a decade and real earnings have declined precipitously since the sixties for most americans who work longer hours for lower pay than ever. the rich world is used to profiteering, not pace.

"Wage growth is more mysterious."

Amazon and Walmart were faced with a rash of calls for unionization coupled with walkouts. wages were increased to undercut these efforts, but only as a last resort tactic of union busting. Covid ushered in a rash of unemployment which triggered personal debt in the form of delayed rent payments from eviction moratoriums that disproportionately applied to low-wage service employees. reopenings in these jobs exposed employees to the same low wages and deputized them all as mask enforcement officers to be harassed and shot at. this ensuing personal abuse that broke the camels back for the service sector resulted in many of them walking away to other opportunities when second-wave lockdowns ensued. time off means plenty of time to assess your alternatives in fields that dont scream at you for poverty wages.

"That means policymakers should focus on the labour supply"

Raise. The. Minimum. Wage. offer healthcare, parental leave, child care, and vacation for everyone. stop insisting everyone needs to go to college when theres a trucking and trade shortage, and for god sake stop referring to McDonalds as a "highschool" job to justify low wages when they open early and close late during school hours and the average employee is in their thirties.

> the minimum wage has not increased in a decade and real earnings have declined precipitously

And inflation is causing real wages to fall even now, especially at the bottom of economy! A shame. We had some decent progress over the past few years.

> Raise. The. Minimum. Wage.

And pretend this won't contribute to inflation either directly or indirectly! Then publicly shame companies for raising prices and propose price controls as a political salve, then shame those companies when the price controls lead to shortages and propose nationalization (or at least invoke the Defense Protection act!) Marvel when the problems deepen!

Surely you mean "Blame the rich some more when the problems deepen".

As if the total amount of wealth in the Western world does not account for a living wage for every person healthy enough to work.

This isn't a zero sum game.

Wealth is not income. In particular, the wealth of say Jeff Bezos is mostly the amount of Amazon shares he bought multiplied by the last price Amazon shares traded it. If Amazon shares trade a few percent higher that doesn't mean there is magically several billion dollars more actual, real, inflation and purchasing power adjusted money that could be going into the pockets of workers if Bezos didn't pocket it. There's simply no mechanism by which that translates into the several billions of dollars of extra real world goods and services required to make that possible.

Now, there are actions that can be taken which are non-zero-sum. For example, if someone were to organise a way of providing people with goods and services more efficiently, that could increase the amount of them available and therefore actual real-terms income. We generally call these organisations "companies" and some of the value of that organisation existing is measured in the form of wealth. Just moving income around and expecting it to make everyone better off somehow is pretty zero sum, as is printing more money to chase the same amount of goods and services, or trying to convert wealth into actual income by confiscating businesses from the people who set them off and selling them off.

Wage increases and inflation are not zero-sum. For anyone who believes businesses pass total savings from low wages on to the consumer, I have a bridge to sell you.

>And pretend this won't contribute to inflation either directly or indirectly!

Why is inflation the devil? Why should I care about inflation? When people have money and they spend it prices rise and companies will invest to produce more. If you keep inflation low by telling people that they don't matter then the economy won't matter to those people.

>Then publicly shame companies for raising prices and propose price controls as a political salve

I honestly don't care. If prices rise then there is more room for competitors and growth.

>then shame those companies when the price controls lead to shortages

Yeah sure but a basic stance against price ceilings is only logical. Minimum prices are not ideal but during a shortage they don't really ruin anything. Price ceilings are obviously bad because they do not help with inflation and just act as a general ban on trade altogether. What I personally find strange is that employer imposed price ceilings receive no scrutiny.

A lot of wage growth has been in the cost of healthcare and other benefits.

As the minimum wage rises it will hurt the poorest and most vulnerable, minimum wage removes the bottom rungs of the adder.

> the cost of healthcare and other benefits.

Low wage hourly workers rarely get benefits, so does not apply in this situation.

> As the minimum wage rises it will hurt the poorest and most vulnerable

You're really going to need to cite a source for this completely counter-intuitive statement. Something academic and peer-reviewed rather than "I got a C- in Econ 102/Macro and this is my best guess" that is the standard when HN discusses economic policy.

"making an activity illegal reduces the incidence of that activity" is not a "counter-intuitive statement". The literature shows a slight skew in results that show negative effects from minimum wage (& related policies): https://slatestarcodex.com/2014/12/12/beware-the-man-of-one-...

Scott thinks that the shape of the distribution implies publication bias; as per the very first comment thread in response to that post, I disagree with that interpretation. Since 101 theory would in fact predict a negative effect you can go ahead and assert with weak confidence that a negative effect exists. (You can also trivially demonstrate that above a certain threshold, like, say, $100/hr, you would have a negative effect. Now you need to add epicycles to your theory to explain why the effect would flip from negative to positive as that number goes down, while the mechanisms by which the negative effects occur remain unchanged.)

I don't believe it. The reason why minimum wages work is that the government becomes the union of last resort. Also, if poor people receive more pay they spend more which then creates more minimum wage jobs for other people.

The minimum wage is rarely raised to some absurd level. Instead it is just gradually increased every year by a small amount.

I'm fine with a higher minimum wage, but if you have to worry about what the minimum wage is, you're already in trouble. In a healthy market for anything, that thing is not sold for the absolute minimum that can possibly cover costs. Labor should be valued at more than the government-mandated minimum wage. Not least because when there's a competition for labor, employers care more about working conditions and whether their middle managers are jerks or not.

Healthcare and child care (including education that is not done via video) do seem like things we need to be universally available. It's odd to me that we make healthcare your employer's responsibility to provide.

> real earnings have declined precipitously since the sixties

My recollection is that this is not true and that real wages have risen (although not by as much as one would hope) since the 60s. Do you have a source for this?

important to mention im still talking about blue-collar high school grads here, the ones driving current wage growth post-intra pandemic. these include paramedics and bartenders for perspective, who generally do not get healthcare or retirement benefits.

https://sgp.fas.org/crs/misc/R45090.pdf

Right, but your source here is from 1979 (I think there's a larger increase since the 60s) and it still displays an overall (small) rise in real wage growth for the 10th and 50th percentile. It displays a (small, which is still very bad to be clear, you would expect a large increase, but this isn't really "precipitous") drop in real wage growth for males in the 10th and 50th percentile. I don't have a source off the top of my head, but I think you'll find a rise in real wage growth for both males and females for both 10th and 50th percentile since the 60s.

On closer reading indeed the high school grads part seems to be suffering quite a bit. That decline seems to be something that would not wiped out by any increases since the 60s. But it's important to note that at this point only high school grads do not make up "most Americans." Whether that's good is another topic.

The minimum wage (not directly the answer but a useful reference) hit its peak inflation-adjusted value in 1968, per the EPI: https://www.epi.org/publication/congress-has-never-let-the-f...

This is a good point. The federal minimum wage not rising is a good indicator that there are likely large sections of the U.S. with precipitous drops in real wages, in particular those places with no higher minimum wage than the federal minimum. But the overall minimum wage is the highest in history (adjusted for inflation): https://www.nytimes.com/2019/04/24/upshot/why-america-may-al...

'Effective minimum wage' is Ernie Tedeschi's hobbyhorse and has little to do with my point. I'd like to live in a world where minimum wage was irrelevant because business owners grow their companies efficiently and pay a salary that is fair according to universal consensus, but gig work tells us all we need to know about the effectiveness of a price floor for protecting those around the poverty level from completely devaluing low skill labor.

Don't unions essentially exist for the same reason?

Interesting question really. Who should receive minimum wage? I would probably think of unskilled unskilled labour. That is only the labour starting in those unskilled positions. A few months should have already improved their productivity compared to peers just starting.

I don’t think that they have shrunk but they grew only moderately. When you account for costs like house no, health care or education then they definitely have shrunk. When I grew up there were families in my neighborhood with the dad working as a loader in a warehouse, stay at home mine, three kids and a nice house. This isn’t possible today.

Even if lower incomes have grown a little, upper incomes have grown way more making a lot of things way more expensive for people with lower income.

Couldn't find data for the 60s and 70s, but FRED data shows that median real wages were essentially flat from 1979 to 2015ish: https://fred.stlouisfed.org/series/LES1252881600Q

The picture gets worse if you look at men only: https://fred.stlouisfed.org/series/LES1252881900Q (The COVID spike should be ignored - low wage earners going unemployed skews the median.)

Say what you will about gender equality, but societal expectations around men providing for the family still exist.

This is also using a CPI adjustment that offsets steep increases in the price of necessities like housing, education, and healthcare with hedonic adjustments for higher quality cars, TVs, and phones. So the real picture is even worse than the data might suggest.

> FRED data shows that median real wages were essentially flat from 1979 to 2015ish

Yeah that makes sense. Precipitous drop in real wages since the 60s though is a pretty big claim that deserves quite a bit of scrutiny before just being accepted as brute fact.

> offsets steep increases in the price of necessities like housing, education, and healthcare with hedonic adjustments for higher quality cars, TVs, and phones.

Right but the offset is proportional to the monetary amount spent right (I also don't believe cars actually get a hedonic adjustment but I may be misremembering)? That is for steep increases in housing, education, and healthcare to be offset by hedonic adjustments in TVs and phones, roughly the same amount of money would be spent on housing, education, and healthcare, as on TVs and phones (or would need astronomically large hedonic adjustments). That being said housing, education, and healthcare have indeed seen steep inflation-adjusted increases in costs, but I interpret that to mean a widespread low rate of increase in costs for the rest of the basket, which includes clothing, food, and the like (which is not necessarily a good thing, it would probably be a good thing to say triple the price of electronics if that could result in healthcare costs staying stable).

Cars and trucks get a "cost based adjustment": https://www.bls.gov/cpi/quality-adjustment/

According to this, hedonic adjustments and cost based adjustments are two ways that the US BLS performs quality adjustments for the CPI: [pdf] https://www.bls.gov/cpi/additional-resources/quality-adjustm...

For a higher level view of how these adjustments may have impacted the CPI, along with changes within individual categories, this article presents a fairly balanced view: https://www.lynalden.com/inflation/#cpi

Oooo that's a fantastic article.

> Plus, wages have barely kept up with inflation, which is compounded by the fact that more education (and thus more student debt) is required on average to get those same inflation-adjusted wages. In other words, on an inflation-adjusted and education-cost-adjusted basis, median wages have decreased.

is a pretty compelling take.

>Say what you will about gender equality, but societal expectations around men providing for the family still exist.

Unpopular opinion. Demanding that women receive the same pay as men is the same as demanding that the man does not provide for the family. Demanding both is a double standard as men are forced to increasingly compete with someone they are supposed to support.

Real wages have risen on average. The question is for whom.

I thought the Freakonomics episode this year on raising the minimum wage was interesting.

Assuming the premise that you would like people at the bottom of the wage scale to be better off, the conclusions from the researchers they interviewed were mixed, with the one interviewee concluding that it tends to make older people better off and younger people worse off.

https://freakonomics.com/podcast/minimum-wage/

Excellent description of why people haven't gleefully returning to their pre-pandemic jobs! Additionally, people quitting their jobs to perform informal labor (eg childcare for their own kids), competitive wages paid by growing businesses sectors (eg package delivery), and of course the number of workers that just plain died.

> Raise. The. Minimum. Wage.

In the short term, obviously. But how about thinking about moving to an economic system where raising the minimum wage is not necessary?

The economic system we have now was that - it has both opportunity, available productivity, and growth and has not provided for the entire work base.

raising the minimum wage is necessary because compounding destruction of real value of nominal prices is baked into the system and without a systematic change if prices didn't rise, everything would collapse catastrophically. Perhaps we should consider a system where real value is not destroyed. Needing to raise the minimum wage is a symptom of this greater problem.

Agreed, I was probably unclear in that the system right now makes the only workable way forward with minimum wage increases.

And also agreed it’s unclear how to shift the system. Personally I wonder if added tax incentives for living wage props would help. Ie wages are already deducted from income, but if an added “bonus” deduction on wages hitting a living wage range might provide some incentive.

> the only workable way forward with minimum wage increases.

>> In the short term, obviously.

> how to shift the system.

Well one thing is to have the federal reserve slowly increase its discount rate over fixed preset intervals, say: to 25% over the course of 5 years. At some point, nobody buys bonds at the discount rate anymore, and the fed is no longer necessary for banking operations (originally the fed was supposed to be "the bank of last resort" but it is more like "the source of money printing" now). You'd have to figure out how to make the fed no longer necessary to run government programs, but one can imagine if we cut out the cronyism, actually taxed corporations, and decreased our military budget by about 25% or so, we would be able to do just fine.

>raising the minimum wage is necessary because compounding destruction of real value of nominal prices is baked into the system and without a systematic change if prices didn't rise, everything would collapse catastrophically.

You mean growth dependence? That doesn't change the fact that you would need to represent negative yields which are hated just as much as the increase in the price level known as "inflation". The real world decays. If you do nothing, your assets and labor will decay and provide negative yields.

>Perhaps we should consider a system where real value is not destroyed

You mean like a video game where items never become obsolete or decay? Where labor can be stored and characters don't age? The truth is that the world is not like that and even video games suffer from wealth inequality even though they have a more idealized world.

>Needing to raise the minimum wage is a symptom of this greater problem.

I don't buy this. Minimum wage increases can go way beyond inflation.

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