Here's a fun trick:
If your KPI is "number of jobs" then keep the minimum wage so low that countless people need two or three of them.
If your KPI is "number of jobs" then keep the minimum wage so low that countless people need two or three of them.
You should reflect on why you feel this way despite the facts painting a very different picture.
$7.25 in March 2023 has the equivalent purchasing power as $6.05 in January 2019.
Even in Vicksburg Mississippi, where I lived for a bit as a kid, a poor place, although not Yazoo poor, McDonalds is starting at $11/hour now.
Yes, if you start with a dumb premise, you come to a meaningless conclusion.
And for the record, the year over year growth should indicate that it's not the negative economic signal OP implied it was, since the economy was otherwise weaker during the bottom of the metric!
Prepare to be disappointed. They are openly trying to raise it in order to lower "inflation".
How long will they need to hold interest rates at 5%+ before we see a raise in unemployment?
The US’ economy is not as capital intensive as other economies past.
I don't know. New + used car sales as well as new 15/30 year mortgages (or what would typically be refinances maybe) have to have some effect.
A car salesman closes less deals, he has less money to go on vacation with, etc. etc.
Lots of companies still filling back orders and latent demand from the last three years
When unemployment is low companies are reluctant to lose staff for fear of not being able to rehire when needed
The housing market hasn’t slowed much which is a huge employer
Pent up demand for travel and services is still strong
It's going to be really tough to do that if they can't create some unemployment over here.
The Fed rate doesn't directly affect employment - at best it may encourage some larger businesses to postpone hiring, but most companies (outside tech, which a.) has some very good macroeconomists b.) intends to survive and c.) is unusually sensitive to cost of capital) aren't going to lay off people until their bottom line takes a hit that puts their survival in question. Smaller profitable companies aren't directly exposed to the cost of capital at all, because they fund operations out of cash flow.
The way interest hikes combat inflation is that they make certain lines of business unprofitable, which makes companies either voluntarily shutter them or go out of business for being unprofitable, which frees up the workers involved in those businesses to compete for core, need-to-have industries like food and logistics, which holds down wages. This is happening in tech, but it hasn't filtered down into the broader economy. And it needs to - even if you lay off everyone who "learned to code" in the last 10 years and force them back to working retail, there are still way more job openings than workers.
We'll see unemployment go up when we see major Fortune 500 companies go bankrupt, and we'll see inflation drop sustainably when people are on bread lines.
The money injected into the system was created 2, 3, and 4 years ago. It takes a few years for the effects of multi million dollar financing to show.
They are absolutely not “trying to raise unemployment”. They are trying to control inflation and the expectation is that they will eventually have to stop raising interest rates (or lower them) because unemployment increases too much before they hit their inflation target.
Their main lever is interest rates. Interest rate increases do not necessarily increase unemployment. Now that unemployment is low enough, their priority is inflation, and for that they will raise interest rates. If higher unemployment is a side effect that leads to 2% inflation, then their mandate is still achieved. But rest assured, if inflation comes down to 2% with unemployment flat or improved, it's all the better according to them. Their intention is not "more unemployment -> less inflation", it's just "less inflation," by any means necessary. They will accept causing higher unemployment to achieve 2% inflation because it's a balancing act between their two goals.
"Powell said he hoped that a slackening of demand might reduce pressure in the labor market without raising unemployment."[0]
[0]https://www.bloomberg.com/opinion/articles/2022-07-29/higher...
The critical difference that you are missing is that if inflation stops before employment declines, they will stop raising rates.
No, the Fed is trying to lower aggregate consumer demand to rein in the growth in consumer prices. If it could acheive that entirely by adversely impacting availability and cost of credit while unemployment kept dropping, that would be ideal, given the other side of its dual mandate.
It accepts as a natural consequence that unemployment will likely need to go up to acheive its goals on inflation, but raising unemployment is not a goal.
It would be ideal. But it is not achievable. So raising unemployment is a short term goal to achieve the broader goal of stability.
There is a difference between an accepted cost and a goal.
It may be that the lack of a minimum wage in a situation of labor scarcity empowers workers. When there is a mandated minimum wage, a business can pay that, because it's an easy decision. But when there is no minimum wage, businesses have to work harder to determine an appropriate pay level. They have to conduct market research, hire consultants, study their competitors, and make a decision.
I'm not endorsing the practice - it will get you fired if one of your employers find out (although maybe its practitioners don't care, they'll just get another 10 jobs) - and it's pretty ridiculous that it exists. But it's sort of the logical outgrowth of late-stage capitalism where the only thing that matters is securing the transaction that puts money in your bank account and actually doing the job that you promised to do is secondary.
I wish I could find the interview, but at one point someone brought up the question of wages going up and he basically said "Don't stress we'll get that under control soon"
"That" basically meaning poor people.
As an extreme example, if the minimum wage went to $100/hr, inflation would skyrocket because demand for goods would skyrocket which would send prices for just about everything to the moon.
A metric that matters a lot more is purchasing power. It's better to make $10/hr if a dozen eggs cost $2 (20% of your hourly wage), compared to making $20/hr with a dozen eggs costing $6 (30% of your hourly wage).
In other words, if people get paid more, demand stays the same (or increases) which is counterproductive to lowering inflation.
Hey entry level worker. 2 years ago we (company) would have paid you $12/hr. Now you have made it (by not applying for our open positions we need filled/quitting over time) that you refuse to work for less than $14/hr. That's a 16% increase in our payroll. That's fine! We'll just charge 16% more for our product and the entire thing will be "put off" by the customer who will front the bill. Our bottom line is unaffected and the entire thing is a passthrough for us.
He has suggested that wage decreases are potentially one of the paths between rate increases and reduced inflation which is just an observation of basic facts of economics.
Do you want him to pretend he doesn’t understand how the main monetary policy lever available to the Fed impacts the things that the Fed is responsible for targetting?
Let me rephrase my original comment: a person who hasn't been earning anything and made a *rational decision* to earn something is in a better position than he was before.
I honestly don't think that significant portion of these new jobs are filled with people who decided to be disqualified from social services to earn less money that they have been receiving before.
I haven’t looked at the data recently but I would bet small money that you’re incorrect. I’m thinking of people near retirement age specifically.
Our current job boom has little with minimum wage allowing for lots of low productivity workers and more to do with a demographic shift, baby boomers are retiring and dying off, the demographic pyramid is imbalanced.
For most jobs you simply can't get someone to do the work for that rate.
Is anyone looking into that idea?
Also how weird that we de facto ended minimum wage with no discussions. Just let it happen. Strange things happen when laws don’t account for inflation.