202. RyckNelson - Jan. 28, 1999 - 9:54 PM PT
I'm off to bed,
Imo, an equitable solution is to quit taxing at preposterous rates. When one is making minimum wage the tax liability could be adjusted to near nil. Then a graded scale of tax liability could be implemented. EITC implies that too much tax has been taken and the beneficiary needs to get a rebate. It stands to reason that the taxes are unjust and inappropriately administered.
The burdon of tax upon the middle income brackets like myself and I'm sure many of you is also preposterous. Again equity in taxation is required to make the economy strong. The blood sucking government must be reeled in. In essence, bring it to it's knees.
In saying this, my mind goes to Jesse Ventura and his plan to give back some of the billions surplus in the Minnesota treasury. It will be great if he succeeds and imagine the presidence it sets.
203. pseudoerasmus - Jan. 28, 1999 - 10:32 PM PT
Despite the Cato provenance, a very interesting and meticulous article on the income distribution and taxes during the 1980s.
204. pseudoerasmus - Jan. 28, 1999 - 10:35 PM PT
elliot803 (Message #196)
"An increase in the federal minimum wage will increase the labor costs of your competitors as well as yourself, assuming the workers are in the U.S., so it should not put you at a competitive disadvantage."
Well, no, not necessarily. Some of his competitors would be able to better afford substitutes for the minimum-wage labour.
205. CalGal - Jan. 28, 1999 - 10:46 PM PT
You realize, of course, that from now until the end of time any scoffing at a Cato Institute link will provoke the retort, "Well, PseudoErasmus cited them!"
206. pseudoerasmus - Jan. 28, 1999 - 10:53 PM PT
A Cato study or paper is always guilty until proven innocent.
207. stostosto - Jan. 29, 1999 - 5:36 AM PT
I am in a hell of a hurry, but I can't seem to help commenting here off-the-cuff and, hence, probably somewhat sketchy.
1) Poverty in my opinion can be defined as lack of real choice. Thus, you can live in a rich society and still be poor although you are 5 times richer than, say, the average Chinese. When you live in a society, certain things are required if you are to be around: Cleanliness, clean, not too shabby and outdated clothing, etc. A certain knowledge of what goes on in TV, and even (at least in some parts of the US) a car - can be basic commodities that you simply *have to have*. There is no real choice. These socially determined standards of what is basic for a life in society are changing all the time, as society gets richer. Or, maybe even, as *parts* of society get richer.
2) As a person who has received some education in the field of economics, I have been taught that a wage is the price of labour which should reflect the value of that labour as judged by the market. Otherwise you - as an economist - are required to go "naughty-naughty, poo-pooh!" (In econ-speak it is called things like "inefficiency" and "rigid labour markets", but the meaning is the same). Thus, it is an awkward problem what to do with people who apparently are not able to make a living (whether absolutely or socially determined) on the wage the market is willing to allot them. At least if you are not prepared to disregard those annoying humanitarian principles that modern societies have somehow inflicted on themselves.
Basically there are three strategies:
* Don't bother. If people are poor, they must do something about it. Educate themselves, work harder. If you give them money, they don't have to this, so why should they? This basically amounts to denying the problem. The problem is they have no choice.
* Give them money. Everybody should have an income which enables them to a minimum existence. If their wages
208. stostosto - Jan. 29, 1999 - 5:38 AM PT
* Give them money. Everybody should have an income which enables them to a minimum existence. If their wages are too low, they should be somehow topped up. This risks creating a dependency culture. If low-wagers earn more, the topping will fall, so why should they? Besides, how much is the rest of society able and willing to contribute to this?
* Give them opportunities. Education, education, education. Support them in attaining qualifications, motivation, social networks, etc. that will enable them to contribute to society and merit a living wage.
Guess which one I favour.
Unfortunately, devising such a strategy is not something you just do. In fact, it's so difficult you can wonder whether it is possible at all, at least if your ambition is the total elimination of poverty. But it's not an all-or-nothing. Progress can be made.
(Yeah, I know... )
209. FreeToChoose - Jan. 29, 1999 - 6:15 AM PT
phillipdavid
“Well, just because you didn't like the comparison they made between the budget of the average working person and a scaled down subsistence budget necessary for a family of four doesn't mean any of the numbers they used are bogus.”
I agree. The numbers are bogus for entirely different reasons. There are so many errors going on, we need a program.
I like your phraseology. Let me restate my main point in your phraseology:
It is misleading to compare the average wages of a single working person with the budget necessary for a family of four (containing *two* working adults).
“ It is unfair an unrealistic to characterize the numbers they came up with as "bogus", imo.”
It would be unfair to characterize the numbers as bogus without a bit more explanation. I will try to get to it today.
The comparison they make is bogus, and I have explained the major flaw. The numbers in their living wage look like they were thrown together by a mediocre high school student without any knowledge of the subject matter. If this document were a sociology paper, it would deserve an “F”.
210. FreeToChoose - Jan. 29, 1999 - 6:23 AM PT
Raskolnikov
“Yeah, it is certainly inconsistent to use some proportion of an average single wage earner as a benchmark for a family of four, and it doesn't say a whole lot for their logical processes, but they could easily have kept the benchmarks consistent and just changed the proportion.”
Well, I certainly agree that it says volumes about their logical processes, but I don't accept that they could have done it honestly with the same conclusions (I confess I may not have correctly understood your “change the proportion” point).
The group makes a lot of political hay out of the fact that many fast-growing jobs have average wages less than “living wages”. But if they assumed two wage earners, they would have to use twice the average wages. Most of their examples are eliminated. It would destroy their entire point.
(I won't even get into the statistical error of using the average to draw conclusions; my impression is that you are well-versed in this issue, and know they are being sloppy. But this error is much smaller than the factor of two blunder.)
211. FreeToChoose - Jan. 29, 1999 - 6:26 AM PT
Raskolnikov
“Rather than using benchmarks against an average wage, I would personally use the standards I mentioned earlier.”
I liked those standards very much, and I was excited about pursuing that discussion. However, that was before I learned that the issue isn't about the concept of living wage, but merely a propaganda campaign to repackage the minimum wage debate in politically more palatable verbiage.
212. FreeToChoose - Jan. 29, 1999 - 6:35 AM PT
CalGal - Jan. 28, 1999
The thread topic isn't "Minimum Wage" but "Living Wage".
I fell for this, too. I feel, so….used.
213. elliot803 - Jan. 29, 1999 - 6:58 AM PT
CalGal:
"The thread topic isn't "Minimum Wage" but "Living Wage"."
Most of the discussion has been about the minimum wage. It is difficult to address your questions about a "living wage" without a definition.
"The Ms posted statistics earlier saying that a minimum wage earner couldn't support a family of four, if I understood her. A "modest increase" wouldn't change that. The links that PhillipDavid have posted aren't asking for a modest increase, either."
I agree with her. And?
"Enochsmoky was talking about a $2 increase in the minimum wage. You responded by saying that a "modest increase" wouldn't affect the economy. Does this mean you consider a $2 increase--which is 30% or so--to be modest?"
I would call a $1 increase modest. Perhaps $2. You keep talking as if raising the minimum wage and increasing the EITC are mutually exclusive, but of course they're not.
"Have we ever increased the minimum wage by that much in the past?"
I doubt it. So what?
214. Raskolnikov - Jan. 29, 1999 - 7:10 AM PT
FTC: I don't think that I can more accurately discuss the methodology used by Living Wage advocates without knowing precisely how they did it. Got link?
215. Raskolnikov - Jan. 29, 1999 - 7:16 AM PT
FTC:"However, that was before I learned that the issue isn't about the concept of living wage, but merely a propaganda campaign to repackage the minimum wage debate in politically more palatable verbiage."
I'm not sure what the difference is. Living Wage proposals, as envisioned by their supporters, and as discussed here, are an attempt to get the minimum wage up to a standard which is considered "livable". Currently their efforts are devoted to public sector contractors, where they are having great success in getting laws passed, but less success in getting *effective* laws passed. I don't much care for that specific effort but I quite support a broad attempt to make sure working people are above some societally determined poverty line, whether this be through a buck or two increase in the minimum wage, or an EITC.
How did you envision a living wage that allowed you to be disillusioned by current efforts?
216. FreeToChoose - Jan. 29, 1999 - 7:18 AM PT
Here
(Thanks to PD)
217. FreeToChoose - Jan. 29, 1999 - 7:20 AM PT
Particularly page 8 of the document for some level of detail on how the amounts were constructed.
218. CalGal - Jan. 29, 1999 - 7:24 AM PT
Elliot,
No, actually, the discussion has been about a living wage. The concern has been how to give people at the poverty line enough money to live on (hence the term, I imagine).
Of course, the numbers the Ms posted showed that a single person earning the minimum wage for a 40 hour work week is above the poverty line. So perhaps this means we need no changes in the minimum wage at all?
I have not said that raising the minimum wage and increasing the EITC are mutually exclusive. But the whole focus of the living wage movement, I thought, was to raise the minimum wage to at least $8/hour, and that is a lower estimate.
If all we are doing is discussing whether or not we should raise the minimum wage to $6.25, shrug.
I don't call either a $1 or $2 increase in the minimum wage modest. You are welcome to, of course. Is this one of those times where a majority opinion is proof that an idea is correct, or indication of the public's misguided notions?
219. CalGal - Jan. 29, 1999 - 7:31 AM PT
Have there been studies done estimating the impact a $2 increase would have on employment?
It seems to me as if it would be significant, but this could be a time when what seems intuitively obvious is wrong.
But I find it hard to believe that we would all start paying $.99 for a taco at Taco Bell. (Yes, I made that number up, too.)
220. FreeToChoose - Jan. 29, 1999 - 7:33 AM PT
Phillipdavid
I promised to respond in more detail to the specific makeup of the wage amount.
Please note that some of my problems with the calculation would make the number lower, others would make the number higher. I don't assume that the errors are off-setting without seeing the analysis.
Food – the authors choose the second lowest of four ag dept budgets? Why the second lowest? Is the lowest budget deficient nutritionally, or by some other standard? I'm not familiar with their work, so I cannot say definitively that this level is the right level, but far more homework is needed before accepting this number.
Transportation – the number seems a bit low, but I don't have a lot of experience here.
Housing – the authors selected the 40th percentile? Why so high? This assumes that 40% of all renters are in locations that we would consider deficient. Is this plausible?
Day care – amount seems quite arbitrary. In addition, there are federal programs to help with child care costs. How are these factored in?
Clothing and Personal – the budget contains zero money for appliances? This family is supposed to live without a stove, refrigerator or TV? Who peer-reviewed this work?
Telephone - $703 for telephone service? I spend much more, but I am guessing I could spend far less than this if I were on a tight budget.
Federal and State taxes – a family earning 32k pays almost 7K in federal and state taxes? Is this accurate? Don't get me started.
Life insurance – none. I may be biased here, but this is irresponsible.
221. TheDiva - Jan. 29, 1999 - 7:39 AM PT
I have a question for the economists in the bunch:
If the minimum wage were tied to the cost-of-living (thus making the wage variable according to geographic region), theoretically making it possible for welfare-to-work people and others to live without government assistance, would or could that eventually reduce the tax burden on the rest of the population enough to make a tax cut possible, thus giving households more discretionary income and giving a boost to local economy? If so, how?
222. elliot803 - Jan. 29, 1999 - 7:41 AM PT
CalGal:
"No, actually, the discussion has been about a living wage."
It's been about both. Most of your own posts have been about the supposed costs and benefits of increasing the minimum wage versus increasing the EITC.
"Of course, the numbers the Ms posted showed that a single person earning the minimum wage for a 40 hour work week is above the poverty line. So perhaps this means we need no changes in the minimum wage at all?"
No, it does not mean that. Why should anyone who works for a living in the richest country in the world have to live in (or close to) poverty, even a young single adult? And many people who earn the minimum wage, or little more, have dependents and thus fall below the federal poverty level, anyway. Economic and income inequality in the U.S. are at near-record highs, and are higher than those in most or all other rich industrial nations.
"I have not said that raising the minimum wage and increasing the EITC are mutually exclusive."
No, you just keep implying it by discussing them as if they are conflicting options.
"But the whole focus of the living wage movement, I thought, was to raise the minimum wage to at least $8/hour, and that is a lower estimate."
No, I think the "focus" of the "living wage movement," if there is such a thing, is to increase the incomes of workers who live at or near the poverty level. I suspect most people in this "movement" don't care much whether this is done through a minimum wage increase or some kind of transfer payment that has an equivalent effect.
"If all we are doing is discussing whether or not we should raise the minimum wage to $6.25, shrug."
That is not what we have been discussing.
223. elliot803 - Jan. 29, 1999 - 7:43 AM PT
CalGal:
"But I find it hard to believe that we would all start paying $.99 for a taco at Taco Bell. (Yes, I made that number up, too.)"
Gee, do you?
224. Raskolnikov - Jan. 29, 1999 - 7:50 AM PT
I once did an exercise to determine how much a single person would need to live in decently in the Minneapolis area. This was my basic budget:
Rent: $300 per month (2 bedroom apartment, with roommate. includes heat, water and electricity)
food: $100 per month (no caviar, but not living on Kraft Mac&Cheese either
transportation: $40 for an unlimited bus pass, for one month
health care: $250 per month for a standard HMO.
clothes: Discount stores are your friend. $50 per month is quite enough
phone: assume communication is a necessity $30 per month
Misc expenses: (toiletries, supplies, a basic entertainment budget) $100 per month
Savings: ability to save for a house downpayment, or an IRA, $175
add 8% for FICA and Medicare
Grand total: about $1100 per month, or $13,500 per year.
Now, a lot of employers offer subsidized health care, or the state offers a subsidized health care plan you will be eligible for as a worker, so health care costs will really be a lot less. Still, I think a minimum wage paying $10700 per year is a just a bit shy.
Make it a two parent family with two kids not in school, and the $500-$700 they would pay per kid in day care would not make it economical for one parent to work (except maybe in the day care profession). Add about another $300 per month in health care for a family plan, plus another $200 in food & clothing, plus your roommates share of the rent, at $300, plus more savings (spouse's retirement and college education for the kids) and a minimum wage is now about half of what the family needs to get by.
Once the kids make it school, the second parent can work, and after school day care expenses for two kids drop to about $500 per month. You are now shy about $5000.
225. Raskolnikov - Jan. 29, 1999 - 7:52 AM PT
(cont)
Once the kids don't need day care, you about break even, and you will probably have enough saved to put a downpayment on a small house (townhouse mortgages and fees go for around $600 per month, the cost of a 2 bedroom apartment), and you will probably get by.
Now, all of this is back-of-the envelope, and based on 9 years of near minimum wage living in Minneapolis (although woe be unto you if you have student loan payments on top of all the other ones).
So, my general conclusion is that, for this geographic area, while a little bump in the minimum wage would be nice, it wouldn't do much to help the working families that are in dire straights (any minimum wage bump sufficient to give them what they need would be a hell of an economic shock, and much of the benefit would go to those who don't need it as badly). I would therefore prefer to target any programs to the working poor. Viva EITC!
226. CalGal - Jan. 29, 1999 - 7:53 AM PT
Elliot,
"Most of your own posts have been about the supposed costs and benefits of increasing the minimum wage versus increasing the EITC."
Actually, they have been about the EITC vs. increasing the minimum wage *significantly*--which I consider a $2 increase to be. In fact, I think a $1 hike is pretty big.
"I suspect most people in this "movement" don't care much whether this is done through a minimum wage increase or some kind of transfer payment that has an equivalent effect."
I got the impression, from the link PD posted, that there was a movement to do this through a significant hike in the minimum wage.
"That is not what we have been discussing [6.25 minimum wage]. "
Great. Your assertion that a "modest" hike of $1-2 not impacting employment--could you back that up, please?
227. FreeToChoose - Jan. 29, 1999 - 7:53 AM PT
In Message #67 and Message #71 Raskolnikov says:
“Jade: It is currently possible to have your expected EITC payments added to your paychecks….
Although I don't know the particulars of how this gets set up. But if they can automatically deduct taxes from each paycheck, it can't be any more difficult to add a credit.”
You are correct. Not that this is any surprise to you, but for those interested in details, see IRS rules on Advance payments of EITC
228. Raskolnikov - Jan. 29, 1999 - 8:08 AM PT
Diva:"If the minimum wage were tied to the cost-of-living (thus making the wage variable according to geographic region), theoretically making it possible for welfare-to-work people and others to live without government assistance, would or could that eventually reduce the tax burden on the rest of the population enough to make a tax cut possible, thus giving households more discretionary income and giving a boost to local economy? If so, how?"
Effective welfare reform isn't a money saver. States like Minnesota and Wisconsin have seen that in order to get people off welfare, you have to spend more money, by having a graduated drop off in aid and health care benefits instead of an abrupt drop off. A higher starting wage would probably mitigate some of that, but I still wouldn't bank on any spending cuts, unless your state has no problem cutting people off completely.
I worked on a welfare project recently. The states are going to be damned lucky to get much more than 1/3 of their caseload permanently into the workforce.
229. TheDiva - Jan. 29, 1999 - 8:11 AM PT
Rask
Oh, yes, I know....I worked in human services for a long time, and it isn't cheap to help people become self-sufficient.
I suppose I should have added to my question:
"Thus eventually making the rise in living wage pay for itself?"
Or is that impossible in economic terms?
230. TheDiva - Jan. 29, 1999 - 8:12 AM PT
errata, corrigendum, or duh
"I worked in human services for a long time, and *I realize* it isn't cheap to help people become self-sufficient.
231. TheDiva - Jan. 29, 1999 - 8:13 AM PT
"
232. elliot803 - Jan. 29, 1999 - 8:26 AM PT
CalGal:
"Actually, they have been about the EITC vs. increasingthe minimum wage *significantly*--which I consider a $2 increase to be. In fact, I think a $1 hike is pretty big."
No, this is the first time you have stated such a qualification to your claim.
"I got the impression, from the link PD posted, that there was a movement to do this through a significant hike in the minimum wage."
I didn't. Where does it say that?
"Great. Your assertion that a "modest" hike of $1-2 not impacting employment--could you back that up, please?"
I don't have that burden. If you are claiming that a modest minimum wage increase will have an adverse effect on employment rates (or anything else), you assume the burden of demonstrating that.
233. elliot803 - Jan. 29, 1999 - 8:32 AM PT
As for federal welfare reform, it's way too early to pass judgement on the success of that. I suspect that the alleged success of eliminating AFDC will disappear as soon as there is a downturn in the economy. Dateline and 20/20 will start running stories about single parent families living on the streets and eating at soup kitchens because they no longer qualify for federal assistance and the states have failed to compensate for the loss.
234. CalGal - Jan. 29, 1999 - 8:34 AM PT
Elliot,
No, it isn't the first time. Besides, the topic is "living" wage.
"If you are claiming that a modest minimum wage increase will have an adverse effect on employment rates (or anything else), you assume the burden of demonstrating that."
I'm not claiming anything. I'm asking. However, you are saying that $1-2 increase in the minimum wage is "modest". You have also said that this will not impact the economy. I have not asserted that it wouldn't--I have said that intuitively, this doesn't seem quite right. But that I am open to new information.
Since there has never been a $1-2 increase in the minimum wage, I believe the burden is on you to provide proof that it won't affect employment.
That will be beyond you, I'm sure. So I open the question up to anyone. I am, as I've said, genuinely curious to know if a significant increase in the minimum wage--which I define as $1-2--would impact employment.
Elliot calls this a modest increase, and says it would not. Can anyone else enlighten me?
235. CalGal - Jan. 29, 1999 - 8:37 AM PT
Elliot,
No, it isn't the first time. Besides, the topic is "living" wage.
"If you are claiming that a modest minimum wage increase will have an adverse effect on employment rates (or anything else), you assume the burden of demonstrating that."
I'm not claiming anything. I'm asking. However, you are saying that $1-2 increase in the minimum wage is "modest". You have also said that this will not impact the economy. I have not asserted that it wouldn't--I have said that intuitively, this doesn't seem quite right. But that I am open to new information.
Since there has never been a $1-2 increase in the minimum wage, I believe the burden is on you to provide proof that it won't affect employment.
That will be beyond you, I'm sure. So I open the question up to anyone. I am, as I've said, genuinely curious to know if a significant increase in the minimum wage--which I define as $1-2--would impact employment.
Elliot calls this a modest increase, and says it would not. Can anyone else enlighten me?
236. msivorytower - Jan. 29, 1999 - 8:39 AM PT
Well, kiddies, I haven't much time to play right now, but I need to respond to a few things:
1) The congressional study I referred to last night is the following:
Falling Behind: The Growing Income Gap in America.
Report produced by the Joint Economic Committee of the US Congress
The data used in the study comes from the CBO, the BLS and the Dept. of the Census.
The percentage change in Real Average Family Income 1979-1987
by income Group, Pre- and Post- Tax
..................%Change in Pre.........%Change in Post
...................Tax Cash Income........Tax Cash Income
Lowest 5th...........-5.0..................-7.7
Second 5th...........-0.9..................-5.1
Third 5th.............1.6.................. 1.3
Fourth 5th............4.5.................. 5.8
Highest 5th..........11.8..................15.8
Source: CBO. Computed from the March CPS for 1980 and 1989. Based on pre-tax family cash income, weighted by families. Family definition includes one-person units.
2) The Cato report PE linked is, at first glance, typically disingenuous. It states that tax policies were not responsible for contributing to the growing income inequality by examinining federal receipts for only the top quintile in one graph, and by examinining total tax transfer payments for the year 1990 only.
Now, note above that the CBO study is a comparative one between 1979 and 1989 (in other graphs they use 89 as the end point). The above data shows the decline in after tax income by quintile for the two years in question. Cato refutes this by looking only at 1990 data.
con't.
237. CalGal - Jan. 29, 1999 - 8:39 AM PT
You know, I think that's my first double post ever. And I didn't press the button twice or anything.
238. msivorytower - Jan. 29, 1999 - 8:39 AM PT
Table 4 of the Cato study is also a case of hand waving. By breaking out the top 5th of the income groups it attempts to minimize the gains in after tax income for that group. In addition, by choosing 1977 as a starting point, the comparison is not analogous to the CBO study.
A final quick criticism (there are many others, but I'm too busy right now to address them, perhaps tonight or tomorrow), In preparation for their discussion of Table 4, the Cato author cites Brookes (and others) as having shown that the Reagan administration is not to blame for the widening income distribution. I encourage you to read the cite given at the end of the paper. This is not an academic paper, it is an article in the WSJ and there are no other individuals making that claim but Brookes (as cited in the paper). In fact, the paper does not ever refute the notion that changing tax policies were responsible, at least in part, for the growing income inequality of the 80's.
My first pass examination of this paper is that it makes an argument that is not supported in the analysis and data they present. It is, then, typical Cato bullshit.
I'll try to get back to this later.....
239. Raskolnikov - Jan. 29, 1999 - 8:42 AM PT
Diva: Well, since government is the representative of society, its cost and benefit calculations should reflect societal costs and benefits, not "what is best for government revenue", although knowing what it will cost government is certainly part of the accounting. Transfers of money in and of themselves are generally considered a wash, although the distortion effects of the transfer mechanism are costs.
From a societal standpoint, the benefits of things like the minimum wage are determined by the redistributive impacts such as the arguable value of greater economic equality in and of itself, reduced crime, lower health expenditures, and spillover benefits of the better education that a higher wage can buy.
So, in evaluating a raise in the minimum wage to a livable wage you would have to balance the redistributive benefits (as well as any benefits from cuts in other programs like Medicaid, such as the benefits of funding a different program or the distortion reductions of a tax cut) against costs like any increase in unemployment or enforcement costs.
In short, any tax reduction which could result from a living wage change isn't necessarily a benefit. Calculating whether a living wage would "pay for itself" requires a different sort of accounting. Using the accounting I described, I think a modest increase of a buck or two probably would "pay for itself".
240. elliot803 - Jan. 29, 1999 - 8:45 AM PT
CalGal:
"No, it isn't the first time. Besides, the topic is "living" wage."
Yes, it is. And the topic may be "living wage," but you have been talking almost exclusively about the minimum wage and the EITC.
"I'm not claiming anything. I'm asking."
You're not claiming that a modest increase in the minimum wage will have an adverse impact on employment rates? Great.
"However, you are saying that $1-2 increase in the minimum wage is "modest". You have also said that this will not impact the economy. I have not asserted that it wouldn't--I have said that intuitively, this doesn't seem quite right. But that I am open to new information. "
Your intution is a poor guide to policy results. If you're suggesting that a modest minimum wage increase will hurt the economy, I think you have to offer more than your "intuition" to back that up. If you are not making the suggestion, then you agree with me.
"Since there has never been a $1-2 increase in the minimum wage, I believe the burden is on you to provide proof that it won't affect employment."
No, the burden rests with the person who asserts the effect. I am not making such an assertion.
241. TheDiva - Jan. 29, 1999 - 8:45 AM PT
Rask
hmmmm...food for thought. Thanks.
242. CalGal - Jan. 29, 1999 - 8:49 AM PT
Elliot,
I have no idea what you are trying to prove, but this is becoming tedious. Since it is impossible that you would provide the information I'm looking for, consider this particular branch dropped.
243. Raskolnikov - Jan. 29, 1999 - 8:51 AM PT
elliot:"As for federal welfare reform, it's way too early to pass judgement on the success of that. I suspect that the alleged success of eliminating AFDC will disappear as soon as there is a downturn in the economy. Dateline and 20/20 will start running stories about single parent families living on the streets and eating at soup kitchens because they no longer qualify for federal assistance and the states have failed to compensate for the loss."
Yeah, this is a topic for another thread, but this is what I am seeing as well. The myth of perfectly employable, or trainable, welfare moms sitting at home watching TV and cranking out more kids is going to get a kick in the teeth. Once states have only succeeded in getting a fraction of the welfare rolls into the workforce, and the federal deadline hits, they are going to have to make a decision whether to cut them off cold, sending a lot of mothers and kids into the streets (many, however, will fall back on family support mechanisms or significant others), or decide whether they want to pick up the funding themselves.
244. elliot803 - Jan. 29, 1999 - 8:55 AM PT
The issue of accounting that Rask describes is central, because opponents of policies for increasing the incomes of the working poor tend to focus narrowly on alleged direct costs in economic growth and employment rates and ignore indirect social and economic benefits of the kind Rask enumerated.
245. TheDiva - Jan. 29, 1999 - 9:02 AM PT
Yes, and I think it's because sometimes such things are hard to quantify. It's so easy to say 'we can't have government in the business of child care, so therefore we aren't going to fund after-school programs', but how much money would be saved in the long run if kids weren't left to their own devices after school? And, of course, that's not to mention the intangible and far-reaching benefits to children and families participating in such programs.
246. elliot803 - Jan. 29, 1999 - 9:04 AM PT
CalGal:
"Since it is impossible that you would provide the information I'm looking for..."
It's not impossible. There's just no reason to "back up" the nonexistence of an effect that I know of no reason to believe does exist. Since you now say you aren't claiming it exists either, your argument has been reduced to your "intuition," which is worthless.
247. CalGal - Jan. 29, 1999 - 9:06 AM PT
Rask,
There has been a decent amount of coverage of this topic. The general consensus is that the welfare reform act did kick out those who were actually scrounging out and the economy did absorb those that were employable.
But of the long-term welfare recipients, most of them are considered pretty close to unemployable.
I can't remember the details, but the ex-Clinton cabinet member who wrote an article in the Atlantic (if someone can give me his name, I'll look it up in the archives and link) provided some statistics that he intended to demonstrate the value of educating these people. A year of education only improved their chances of staying employed some small amount. I remember thinking it made more sense just to support them, rather than try to make them employable.
248. pseudoerasmus - Jan. 29, 1999 - 9:22 AM PT
Studies of the impact of the minimum wage on employment are stated in terms of what % change in employment in the relevant labour pool would occur given, say, a 10% change in the minimum wage. Most studies for the 1960s to 1980s cited a range from -1% to -0.1%, but I have seen one as high as -3%. At any rate, the impacts of a 10% increase in the minimum wage are going to be quite small. Please note: the relationship between these two figures is likely not linear for large variations, so you cannot extrapolate from these results what the likely result of a 50% increase in the minimum wage might be.
Msit's criticism of Table 3 in the Cato paper is completely valid. But I find her dismissal of Table 4 baffling. What difference does it make whether the top quintile is broken up into five parts? In all cases, a downward trend is visible.
249. pseudoerasmus - Jan. 29, 1999 - 9:25 AM PT
I totally agree with Raskolnikov's Message #239.
250. Raskolnikov - Jan. 29, 1999 - 9:37 AM PT
FTC: I checked out the methodology of the report. It is pretty much junk, as you said. Their assumptions and budgets do assume both parents are working, but all of the standards are compared to a single income. It also isn't clear what jobs they are comparing the living wage to. The headers say "new jobs", but is it starting salary? average salary? median salary?. What percentage of 4 person families take low paying cashier or retail jobs as opposed to higher paying ones? Presumably a lot of people with two kids is going to be a bit older and have some work experience. Also, many of the jobs they compare to presumably have benefits, such as health care, which they are not including in determining whether the job offers a livable wage.
I also don't understand how they came up with the wage in many cases. Food ($500 a month for food, without eating out?? I could take the family out for fast food every night of the week and not spend $500), transportation, and taxes seem inordinately high, and taxes are explicitly linked to income. You can't look at the tax bill of someone who makes 30,000 and say that someone who makes $15,000 is partially impoverished because they can't pay the taxes of someone who makes twice as much. (I glossed over this when I did my back of the envelope calculation, but I wasn't publishing the damn thing). They also assume the family of four is renting a house, which is a bit of a stretch. Is home possession a requirement for someone to be considered at a decent standard of living? The telephone bill is nuts. The teenage boy in the house evidenty calls 1-900-HOT-CHIX a lot.
251. ScotusAntonovich - Jan. 29, 1999 - 9:41 AM PT
elliot:
Perhaps if you could get a reputable known person to agree with your "$1 to 2 is a modest increase" notion, that might go a long, long way to have people pay attention.
As it stands, your case is weak.
252. elliot803 - Jan. 29, 1999 - 10:00 AM PT
Scotus:
Perhaps you could identify some "reputable people" who disagree, since you seem to think they exist.
Regardless, if you think the question of whether "modest" is a valid adjective for a $1 to $2 increase in the minimum wage is important, then you haven't understood the argument.
253. pseudoerasmus - Jan. 29, 1999 - 10:09 AM PT
10-15% is what economists generally refer to as a "modest increase" in the minimum wage.
But I don't see why a larger increase need not still produce net social benefits.
254. elliot803 - Jan. 29, 1999 - 10:13 AM PT
What is the current federal minimum wage? I know it's around $5, but I can't remember the exact figure.
255. FreeToChoose - Jan. 29, 1999 - 10:17 AM PT
Well, I knew it was too good to be true. I actually agreed with Elliot when he said, “As others have pointed out, there really is no evidence that a modest increase in the minimum wage will have a dramatic adverse impact on the unemployment rate.” The trouble was, it didn't occur to me that he would consider a $2 an hour increase “modest”. I haven't checked the history, but I'm sure an increase of this size would qualify as one of the, if not the largest increase in history.
256. elliot803 - Jan. 29, 1999 - 10:18 AM PT
pseudo:
"I totally agree with Raskolnikov's Message #239."
...in which he refers to a $1 to $2 minimum wage increase as modest and suggests that it would pay for itself (memo to CalGal and Scotus).
257. elliot803 - Jan. 29, 1999 - 10:19 AM PT
Add FTC to the mailing list for that memo.
258. pseudoerasmus - Jan. 29, 1999 - 10:26 AM PT
I have to check, but I don't think there has ever been a single increase in the minimum wage larger than $1.15. But I do know that every increase in the min. wage since the early 1970s has been smaller than the previous one in _real_ terms.
259. FreeToChoose - Jan. 29, 1999 - 10:31 AM PT
In Message #207 stostosto says:
“Poverty in my opinion can be defined as lack of real choice. Thus, you can live in a rich society and still be poor although you are 5 times richer than, say, the average Chinese.”
Would it follow from your argument that the introduction of the Lexus into a world that already had Mercedes exacerbates the poverty of low-income Americans, because now there is yet another choice of a luxury car beyond their means?
260. TheDiva - Jan. 29, 1999 - 10:31 AM PT
I think it's $5.75/hour.
261. pseudoerasmus - Jan. 29, 1999 - 10:38 AM PT
By the way, let me do my minimum wage mantra. Economic theory offers two models of the minimum wage: the neoclassical model, which predicts that raising the minimum wage lowers employment; and the monopsony model, which predicts that under certain circumstances employment could rise. The empirical evidence for the latter, however, is pretty weak, but I suspect in the future the evidence for mixed effects -- neoclassical & monopsonistic -- will mount.
262. CalGal - Jan. 29, 1999 - 11:03 AM PT
Elliot,
As I said, I'm not sure what you're trying to prove. I agree with Rask's analysis in 239 *except* where he called the bump "modest". I'm willing to grant a $1 as slightly high but within norms. But $2? That's 34%. A 34% raise is not what I consider "modest".
Rask says he thinks that the raise would pay for itself. I don't know if that means he doesn't think it would adversely affect employment. If it would not, fine. All I was asking for was any information about the effect on employment, one way or the other.
Pseudo,
What certain conditions could cause an increase in employment in the monopsony model?
263. Raskolnikov - Jan. 29, 1999 - 11:39 AM PT
The minimum wage is currently $5.15. The Dems are trying to raise it 50 cents this year and 50 cents next year.
To me, a raise of a buck or two an hour is a modest raise. I suppose that to someone on minimum wage, it is a much more significant increase. My experiential biases are showing.
I don't know how much a raise would affect unemployment. Most of the data I have seen shows that the elasticity of demand for labor is pretty high at current miniumum wage levels, as Pseudo mentioned earlier. However, even if there are some detrimental consequences, the equity and poverty alleviation benefits of a wage hike might make it worth the trade off. I would personally recommend moving gradually.
264. ScotusAntonovich - Jan. 29, 1999 - 11:40 AM PT
Re: Message #252, elliot803.
"Perhaps you could identify some "reputable people" who disagree, since you seem to think they exist."
Um, nope. As I said, who advocates an increase of $2 or so and secondly do they call such an increase "modest"? That's all I'm asking.
Surely you wouldn't have been so adamant had you no source.
(P.S. Don't point to PE as you made this argument long before he posted what he did. Thanks.)
265. TheDiva - Jan. 29, 1999 - 11:42 AM PT
Cal
All things being relative when it comes to this stuff, a raise from $5.75/hour to $7.75/hour is pretty modest in terms of financial impact on a family's bottom line.
OTOH, if you're making, let's say, $75/hour, a 34% raise will bring you to, what, a few cents over $100/hour? Not modest in this neighborhood, no matter how you look at it.
266. Raskolnikov - Jan. 29, 1999 - 11:43 AM PT
Ack, I am forgetting some of econ language. What is the usual way to describe an elasticity of 5 or so. Is it "the elasticity is high" or would you avoid misunderstanding by saying the "the inelasticity is high"? Or does one avoid "high" and "low" in the first place?
267. TheDiva - Jan. 29, 1999 - 11:45 AM PT
um....
268. Slackjaw - Jan. 29, 1999 - 11:56 AM PT
Message #266
depends on the audience--economists would say "high elasticity" to each other with impunity because the meaning is usually clear from the context. Or you can say "very elastic" or something like that to avoid describing a negative number that's large in absolute value as a large number.
269. Raskolnikov - Jan. 29, 1999 - 12:04 PM PT
Slack: thanks. Where the hell have you been man? You have been missed.
270. Slackjaw - Jan. 29, 1999 - 12:25 PM PT
Oh, well, thanks, that's nice of you. Been busy with school, mostly, but I reorganized my reading breaks so I have less time to surf the web in any case. Too many other things I want to do right now.
271. FreeToChoose - Jan. 29, 1999 - 1:22 PM PT
TheDiva
“All things being relative when it comes to this stuff, a raise from $5.75/hour to $7.75/hour is pretty modest in terms of financial impact on a family's bottom line.”
I would consider is rather important if the market value of a person's job skills was $6 and hour, and a mandated increase meant that the person was fired.
272. TheDiva - Jan. 29, 1999 - 1:26 PM PT
FTC
No fair. You're an economist and I'm not.
Anyway, seriously, of course it is. I was only talking in terms of the increase itself, not the larger implications of a mandate.
273. elliot803 - Jan. 29, 1999 - 1:39 PM PT
FTC is not an economist.
274. TheDiva - Jan. 29, 1999 - 1:40 PM PT
Oh.
Never mind.
Why did I think he was?
275. FreeToChoose - Jan. 29, 1999 - 1:41 PM PT
TheDiva
I won't put up with your insults. I challenge you to a duel. You get to choose the weapons.
276. CalGal - Jan. 29, 1999 - 1:42 PM PT
Diva,
I agree that in the end, neither princely sum is very easy to live on. But that's besides the point when looking at it as a percentage increase. It's 35%. And those advocating a living wage--8/hour--are pushing for a 55% increase.
277. TheDiva - Jan. 29, 1999 - 1:42 PM PT
Oh.
Never mind.
Why did I think he was?
Oh wait, I know why.
PE=economist
PE=libertarian
FTC=libertarian
ergo, FTC = economist
Only in my fevered brain is such a leap possible
278. elliot803 - Jan. 29, 1999 - 1:44 PM PT
Scotus:
"Um, nope. As I said, who advocates an increase of $2 or so and secondly do they call such an increase "modest"? That's all I'm asking."
A lot of people would probably advocate an increase of $2 and would call it modest.
"Surely you wouldn't have been so adamant had you no source."
So "adamant" about what? "Source" for what? I don't think you've been reading my posts very carefully.
279. FreeToChoose - Jan. 29, 1999 - 1:45 PM PT
TheDiva
I understand the point you were making. I confess to using it as a segue to one of my oft-stated, but overly-forgotten points. Too many people think about how much better off a person would be if the minimum wage were increased from A to B, and too little time thinking about the people that might not be employable at level B.
280. FreeToChoose - Jan. 29, 1999 - 1:46 PM PT
Oh my God, everybody duck!!!!!!!!!
281. ScotusAntonovich - Jan. 29, 1999 - 1:47 PM PT
Um, Diva, you *didn't* call PE a "libertarian" did you? Woe. Woe is you if you did.
Elliot, does your Message #273 mean you haven't a single non-Fray "economist" to back-up your "modest" proposal? Thought so.
282. TheDiva - Jan. 29, 1999 - 1:47 PM PT
Sorry, FTC. And why are you using my title?
Cal
What I'm interested in is how feasible it would be to tie the minimum wage to the COL in an area, not that I have any idea how you'd formulate the wage, nor how you'd get it past the business community. $8.00 an hour in Northern Virginia buys you a whole lot less than $8.00 an hour in Madawaska, Maine.
283. FreeToChoose - Jan. 29, 1999 - 1:47 PM PT
I'll be back when the smoke clears. Diva, do you have any idea what you just said??????
284. TheDiva - Jan. 29, 1999 - 1:48 PM PT
Oh, that's right, I forgot.
PE=libertarians bad, economists good
FTC=economists bad, libertarians good
Now I've got it straight.
Phew!
285. CalGal - Jan. 29, 1999 - 1:49 PM PT
Diva.
You did a bad thing.
But look on the bright side. You're about to get your wish.
PseudoErasmus is going to call you an idiot.
286. TheDiva - Jan. 29, 1999 - 1:50 PM PT
(FTC - shhhhhhhhhhhh.......
It's okay, I'm just trying to smoke him out so's he answers some questions. Plus, I'm STILL trying to get him to call me an idiot.)
287. FreeToChoose - Jan. 29, 1999 - 1:50 PM PT
Diva, do you want flowers, or is there a charitable foundation for donations in your name. Please answer quickly, you have little time.
288. TheDiva - Jan. 29, 1999 - 1:50 PM PT
YESSSSSSSS!!!!!!!
289. TheDiva - Jan. 29, 1999 - 1:53 PM PT
PE's a libertarian
PE's a libertarian
neener neener neener
290. elliot803 - Jan. 29, 1999 - 1:54 PM PT
CalGal:
"Elliot, As I said, I'm not sure what you're trying to prove. I agree with Rask's analysis in 239 *except* where he called the bump "modest". I'm willing to grant a $1 as slightly high but within norms. But $2? That's 34%. A 34% raise is not what I consider "modest"."
Fine. Who cares. If you agree with everything else in Rask's #239, you've wasted a lot of energy on nothing. But it is silly to think of a "modest increase" simply in terms of a percentage.
"Rask says he thinks that the raise would pay for itself. I don't know if that means he doesn't think it would adversely affect employment."
It means he thinks the net benefits would (probably) outweigh the net costs. It may or may not have an adverse effect on employment, but overall, it would have a positive effect. I agree with him.
291. ScotusAntonovich - Jan. 29, 1999 - 1:54 PM PT
Sigh.
Posted too quickly.
Re: Message #278, elliot803.
"A lot of people would probably advocate an increase of $2 and would call it modest."
I don't give a rat's ass what "most people" would say. I do care what people who happen to know what they're talking about say. Now, do you or do you not know of a non-Fray economist who agrees with your assertion that a $2 increase in the minimum wage is "modest"? If yes, then who? This isn't a complicated question. Quit dodging.
292. TheDiva - Jan. 29, 1999 - 1:55 PM PT
Sure, you guys, stay on topic. Fine.
293. elliot803 - Jan. 29, 1999 - 1:58 PM PT
Scotus:
No, I don't. Do you know of a non-Fray economist who disputes that a $2 increase in the minimum wage is "modest?" And what does it matter anyway? Also, why does it have to be a "Non-Fray" economist?
294. elliot803 - Jan. 29, 1999 - 2:02 PM PT
"PE=libertarians bad, economists good
FTC=economists bad, libertarians good"
Economics is the "dismal" science, but at least it is a science of sorts; Libertarianism is more akin to a religion.
295. ChristiPeters - Jan. 29, 1999 - 2:03 PM PT
Ummm.....
Why is it important whether or not a $2/hr wage increase can or cannot be characterized as modest?
296. ScotusAntonovich - Jan. 29, 1999 - 2:04 PM PT
It matters, elliot, because you kept slamming CalGal with your silly assertion that "most people" agree with you when haven't any idea whatsoever that's the case.
I don't know of any economists that dispute you, no. But then, I haven't made a claim out of my ass that I can't back up either.
As for why non-Fray people matter, I'm not even going to answer that.
(Diva: hey, it isn't often I'm accused of being on topic!)
297. TheDiva - Jan. 29, 1999 - 2:06 PM PT
Scot
Glad I could help.
298. elliot803 - Jan. 29, 1999 - 2:11 PM PT
Christi:
"Why is it important whether or not a $2/hr wage increase can or cannot be characterized as modest?"
It isn't important. CalGal and Scotus are making a song-and-dance about nothing. Scotus even seems to think it's a technical question that only economists ("Non-Fray" economists, that is) are qualified to answer.
299. CalGal - Jan. 29, 1999 - 2:12 PM PT
"But it is silly to think of a "modest increase" simply in terms of a percentage."
Really? I don't think so. Without any other parameters given, I can't think of any other way to look at it that is meaningful.
In what sense can you describe it as modest?
Or we can drop this--heaven knows I find it tedious.
300. ChristiPeters - Jan. 29, 1999 - 2:13 PM PT
Ok.
But elliot, it looked to me that you were dancing, too.
Oh well, I *am* overdue for new glasses.