Galbraith proposes 12 dollar minimum wage

[Thailandnotes]

http://www.foreignpolicy.com/article...mum_wage_a_lot

[rjwjr]

Re: Galbraith proposes 12 dollar minimum wage

Abolishing the minimum wage is a better idea in my humble opinion, but I only run a business, I don't have JKG's credentials.

[davidstvz]

Re: Galbraith proposes 12 dollar minimum wage

Paul Craig Roberts has been supporting that idea despite being relatively libertarian. Somewhere he linked a study suggesting that it improves a local economy to up the minimum wage. I guess it would suck money out of the hands of wealthy business owners and allow more money to circulate among the average folks. It could hurt smaller businesses... but then that might be offset by the more dollars circulating deal.

[mesyn191]

Re: Galbraith proposes 12 dollar minimum wage

I guess it would suck money out of the hands of wealthy business owners and allow more money to circulate among the average folks. It could hurt smaller businesses... but then that might be offset by the more dollars circulating deal.

Yuuuup. If you put money in the hands of the non rich they usually spend most if not all of it. If you put more money in the hands of the rich they usually don't spend it, they invest it into the FIRE economy.

[oddlots]

Re: Galbraith proposes 12 dollar minimum wage

Dearth of aggregate demand. Plus all the pump-and-dumps have been played out with the demise of - drum roll!!!!!!!! - real estate, the only investment you can (could) make with no money down. What do you top that with?

Pretty soon someone's gonna have to come up with a plan. I hear there's a corporal out there in the sticks with some real talent at rabble raising.

God help us.

[dcarrigg]

Re: Galbraith proposes 12 dollar minimum wage

http://www.foreignpolicy.com/article...mum_wage_a_lot

You know, up until about 5 years ago, raising/lowering the minimum wage was commonly thought of as a trade-off, and referred to as such by the MSM and economics textbooks. What they basically said was: Raise it and get slightly higher unemployment, but slightly more equal income distribution, lower it and get slightly lower unemployment, but get slightly more unequal income distribution.

So one could say, five years ago, that the UK and Canada, for example, have higher minimum wages than the U.S., but they also have higher unemployment to show for it. This was essentially taken as mainstream macroeconomic gospel if my memory serves correctly.

But now, and for the last five years, the U.S. has higher unemployment despite a significantly lower minimum wage ($7.25/hr with 8.5% unemployment) than Canada ($9-$10.25/hr with 7.5% unemployment) or the UK ($9.50/hr with 8.3% unemployment).

This has held for five years now. It is indeed strange. If it continues to hold, then one must wonder how one makes a rational empirical macro-economic argument for lowering or eliminating the minimum wage, given the facts of first-world economics.

Put another way, the minimum wage seems like it may have 'decoupled' from macroeconomic relevance. While its social relevance may be clear, raising or lowering the minimum wage likely may now have less macroeconomic relevance than what's in Madoff's closet or Corzine's harddrive, to turn a phrase.

If one would raise the minimum wage in the U.S. by $2 per hour, that could be represented by the following formula:

($2/hr * 40hrs/wk * 52wks/yr * 72.9M minimum (and close) wage workers) It comes out to about $300B per year. That's about 2% of our $14.5T annual GDP. Now this money's not gone, mind you, it's still in the local economy slushing around. But one thing is certain about this potential significant raise or drop in the minimum wage:

Despite the significant effects it may have on the lives of minimum wage workers and the payrolls of businesses, it's less consequential from this vantage point than it has been in 70 years, since the signing of the '38 FLSA, and it becomes less relevant by the day.

It doesn't necessarily matter greatly at national GDP scale, and as long as that's true, raising or lowering it may tend to have little and random, rather than large and predictable, macroeconomic effects.

I'm specifically trying not to make any value judgement with this post, but rather, I'm just conveying something I've been thinking about as of late.

[mesyn191]

Re: Galbraith proposes 12 dollar minimum wage

Personally I think it'd be better over all if we had a "living wage" as the lowest payable wage, that got raised or lowered yearly accordingly, rather than just bumping the current minimum wage a few bucks. No one in US politics seems to be interested though and most people I talk to about the concept look at me like I've grown a 2nd head.

Raising the minimum a few bucks is at least a step in the right direction. Hopefully it actually happens sometime soon.

[gnk]

Re: Galbraith proposes 12 dollar minimum wage

Not all of the "rich" are the same. A Steve Jobs is very different from a Lloyd Blankfein. A restaurant owner is also very different from a Steve Jobs.

Think about it.

Can a local business employ people abroad? Steve Jobs could.

What you guys are suggesting is very dangerous. You're destroying the real capitalists - the only capitalists left in the US - the small businessman.

The small businessman and woman, may not have access to labor markets in Asia. The small businessman or woman does not have access to the Fed window. The small businessman or woman often uses their savings or mortgages their house to create a business - they have "skin in the game" unlike a Jamie Dimon.

Increasing the minimum wage is taxing the only capitalists left in America. Destroy them and you are only left supporting those who outsource anyway or the FIRE economy.

This is the problem with people like Galbraith (who I respect on other matters). They don't realize that there are nuances out their in this system we call "Capitalism." It's not some monolith that you can regulate equally.

There are different players and some contribute a lot, some a little, and some don't contribute at all, rather, they extract.

We need to keep this in mind. Not all "rich" are the same.

[oddlots]

Re: Galbraith proposes 12 dollar minimum wage

Not all "rich" are the same.

Well, speaking for myself, I'm not rich by a long shot, and not in government employ and by no means have it out for business small or large.

I run a business.

But I do recognise that we're in a blind alley. If "they" offshore production en masse (globalisation) while we are also suffering a historic productivity / culling of jobs (technology revolution) and "they" manage to pull off a final looting via the real estate market, I feel pretty confident that it's not paranoia, they really are out to get us.

What

[mesyn191]

Re: Galbraith proposes 12 dollar minimum wage

What you guys are suggesting is very dangerous. You're destroying the real capitalists - the only capitalists left in the US - the small businessman.

Is this what you fear will happen if wages are raised significantly? dcarrig has pointed out what you're describing doesn't jive with what is actually happening in other countries who not only have their workers paid more but also give them more and better benefits. If it works there why won't it work here?

[gnk]

Re: Galbraith proposes 12 dollar minimum wage

The increases in minimum wages dcarrig mentions were pre GFC. And the two examples given, the UK and Canada, are not strong examples. Canada is an energy exporter in a commodities boom era, and the UK has similar unemployment to the US. I'm open to other examples...

I'm all for wealth re-distribution if it only affects those that extract wealth in the first place - the big banks, FIRE, CEOs of publicly traded companies with no skin in the game, etc... But the average small business in this era of economic crisis? Just put them out of their misery and shut them down.

For example, restaurants are screwed with higher food costs. Their margins are shrinking. If the plan to redistribute income affects mostly main street yet leaves FIRE and multinationals that outsource unscathed... well I see that as suicide.

It's one thing to increase the minimum wage during a boom, and another during a bust. You want to stimulate aggregate demand? I prefer the helicopter approach targeting the middle class than the sacrifice small businesses approach. Governments can print, small businesses don't have that option.

[Raz]

Re: Galbraith proposes 12 dollar minimum wage

not all of the "rich" are the same. A steve jobs is very different from a lloyd blankfein. A restaurant owner is also very different from a steve jobs.

Think about it.

Can a local business employ people abroad? Steve jobs could.

What you guys are suggesting is very dangerous. you're destroying the real capitalists - the only capitalists left in the us - the small businessman.

the small businessman and woman, may not have access to labor markets in asia. The small businessman or woman does not have access to the fed window. The small businessman or woman often uses their savings or mortgages their house to create a business - they have "skin in the game" unlike a jamie dimon.

increasing the minimum wage is taxing the only capitalists left in america. destroy them and you are only left supporting those who outsource anyway or the fire economy.

this is the problem with people like galbraith (who i respect on other matters). They don't realize that there are nuances out their in this system we call "capitalism." it's not some monolith that you can regulate equally.

There are different players and some contribute a lot, some a little, and some don't contribute at all, rather, they extract.

We need to keep this in mind. Not all "rich" are the same.

+1. ;_tu ;_y

[rjwjr]

Re: Galbraith proposes 12 dollar minimum wage

Is this what you fear will happen if wages are raised significantly? dcarrig has pointed out what you're describing doesn't jive with what is actually happening in other countries who not only have their workers paid more but also give them more and better benefits. If it works there why won't it work here?

As gnk already pointed out, the examples of Canada and the UK are too selective and too skewed. I run a manufacturing business and the decision is easy...raise the minimum wage and I ship jobs to lower labor markets. Not because I'm anti-US, but because I am pro-staying in business.

Here is a factual experience: The economic slow down since 2008 has already caused our customer base to worry more about initial purchase price than ever before. We must reduce our costs to compete with our much larger competitors. For the first time in our history, we are shipping jobs to Mexico in a partnership manufacturing arrangement that will be in full swing this year. Trust me, it is a lot more work, aggravation, and stress for me to have to worry about quality and such from afar versus being able to walk the factory floor daily right outside my office door. I don't want to ship the jobs elsewhere but, I have to do it. Competitive pressures and customer wants require it.

Raise the minimum wage and I likely ship 100% of my production jobs to Mexico.

Globalization means global competition. That includes wages.

Many of us need to look in the mirror. We'd drive an hour if we could save $50 on an iphone. Where exactly did you think those savings came from; the savings fairy?!

[rjwjr]

Re: Galbraith proposes 12 dollar minimum wage

Yuuuup. If you put money in the hands of the non rich they usually spend most if not all of it. If you put more money in the hands of the rich they usually don't spend it, they invest it into the FIRE economy.

I still contend that this "solution" is short-sighted. You could take all of my current money and assets and give it to the less "fortunate" and I contend that I'd have it all back and more within 10 years. We've all read the studies about lottery winners that are broke, or worse in debt, within a couple years of hitting big jackpots.

These less "fortunate" are not typically less lucky, they are often less capable. It doesn't matter how often you redistribute wealth in this case, the capable will most always get it right back from the less capable.

Of all of us here on iTulip, where are the rest of our billions of fellow "less fortunate" citizens? Collecting unemployment and watching Dr. Phil in far too many instances. There's what, maybe a couple thousand of us worldwide that make the effort to better ourselves via this site? If the masses don't care to make the effort to help themselves, why should our money be redistributed to them?

Equal opportunity! Not equal/redistributed outcome.

[davidstvz]

Re: Galbraith proposes 12 dollar minimum wage

rjwjr: That's why a permanent wage increase rather than a one time transfer is important. It keeps the money circulating like electricity in a circuit or water in a dammed river, if it isn't flowing no work gets done. However, gnk and others are correct that it would unfairly harm the productive economy and probably not even do much to the FIRE interests to rage minimum wage. Yet we have the problem of how people can survive with such a low wage?

It seems that everything is distorted by the dollar's status as a reserve currency. We get cheap imports which are a great boon in many ways, but it makes our workforce uncompetitive in producing things. Hence, there is not enough new money circulating in the lower reaches of the economy. Real jobs and good wages are replaced by declining wages and welfare. Things don't seem to have gotten so much worse because technology has made life so much more efficient, but the growing disparity between the very rich and everyone else proves otherwise. If the government abandoned welfare in favor of tariffs and such to try and force an improvement, wouldn't that threaten the dollar's status as reserve currency? So we are in a sort of catch-22 where the only way out may be a crash or a deliberate exit lead by someone like Ron Paul. If we don't abandon FIRE and the reserve dollar, it seems the only way to survive is to tax the finance economy and give handouts to the poorer folks and make-work jobs (hopefully with a productive bent) for the middle class.

If I have made some fundamental error, please correct me.