3 Minute Fix to the Economy

[Ned Hamford]

http://www.salon.com/2015/05/10/robert_reich_how_to_fix_the_economy_partner/

A so oversimplified it is insulting video is making the rounds and being treated like sound economic theory by adults who should really know better.  The crux, increase minimum wage by double. 
 

I decided to respond with a touch of legal analysis, rather than try to do the usual intro to economics primer about capital and inflation, or even fairness and fallout (non Skilled labor suddenly balanced with skilled labor). Or diving into specific economic areas where we import foreign labor to the direct detriment of local, or when we just export work long done here. 

Having studied employment law at a near minimal level and knowing the material for the state level stacks higher than myself and a tall friend combined, that near all states have their own laws, and that the federal level is even worse…. yes. Yes it is complicated. It doesn't have to be, but we made it complicated.

Just one angle… there are many contracts where the pay is set at a multiple of the minimum wage.  Suddenly allocations set have multi-million dollar overages.  In some places that can absorb the change, a boon to workers, in others, obliteration. 

Another; the poverty line itself.  Health care is even more heavily embedded in this due to the Affordable Health Care Act.  If folks cross an imaginary economic line by earning potential, they lose their insurance, childcare, EBT, Housing, ect because they crossed an imaginary line of earning potential. There is no scaled system, or transition phase, just here you get help and here you don’t get anything but more taxes and threat of criminal action and civil suits if you handled your transition wrong. 

There is a giant web of complications that need be addressed.  Passing legislation in isolation just makes everything worse in the long run.  While laws are cumulative, due to their interacting with each other, the complexity is exponential.

[brimic]

Its robert reich, I wouldn't waste 1 minute let alone 3 minutes listening to that communist bunghole.

[cordex]

It's simple, guys!  Fix the minimum wage at $500 an hour and have the government hire anyone who wants to work.  Everyone will be wealthy, crime will disappear and we'll all live happily ever after.

Next up, pass a law outlawing cancer.

[Ben]

My question is always, not the obvious one of "How is a set minimum wage equal for people living in say, San Francisco and BFE?". My question is, how do they think this is going to affect the mindset of many in the middle class, who went to some kind of school or training to get a job that pays $20/hr? When they're only making a few dollars an hour more than teenagers with zero skills, I'm thinking they're going to get a little disgruntled. I certainly would.

[TommyGunn]

How does raising wages make for mre "potential employees?"  And what is a "potential" employee?   Do we not want more "actual" employees?   

How does making a employee more expensive for the employer better?   I imagine it goes something like; (minimum wage worker voice) "I can't afford the $20 gizmo 'cause I only make minimum wage."  <insert minimum wage hike here> "Oh yippeeee I can afford the $20 gizmo now." <min wage worker goes to buy gizmo> "Oh **** the $20 gizmo now costs $30 --- I can't afford it again!" <as the store's managers had to increase prices to pay their employees the new higher wages>.


Reich seems to think all the employers have this big cash stash they go to to pay out $$$$.   The govt. sure seem to tax and regulate that way.

It seems a nice theory that raising wages does nothing but "put more cash in the employee's pocket."

Now, I have heard some northwestern states/cities have raised the wage .... and supposedly this has had a beneficial effect, rather than the supposed negative one.  But I wonder what other forces were at work to do that, that the MSM ignored -- or were totally unaware of from the start.

Economics isn't my strong point, admittedly.....but I still  have the gut feeling there is a lot of witch doctoring involved with people like Robert Reich and his ilk, as well as Obama, Pelosi, Feinstein, Harry Reid, et al.

[HankB]

Its robert reich, I wouldn't waste 1 minute let alone 3 minutes listening to that communist bunghole.

I put him on a par with left wing Noble prize winning economist Paul Krugman - an overeducated nitwit completely divorced from reality.

[vaskidmark]

How about a 30-second fix to the economy?

"You have thirty seconds to grab the working end of that shovel/broom/paintbrush and start paying society back for all the free cheese you've already eaten and the education you probably wasted.  And when you have paid off that debt you can keep your grip and start working towards the bill for what we are going to have to keep paying out for your worthless soul.
By the way, there wll be night school and you must attend.  There you will be taught the basics necessary for you to find a real, taxpaying, job.
If you get a taxpaying job you can get out of here.  But if you lose it through your own fault you come right back here."

Too touchy-feely?

stay safe.

[Monkeyleg]

I  don't know why liberals think that basic laws of human nature and economics can be circumvented by their good intentions. One basic law of economics is that if you make something more expensive, you get less of it and, conversely, if you more something less expensive you get more of it. Make living in the US more expensive for people with a lot of money, and you'll have fewer people making a lot of money. Make jobs more expensive and you'll have fewer jobs.

Why is this so hard to grasp for some folks?

[brimic]

How does making a employee more expensive for the employer better?   I imagine it goes something like; (minimum wage worker voice) "I can't afford the $20 gizmo 'cause I only make minimum wage."  <insert minimum wage hike here> "Oh yippeeee I can afford the $20 gizmo now." <min wage worker goes to buy gizmo> "Oh **** the $20 gizmo now costs $30 --- I can't afford it again!" <as the store's managers had to increase prices to pay their employees the new higher wages>.

The only people who benefit, are those who belong to unions, specifically public employee unions.
Its designed to wipe out the middle class. $20 won't work, the next step with be $50/hr. The only people who will be able to afford basics like groceries at some point will be those with EBT cards or who work for the government- unless private sector workers start tapping into their rapidly devalued retirement savings to make ends meet.

I'm almost at the point where where I say "do it." It will be really interesting to see a nation where a few million janitors make as much money as formerly employed Doctors and Engineers- all paid with debtbux.

Which way to Galt's Gulch?

[Headless Thompson Gunner]

How does raising wages make for mre "potential employees?"  And what is a "potential" employee?   Do we not want more "actual" employees?   

How does making a employee more expensive for the employer better?   I imagine it goes something like; (minimum wage worker voice) "I can't afford the $20 gizmo 'cause I only make minimum wage."  <insert minimum wage hike here> "Oh yippeeee I can afford the $20 gizmo now." <min wage worker goes to buy gizmo> "Oh **** the $20 gizmo now costs $30 --- I can't afford it again!" <as the store's managers had to increase prices to pay their employees the new higher wages>.


Reich seems to think all the employers have this big cash stash they go to to pay out $$$$.   The govt. sure seem to tax and regulate that way.

It seems a nice theory that raising wages does nothing but "put more cash in the employee's pocket."

Now, I have heard some northwestern states/cities have raised the wage .... and supposedly this has had a beneficial effect, rather than the supposed negative one.  But I wonder what other forces were at work to do that, that the MSM ignored -- or were totally unaware of from the start.

Economics isn't my strong point, admittedly.....but I still  have the gut feeling there is a lot of witch doctoring involved with people like Robert Reich and his ilk, as well as Obama, Pelosi, Feinstein, Harry Reid, et al.

Reich is dead wrong that raising the minimum wage will be all rainbows and unicorn farts for the economy.  But he is right that higher wages will make more potential employees.  Labor is like anything else, higher prices increase supply.  Some people who decided it wasn't worth working for $7/hr might decide it is worth working for $15/hr.  So more potential workers for employers to choose from. 

Here's an interesting analysis of Reich's proposals by someone who understands economics a little bit better:
Marvel As Robert Reich Proves The Minimum Wage Increases Unemployment

[KD5NRH]

Another; the poverty line itself.  Health care is even more heavily embedded in this due to the Affordable Health Care Act.  If folks cross an imaginary economic line by earning potential, they lose their insurance, childcare, EBT, Housing, ect because they crossed an imaginary line of earning potential. There is no scaled system, or transition phase, just here you get help and here you don’t get anything but more taxes and threat of criminal action and civil suits if you handled your transition wrong.

This, IMO, is the biggest social issue of the whole mess; you find yourself just below that line, getting all the assistance, or just above that line, unable to afford even half of what you had when you were below the line.  The incentive, then, is to get back below the line, rather than spend the next few years working your ass off and slowly improving your situation until you can afford (by working your ass off still) what you were given when you weren't working that hard.

This is why I prefer a gradual cutoff; say, reducing total benefits by half of what you earn in excess of the poverty level, adjusting that level appropriately.  Thus your total cutoff would be when you earn 150-200% of the level. (150% currently would be $17,655 for one person, $23,895 for a couple, or $30,135 for a family of three.)  Thanks to AHCA, medical would have to be handled separately, because there's just no way someone making ~$1500/mo can pay for it without the subsidy if they're also having to pay housing, utilities, transportation, etc.

I'd also favor mandatory education for those receiving benefits; unless you can prove a legitimate learning disability, your benefits should be at least partially tied to your class performance in subjects that will help you become more productive.  (OJT and/or holding a job with real promotion potential that will get you at least beyond the cutoff substituting for classroom time as appropriate.)

[RevDisk]

If you can explain a solution to a complex problem in under 3 minutes, you don't understand the problem nor any likely solution.

[brimic]

If you can explain a solution to a complex problem in under 3 minutes, you don't understand the problem nor any likely solution.

Unless the solution is 'a lot of detcord' or 'kill it with fire.'

[KD5NRH]

Unless the solution is 'a lot of detcord' or 'kill it with fire.'

Both of which are valid solutions to many government actions.

[230RN]

Let's not forget that the "logic" behind these things is not based on any benefit to people in the U.S.

The logic is to destroy the economy in order to create chaos and high discontent.

Why?

Think about it.  

[MechAg94]

Get rid of the middle class leaving the ruling class and the serfs.

[Perd Hapley]

Here's you three-minute fix, Rob, for you and your ilk:



Applied orally.

[MillCreek]

Is 'ilk' the word of the day?  Twice just now I have seen it!

[Boomhauer]

A so oversimplified it is insulting video is making the rounds and being treated like sound economic theory by adults who should really know better

The *expletive deleted*tards love the idea because they think it means their pay rate will double and they will be sitting pretty (prices increase? Never...). These people are of course, *expletive deleted*ing morons who have no idea how economics really works. They are the ones constantly ranting on about The Rich, Big Business, Big Oil, etc are "so evil" without a clue of how capitalism enables them to live a comfortable life with modern convieniences.

[230RN]

^

They are the ones constantly ranting on about The Rich, Big Business, Big Oil, etc are "so evil" without a clue of how capitalism enables them to live a comfortable life with modern conveniences.

On the Citizen's Band radio channels, that used to be called "spreadin' hate and discontent."

Terry, 230RN

[Firethorn]

How does raising wages make for mre "potential employees?"  And what is a "potential" employee?   Do we not want more "actual" employees?  

1.  For under $10/hour, I'm not going to drag myself out of bed.  For $30/hour, I will.  Increase wages(amount you're willing to pay), increase the supply, classic economics.  Note that I'm semi-retired.
2.  A 'potential employee' would be somebody out there looking for work.
3.  Yes, we do want more actual employees.

There are indeed times I'd like to start up a 'federal jobs program' that works a bit like it's out of Heinlein's Starship Troopers.  Keep in mind people, that in exchange I'd be killing all the other welfare programs.

And yes, even without that I'm a strong advocate for graduated welfare benefits.  If we have to pay them, they should be graduated such that your getting work is still beneficial.  I used to be for a 50-50 split, then I realized that it's often just not worth it to got to work for 8 hours at a $10/hour job when, even assuming no taxes, we're going to be chopping $5 worth of benefits from it.  $40/day, when you figure in lunch, miles, clothing, etc...?  Often not worth it.  So today I'm more like 20%. 

I'd rather keep paying somebody 80% of their benefits while they're at least working part time than 100% to sit on their ass.

How does making a employee more expensive for the employer better?

Supply side economics.  The theory is that the employee, being a person, tends to spend his wages.  Thus, increase the money he has and he goes out and spends it in stores and such.  They've done studies that giving a really poor person $1 puts 5 into the economy vs only $1-2 for the rich guy.  The idea being along the lines that the poor guy actually gets a haircut at a barber, the barber spends the extra money from more haircuts having his shop repainted, the painter gets to buy more steak, the rancher buys more feed, etc....

While price increases are indeed a problem, generally the increased income outweighs the increased costs.

Now, I have heard some northwestern states/cities have raised the wage .... and supposedly this has had a beneficial effect, rather than the supposed negative one.  But I wonder what other forces were at work to do that, that the MSM ignored -- or were totally unaware of from the start.

It's actually quite a few states at this point.  I don't completely understand it myself.  I think it has to do with an imbalance, a sort of tragedy of the commons.  The rules are such that the 'rich' are winning 'too much' and their money doesn't have the 'velocity' of money of poor people.  By increasing the minimum wage, none of the business owners paying it actually lose out all that much because they're still on an even field.  Faster money is 'better' in that because it changes hands faster it generates more economic activity(and yes, more taxes).  Basically, in a few very strategic spots economic relief and even welfare generates more taxes than it costs.  Giving rich people more money doesn't work nearly as well.

[MechAg94]

First, I don't think think you are describing Supply Side Economics very well.  Second, Govt imposed costs to business are not 100% passed on to the consumer.  Increasing costs of doing has an affect on a business' bottom line no matter how big or small.  What we often always ignore in this is the enormous cost of employees imposed by payroll taxes, corporate income taxes, mandated health care, various regulations at multiple levels of govt, and various other costs that few know anything about that having run their own business.  

If you were broke, you would get out of bed for $10 hour.  You either don't need the money or have better options.  Same for me.  Others maybe not.  If someone is not qualified to do anything but dig ditches, then $10 might look pretty attractive.  My home town is a retirement community with a lot of long distance commuters and farmers mixed in. There are plenty of people who will take lower level hourly jobs.  Because of that, it is hard to find a job much above minimum wage.  A lot of people I know commute toward Houston or other larger town where wages are a bit higher.  

Businesses probably do want more employees........at the same or lower wages.  What they want is not always what the market will accept.  Also, just because the govt mandates a higher wage does not necessarily mean the business will maintain the same work force at the new wage.  It also means they will hire fewer people in the future.  Artificially screwing with basic supply/demand doesn't usually have good results.

[MechAg94]

On graduated welfare benefits, you might have to define what you think of when you say that compared to what we currently have with welfare and unemployment.   The simple fact is that what you subsidize, you get more of.  I think we currently subsidize all the wrong behaviors. 

[Firethorn]

On graduated welfare benefits, you might have to define what you think of when you say that compared to what we currently have with welfare and unemployment.   The simple fact is that what you subsidize, you get more of.  I think we currently subsidize all the wrong behaviors. 

A lot of our current benefits are effectively trip-wired.  Make over $x and you go from 100% to 0%.  We're at least trying with healthcare type stuff - a sufficiently low income family starts with 100% subsidization, which more or less gradually decreases as they earn more money until the subsidy is gone.

That's the proper way to do it.  But let's say the family also gets housing assistance, food stamps, and a few other things.  Those all end when they make $22k, let's say.  Let's also say Dad is currently at $21k.  Little johnny isn't going to get that part time job because between the housing assistance, food stamps, 'others', and the decrease in healthcare insurance subsidy, it'd cost the family more in benefits than Johnny's wages.

I think we subsidize the wrong behaviors as well, which is why, after determining that we 'need' assistance programs in the first place, I decide that we need 'workfare' programs, not 'welfare' programs.  Rather than just give money out, put them to work. 

Think of it this way - as lousy as they are, an undermanned DMV doesn't really do anybody any good.  It might cost a bit more, but hire some of those welfare people as DMV workers.  Beefed up, even if they're mediocre, the DMV gets through it's workload faster.  Bonus.  Stop putting aside road maintenance that causes damage to people's vehicles from excessive potholes.  Fix the dangerous bridges, etc...

If they're truly that lousy, just have them clean up trash on the roads and such.  Just as long as they are consequently 'not available' for working under the table elsewhere.  Heck, consider occupational training as part of the job.

is the enormous cost of employees imposed by payroll taxes, corporate income taxes, mandated health care, various regulations at multiple levels of govt, and various other costs that few know anything about that having run their own business.

Which actually amounts to that doubling the minimum wage wouldn't double the cost of a minimum wage employee, and especially not double the cost of the end product.

However, there's a lot of factors feeding each other when it comes to an 'effective' minimum wage law.  Higher amounts of automation, work not done balanced against more cash in minimum wage employee pockets being spent creating more job positions to service them.

[KD5NRH]

If you were broke, you would get out of bed for $10 hour.  You either don't need the money or have better options.

The problem is that welfare is a financially better option than working for $10/hour.  No commute costs, plenty of time to find under-the-table work for cash, and your cabinets and fridge are always full.

Right after my ex wife quit her job while I was a full time student, (still working 26-30 hours a week, but at just over minimum wage) we were on food stamps for a couple months.  Even just the amount there was ridiculous; I can't remember the exact number, but she pulled receipts showing we didn't spend that much on groceries when we had a combined income around $90k, and that amount was reduced to account for me still having some income.