McDonalds: "What, my peon, you don't work two full time jobs?"

[merithyn]

This is part where I tell everybody to read Milton Friedman, and no one does.

He's one of those actual economists Berkut wanted to know about.

Isn't he the guy that wanted to get rid of medical licenses and such?

Yeah... no thanks.

[Baron von Schtinkenbutt]

What kind of freak would accept a pay cut if the company was doing poorly? You just eject.

The employees of HP did, a few years ago.

[lustindarkness]

I suddenly want a Happy Meal.

Me too. Lets see what toys they have now...
www.happymeal.com

[Razgovory]

I suddenly want a Happy Meal.

You must be depressed.

I just want to be happy.

[Ideologue]

This is part where I tell everybody to read Milton Friedman, and no one does.

He's one of those actual economists Berkut wanted to know about.

Isn't he the guy that wanted to get rid of medical licenses and such?

Yeah... no thanks.

Why do you love monopolistic practices and the associated, demonstrated rise in prices and decrease in access?

Anyway, my main point is that even a mega-conservative, who is wrong about much, cannot, if he or she is intellectually honest, fail to appreciate that there can be no such thing as a truly free market so long as people are lashed to their biological and basic social needs.  The result is depressed wages.  The true market price of a McJob would out if people didn't fear starvation and eviction.

That said, I'd prefer that a Friedmanesque NIT were established directly rather than the minwage raised to try to awkwardly approximate it.  Berk is right on that score to be sure, since the end result of increasing wages to preposterous levels (though we may reasonably disagree on what constitutes "preposterous") is automation and cutback until like four people run a whole McDonald's, probably from home, and the other thirty employees don't have $15/hr jobs because they don't have jobs at all.  And no one buys McDonald's food, because 80% of the population is unemployed.

An NIT would do the same job, more elegantly, and lead to the same results--with the caveat that the bounty of the Player Piano economy to come would be shared by all.

In the short term, it would also be a great way to restart demand.  But that's a secondary concern.

[Admiral Yi]

That's goofy Ide.

I opened this thread (which had sprouted extra pages) expecting to read a large number of posts in need of refutation, but I see that Throbby has done a pretty complete job of it.

[garbon]

The whys and wherefores aren't my concern. There will be those who are poor because they choose a particular way of life, and those who are poor because it's all they know, and a whole lot of people who are poor because of the circumstances that they're in. I don't really care much why. What I care about is that we, as a society, make sure that each of them has the bare minimum to survive, because we're wealthy enough to do so, and it's the right thing to do.

I guess the question gets raised when money isn't being spent properly and suddenly more is required to survive. Also, and probably more common, is that I think different people have different ideas on what is the bare minimum to survive.

It is now, yes. It didn't used to be. The question is: Are we willing to maintain the status quo of using welfare to fill the gaps that businesses aren't doing? Or did what we have before work better?

I don't have an answer on which is better or worse. I don't have enough information to make an informed opinion. But I do think that those are the questions we need to be asking before we decide yay or nay to raising the minimum wage.

Perhaps but it doesn't seem like anyone is interested in that question.

Maybe it's a wash and there isn't one that's better than the other for the poor, at which point, it's worth looking at which is better for society as a whole, ie businesses, lower-income folks who make more than minimum wage but not by much, etc.

Well I suppose to start that investigation though, you would want to know if one system was worse than the other, no?

[merithyn]

I guess the question gets raised when money isn't being spent properly and suddenly more is required to survive. Also, and probably more common, is that I think different people have different ideas on what is the bare minimum to survive.

The "money being spent properly" isn't an issue if it's money that the individual earns. It is, however, usually an area of contention when it's money that is given as welfare.

I don't think it would be hard to come to a consensus on what's needed for a person to live, eat, and clothe themselves. The argument would be on if that's all that we want to do. I'd argue yes, but I'm sure others would argue no.

Well I suppose to start that investigation though, you would want to know if one system was worse than the other, no?

Absolutely. Has anyone done so? I wasn't able to find anything on it.

[garbon]

Anyway, my main point is that even a mega-conservative, who is wrong about much, cannot, if he or she is intellectually honest, fail to appreciate that there can be no such thing as a truly free market so long as people are lashed to their biological and basic social needs.  The result is depressed wages.  The true market price of a McJob would out if people didn't fear starvation and eviction.

Would there even be McJobs? If food was so plentiful (and easy to prepare as that's often part of the reason that junk food reigns supreme - price would be out in your world since we're all not starving), how many people would be strolling to McD's? Seems most of its customer basis would have moved on.

[DGuller]

Interesting article from CEPR on the topic.

The Minimum Wage and Economic Growth

Written by Dean Baker and Will Kimball      
Tuesday, 12 February 2013 22:26

In his State of the Union address to Congress President Obama called for a higher minimum wage. The purchasing power of the minimum wage peaked in the late 1960s at $9.22 an hour in 2012 dollars. That is almost two dollars above the current level of $7.25 an hour. Most of the efforts to raise the minimum wage focus on restoring its purchasing power to its late 1960s level, setting a target of around $10 an hour for 2015 or 2016, when inflation will have brought this sum closer to its previous peak in 2012 dollars.

While this increase would lead to a large improvement in living standards for millions of workers who are currently paid at or near the minimum wage, it is worth asking a slightly different question. Suppose the minimum wage had kept in step with productivity growth over the last 44 years. In other words, rather than just keeping purchasing power constant at the 1969 level, suppose that our lowest paid workers shared evenly in the economic growth over the intervening years.

This should not seem like a far-fetched idea. In the years from 1947 to 1969 the minimum wage actually did keep pace with productivity growth. (This is probably also true for the decade from when the federal minimum wage was first established in 1937 to 1947, but we don't have good data on productivity for this period.)

As the graph below shows, the minimum wage generally was increased in step with productivity over these years. This led to 170 percent increase in the real value of the minimum wage over the years from 1948 to 1968. If this pattern of wage increases for those at the bottom was supposed to stifle growth, the economy didn't get the message. Growth averaged 4.0 percent annually from 1947 to 1969 and the unemployment rate for the year 1969 averaged less than 4.0 percent.



This link between productivity and the minimum wage ended with the 1970s. During that decade the minimum wage roughly kept pace with inflation, meaning that its purchasing power changed little over the course of the decade. The real value of the minimum then fell sharply in the 1980s as we went most of the decade without any increase in the nominal value of the wage, allowing it to be eroded by inflation. Since the early 1990s the real value of the minimum wage has roughly stayed constant, which means that it has further fallen behind productivity growth.

How was it decided to break the link between productivity growth and the minimum wage? It is not as though we had a major national debate and it was decided that low-wage workers did not deserve to share in the benefits of economic growth. This was a major policy shift that was put in place with little, if any, public debate.

If the minimum wage had kept pace with productivity growth it would be $16.54 in 2012 dollars. It is important to note that this is a very conservative measure of productivity growth. Rather than taking the conventional data published by the Bureau of Labor Statistics for the non-farm business sector, it uses the broader measure for economy-wide productivity.[1] This lowers average growth by 0.2-0.3 percentage points.

This measure also includes an adjustment for net rather than gross output. It also uses a CPI deflator rather than a GDP deflator, which further lowers the measure of productivity growth.[2] Even with making these adjustments the $16.54 minimum wage would exceed the hourly wage of more than 40 percent of men and more than 50 percent of women . We would have a very different society if all workers were earning a wage above this productivity linked minimum wage.

------------------------------------------------------------------------------------------------------------
[1] If we just used non-farm productivity as the basis for indexing the minimum wage, the most commonly used measure of productivity, the minimum wage would have been $21.75 in 2012 [http://www.cepr.net/index.php/blogs/cepr-blog/new-cepr-issue-brief-shows-minimum-wage-has-room-to-grow].

[2] These adjustments are explained in Baker, 2007. For the years since 2006 we assumed that the difference in the growth rate of non-farm productivity and the growth of this adjusted measure is the same as it was on average for the years 2000-2006.

That looks a lot like the graph of productivity and median wages, with a similar sudden divergence.  I wonder if those two effects are connected, and whether there is a causal link between them.

[garbon]

The "money being spent properly" isn't an issue if it's money that the individual earns. It is, however, usually an area of contention when it's money that is given as welfare.

If a person is too lazy (to work enough hours to support themselves) or too profligate with what they get, I think people do see it as an issue if they want a handout. I think the mistake though is that those two bits are generalized to everyone who needs assistance and that's clearly not true.

I don't think it would be hard to come to a consensus on what's needed for a person to live, eat, and clothe themselves. The argument would be on if that's all that we want to do. I'd argue yes, but I'm sure others would argue no.

Yeah, I don't think that's ever seen as enough. Then there's college and buying a home should be affordable for all schemes.

Absolutely. Has anyone done so? I wasn't able to find anything on it.

I've no idea.

[garbon]

That looks a lot like the graph of productivity and median wages, with a similar sudden divergence.  I wonder if those two effects are connected, and whether there is a causal link between them.

The bottom lines decrease isn't really that similar to the top line's increase.

[Ideologue]

That's goofy Ide.

Well, I think that's what he was getting at.

Would there even be McJobs? If food was so plentiful (and easy to prepare as that's often part of the reason that junk food reigns supreme - price would be out in your world since we're all not starving), how many people would be strolling to McD's? Seems most of its customer basis would have moved on.

I dunno.  I don't like to cook food, and although one may argue against the merits of fast food regarding its quality, I tend to think of it as pretty decent grub, and there are real economies of scale to be had by centralized food dispensaries such as a McD's or a Pizza Hut or whatever.

Making your own food is kind of expensive, even in terms of cash money, and in my experience involves enormous wastage.  But that really could be just me.

[Razgovory]

Interesting article from CEPR on the topic.

The Minimum Wage and Economic Growth

Written by Dean Baker and Will Kimball     
Tuesday, 12 February 2013 22:26

In his State of the Union address to Congress President Obama called for a higher minimum wage. The purchasing power of the minimum wage peaked in the late 1960s at $9.22 an hour in 2012 dollars. That is almost two dollars above the current level of $7.25 an hour. Most of the efforts to raise the minimum wage focus on restoring its purchasing power to its late 1960s level, setting a target of around $10 an hour for 2015 or 2016, when inflation will have brought this sum closer to its previous peak in 2012 dollars.

While this increase would lead to a large improvement in living standards for millions of workers who are currently paid at or near the minimum wage, it is worth asking a slightly different question. Suppose the minimum wage had kept in step with productivity growth over the last 44 years. In other words, rather than just keeping purchasing power constant at the 1969 level, suppose that our lowest paid workers shared evenly in the economic growth over the intervening years.

This should not seem like a far-fetched idea. In the years from 1947 to 1969 the minimum wage actually did keep pace with productivity growth. (This is probably also true for the decade from when the federal minimum wage was first established in 1937 to 1947, but we don't have good data on productivity for this period.)

As the graph below shows, the minimum wage generally was increased in step with productivity over these years. This led to 170 percent increase in the real value of the minimum wage over the years from 1948 to 1968. If this pattern of wage increases for those at the bottom was supposed to stifle growth, the economy didn't get the message. Growth averaged 4.0 percent annually from 1947 to 1969 and the unemployment rate for the year 1969 averaged less than 4.0 percent.



This link between productivity and the minimum wage ended with the 1970s. During that decade the minimum wage roughly kept pace with inflation, meaning that its purchasing power changed little over the course of the decade. The real value of the minimum then fell sharply in the 1980s as we went most of the decade without any increase in the nominal value of the wage, allowing it to be eroded by inflation. Since the early 1990s the real value of the minimum wage has roughly stayed constant, which means that it has further fallen behind productivity growth.

How was it decided to break the link between productivity growth and the minimum wage? It is not as though we had a major national debate and it was decided that low-wage workers did not deserve to share in the benefits of economic growth. This was a major policy shift that was put in place with little, if any, public debate.

If the minimum wage had kept pace with productivity growth it would be $16.54 in 2012 dollars. It is important to note that this is a very conservative measure of productivity growth. Rather than taking the conventional data published by the Bureau of Labor Statistics for the non-farm business sector, it uses the broader measure for economy-wide productivity.[1] This lowers average growth by 0.2-0.3 percentage points.

This measure also includes an adjustment for net rather than gross output. It also uses a CPI deflator rather than a GDP deflator, which further lowers the measure of productivity growth.[2] Even with making these adjustments the $16.54 minimum wage would exceed the hourly wage of more than 40 percent of men and more than 50 percent of women . We would have a very different society if all workers were earning a wage above this productivity linked minimum wage.

------------------------------------------------------------------------------------------------------------
[1] If we just used non-farm productivity as the basis for indexing the minimum wage, the most commonly used measure of productivity, the minimum wage would have been $21.75 in 2012 [http://www.cepr.net/index.php/blogs/cepr-blog/new-cepr-issue-brief-shows-minimum-wage-has-room-to-grow].

[2] These adjustments are explained in Baker, 2007. For the years since 2006 we assumed that the difference in the growth rate of non-farm productivity and the growth of this adjusted measure is the same as it was on average for the years 2000-2006.

That looks a lot like the graph of productivity and median wages, with a similar sudden divergence.  I wonder if those two effects are connected, and whether there is a causal link between them.

It's almost as if some sort of new radical economic ideology took hold in the 1970's.

[garbon]

But that really could be just me.