Income Inequality?

[Spartacus]

THAT little, eh?

Omnom rich people.

[Bill the Cat]

Omnom rich people.

eattherich_black_front_large1_01.jpg

[Spartacus]

[ATTACH=CONFIG]2379[/ATTACH]

braaaaaaaaaains

[Truthseeker]

This is not substantiated. Here's a chart showing minimum wage increases (nominal and adjusted) by year:

[ATTACH=CONFIG]2376[/ATTACH]

and here's a chart of US inflation rates by year:

[ATTACH=CONFIG]2377[/ATTACH]

Increases in the minimum wage have not caused long-term growth of inflation. What it would do is reduce poverty and increase consumer spending (leading to short-term GDP growth). A minimum wage increase to $10.10 would bring about 4,600,000 people out of poverty, according to various economic studies. The likely cost of this growth would be about 500,000 jobs lost in the short-term, if I'm remembering correctly.

Arguing that increasing the minimum wage will increase inflation only makes sense if the supply doesn't rise to match increased consumer spending. Since we remain in a demand-side slump where the problem is too little demand rather than too much, increasing the minimum wage and thus increasing consumer spending is likely to have predominately beneficial effects to the economy, allowing us to faster reach potential GDP, and is likely to have little to no effect on the inflation rate.

And for what it's worth, economists responding to Chicago Booth's IGM poll overwhelmingly agree that the costs of a minimum wage increase to $9/hour and indexing the minimum wage to inflation are sufficiently low that the economic benefits of doing so make for good policy.

Economics is not like physics. Every individual is unique. His wants and perceptions and evaluations differ from every one's. The choice of a course of action one may make in a given situation can and often differs from any one's choice. One implication of the last three sentence is that economic data should not always be used to support or oppose an economic recommendation such as putting a floor under wages. Another consideration is that we know very, very little of the details of the world's economy. I don't think I can always predict what I, myself, would do in a given situation. Perhaps I need to have a detailed description of the situation that is impossible to keep in mind.

Suppose unemployment went down though months ago the wage floor went up 20%? Can we thereby conclude that raising the floor was a good idea? NO! The unemployment rate might have gone down even futher had the floor not been raised.

How, then, are we to settle the wage floor argument? Actually, Seer's, Cow Poke's, Sparko's and others' reasoning is for the most part sound economics.

[seer]

This is not substantiated. Here's a chart showing minimum wage increases (nominal and adjusted) by year:

Nonsense Sam. There are other causes of inflation, and other conditions that could keep it down or in check. It is simple logic. If you give the hamburger flipper a three dollar an hour raise how do I not pay more for a hamburger? Do you think the company is going to eat all of that increase (pun intended) or does most, if not all of it, get passed on to the consumer?

[Psychic Missile]

You admitted to being a redistributionalist. That's somebody who takes money from one person and gives it to somebody else. Who gives you that authority?

It comes from the same authority that allows for taxes. In exchange for living in a society, people have a portion of their money pooled for distribution to needed purposes.

Why? Do we owe Mary a job more than we owe Homer a job? Who are you to decide which one of them gets to work?

My concern is that in a depression, there will be a race to the bottom for employees. Don't conservatives complain that illegal immigrants take jobs because they're willing to work for less?

[Cow Poke]

It comes from the same authority that allows for taxes. In exchange for living in a society, people have a portion of their money pooled for distribution to needed purposes.

But you're not talking about that -- you're not talking about directly increasing the tax on the business - you're doing "price controls" backwards -- forcing them to pay MORE for something than they are already paying.

My concern is that in a depression, there will be a race to the bottom for employees. Don't conservatives complain that illegal immigrants take jobs because they're willing to work for less?

In a depression, all bets are off.

And you're ignoring the question.... Why? Do we owe Mary a job more than we owe Homer a job? Who are you to decide which one of them gets to work?

[Psychic Missile]

an example would be nice.

As the price of food in general goes up, healthy choices can remain affordable if funds are redistributed in a household's budget. Most likely, this will put a strain on less immediate but still important items. Whether or not you agree with Obamacare, the problem it was created to solve was unaffordable health insurance. People on a tight budget distributed money that would have gone to health insurance to other, more immediate areas.

[Psychic Missile]

But you're not talking about that -- you're not talking about directly increasing the tax on the business - you're doing "price controls" backwards -- forcing them to pay MORE for something than they are already paying.

Oh. I don't see how that's any different from other business regulations.

In a depression, all bets are off.

And you're ignoring the question.... Why? Do we owe Mary a job more than we owe Homer a job? Who are you to decide which one of them gets to work?

Why does Homer want to be paid less than Mary? Homer and Mary should both find a job and Homer should be happy that he's being payed more than he expected.

[Sam]

Increasing the minimum wage would have two principal effects on low-wage workers. Most of them would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly.

http://www.cbo.gov/publication/44995

So, while the CBO model favors raising a portion of the low-wage workers' standard of living, what about those who will NOT benefit from it? They get driven even deeper into poverty, and the gap between the haves and have-nots remains just as wide.

I agree that there are good and bad secondary effects to raising the minimum wage. I think, on balance, the good effects outweigh the bad. That said, the federal government would save billions of dollars as a secondary effect of increasing the minimum wage — around $8 billion per year (conservative estimate), according to the Economic Policy Institute. I would recommend rolling those savings back into federal welfare programs specifically targeting those people in poverty negatively affected by the wage increase.

[Sparko]

As the price of food in general goes up, healthy choices can remain affordable if funds are redistributed in a household's budget. Most likely, this will put a strain on less immediate but still important items. Whether or not you agree with Obamacare, the problem it was created to solve was unaffordable health insurance. People on a tight budget distributed money that would have gone to health insurance to other, more immediate areas.

You are talking about people deciding what to spend money on. That was not quite what you said previously ("The problem is that there is an area in which goods can be priced that is technically affordable but brings living expenses up to an unreasonable degree.")

But let's take groceries for an example. If people can't afford certain grocery items, then those items will go unsold. Which will drive those companies out of business or they will have to lower their costs. To lower their costs they can either take less profit, lower the quality of the product, or lower the cost of their labor. If there is not much profit to give up, then either the quality will suffer, or they will begin laying people off.

forcing everyone to pay more for labor just means that those groceries will cost more too, because the producers will have to pay more for labor. So while you might have more to spend on groceries, those groceries will cost more and you are no better off than you are now.

[Sam]

Nonsense Sam. There are other causes of inflation, and other conditions that could keep it down or in check. It is simple logic. If you give the hamburger flipper a three dollar an hour raise how do I not pay more for a hamburger? Do you think the company is going to eat all of that increase (pun intended) or does most, if not all of it, get passed on to the consumer?

If your logic conflicts with reality (as shown on the two posted charts) then it's your logic that's faulty, not reality. Your claim that increasing the minimum wage necessarily causes an increase in the inflation rate does not correlate to the nation's history of inflation rates and minimum wage increases. Arguing that a minimum wage now -must- increase inflation is specious logic (and I'll note that we should be much more worried about deflation now than inflation, anyway!).

[seer]

If your logic conflicts with reality (as shown on the two posted charts) then it's your logic that's faulty, not reality. Your claim that increasing the minimum wage necessarily causes an increase in the inflation rate does not correlate to the nation's history of inflation rates and minimum wage increases. Arguing that a minimum wage now -must- increase inflation is specious logic (and I'll note that we should be much more worried about deflation now than inflation, anyway!).

Sam this is complete nonsense. There are other, greater drivers of inflation, or conditions that lessen inflation - the minimum wage is just a small part of the picture. So again Sam, it is a straight forward question, if you give the hamburger flipper a three dollar an hour raise will my cost for my burger go up - yes or no.

[Psychic Missile]

You are talking about people deciding what to spend money on. That was not quite what you said previously ("The problem is that there is an area in which goods can be priced that is technically affordable but brings living expenses up to an unreasonable degree.")

When people have to make sacrifices from necessary expenses, that means living expenses have been raised to an unreasonable degree.

But let's take groceries for an example. If people can't afford certain grocery items, then those items will go unsold. Which will drive those companies out of business or they will have to lower their costs. To lower their costs they can either take less profit, lower the quality of the product, or lower the cost of their labor. If there is not much profit to give up, then either the quality will suffer, or they will begin laying people off.

forcing everyone to pay more for labor just means that those groceries will cost more too, because the producers will have to pay more for labor. So while you might have more to spend on groceries, those groceries will cost more and you are no better off than you are now.

I'm not talking about specific items, I'm talking about grocery items as a general whole. I do not accept the argument you present in that last paragraph. I do not think an increased labor cost, which makes up a negligible amount of the cost of a good compared to materials, would drive up the price of goods to the point where it cancels itself out.

[Sparko]

When people have to make sacrifices from necessary expenses, that means living expenses have been raised to an unreasonable degree.

I don't know where you come from, but here we consider food a necessary expense. If you have to give up cable tv to eat, that would not be unreasonable. It just means you need a better job.

I'm not talking about specific items, I'm talking about grocery items as a general whole. I do not accept the argument you present in that last paragraph. I do not think an increased labor cost, which makes up a negligible amount of the cost of a good compared to materials, would drive up the price of goods to the point where it cancels itself out.

first, "groceries" is not one thing. It is a conglomeration of products. So you can't just lump them into one thing. Each product is produced and sold by different companies.
Second, labor isn't an negligable cost. It is one of the major costs in producing anything. This goes back to my comment that you don't really understand economics at all.