Re: Priming the economic pump

"Arved Sandstrom" <asandstrom@xxxxxxxxxxxxx> wrote:

:"Fred J. McCall" <fjmccall@xxxxxxxxx> wrote in message
:news:2hd4r4l2bq72s0nvo0oj1f5f2ufio3v018@xxxxxxxxxx
:> "Arved Sandstrom" <asandstrom@xxxxxxxxxxxxx> wrote:
:> :
:> :For what it's worth I don't personally advocate going after the upper
:> middle
:> :class or the wealthy. As satisfying as it might be, that solves no
:> :problems - the real problem IMHO is that the lowest legal wages are way
:> too
:> :low. And that hurts each and every one of us.
:> :
:>
:> Push the minimum wage too high and those jobs simply stop existing
:> above ground. If you insist that the wage for fast food workers must
:> be double what it is, for example, you now pay around twice as much
:> for a burger and nobody is better off (and in fact everyone winds up
:> worse off). So what happens is some of those jobs get filled
:> illegally for lower wages.
:
:I knew somebody would make this point, and I actually agree - just bumping
:up the minimum wage is no answer, for the reason you mention.
:
:The real problem is this - why is it that our economies (I'll confine the
:discussion to "Western" style economies) inevitably create a sizeable class
:of paycheque-to-paycheque workers who cannot absorb catastrophic health
:situations, ...
:

The answer seems obvious and it's not just "Western" style economies.
Other systems just call them something different.

Think about it. There are X jobs spread across Y different job types.
Some of those jobs are worth more on the market than others. Assume a
Gaussian distribution of numbers of jobs by what the jobs are worth.
Further assume the same distribution of skills to fill those jobs.
Real life isn't Lake Woebegone. Everyone can't be above average. So
there are going to be a bunch of people below the average income.
Force the average income up and you change nothing. Pump wages for
those below the average income and everyone else's will, over time,
rise to adjust. You're back where you started, but with inflated
currency.

Or, if you're of a more Biblical turn of mind, the poor will always be
with us.

:
:... who by definition contribute much less to our consumer-spending
:driven systems, who cannot save adequately (if at all), and who will
:inevitably have to be assisted financially by their wealthier brethren? I
:don't think it's a natural law that a wage structure _has_ to be this way,
:

Actually, yes, it is one of the immutable laws of economics that a
wage structure WILL be that way.

:
:but I do believe that once a relatively unregulated economy stabilizes it
:probably will produce that large underclass. Which IMHO is of no benefit to
:anyone, except in the short-term to employers (said employers essentially
:allowing all of society to subsidize them).
:

You miss who derives the benefit from them. They perform services
that the market wants. They earn what the market will pay for those
services. Force the market to pay more and you get fewer of those
services and we all suffer.

:
:I think you're describing short term and medium term effects. Since nobody
:has actually tried the experiment of doubling the minimum wage we have no
:idea what the economy would be like 50 years down the road. It's not
:necessarily the case that it would end up a disaster - that prescription
:might work. Simply put we don't know. But I certainly agree - in the short
:and medium term a radical increase in minimum wage would lead to massive
:legal job losses.
:

In the long term, you will wind up back at a market equilibrium. So
you will get a bunch of short and medium term ills in order to achieve
nothing.

:
:The way in which it would be done would probably be something like a
:guaranteed minimum income. This is not a socialist concept - it can be
:espoused by the left as well as by the right. For example, even Richard
:Nixon had thoughts in this regard. One thing is for sure - the money is
:already there...it's just being very inefficiently disbursed.
:

I'm not sure all the money is there, but I'd be interested in seeing
your analysis of what you think such a system would cost and where the
funds would come from. Remember, any such support system, to be
workable in the long run, needs to have the following three
characteristics:

1) It must be sufficient. That is, at the lowest level it needs to
provide all that is needed.

2) It must be efficient. That is, it should not provide support to
those who do not need it.

3) It must provide strong incentives for people to get off the system.
If it does not, you will create a permanent hereditary underclass.

Hint: If you can come up with a system that provides all three of the
preceding in full, you will be the first in history to do so. In
other words, you're going to have to compromise one or more of the
'required' characteristics. You can actually tell a lot about
someone's politics by which they choose.


--
"The reasonable man adapts himself to the world; the unreasonable
man persists in trying to adapt the world to himself. Therefore,
all progress depends on the unreasonable man."
--George Bernard Shaw
.

Loading