On tumblr, it feels like “sassy” is a way more reliable indicator than “taxpayer” ever was.
For the technology argument to work, wouldn’t we expect to see a big jump in productivity? (Productivity is growing but not at an abnormal rate)
Right, I probably shouldn’t have said “technology” because to economists this tends to refer to total factor productivity (i.e. the output you get per combination of labour and capital). Personally I’m super averse to discussing the whole concept of TFP, because it’s so hard to see what it actually corresponds to in the real world. (Macroeconomists call it technology, but it actually aggregates up a whole lot of institutional and regulatory and cultural and demographic and technological changes into one impossible-to-interpret number.)
The concept is more that the technology we’re using has shifted to requiring fewer workers doing stuff that’s routine but non-manually intensive and more workers doing stuff that’s either non-routine or manually-intensive or both. This is called “routine-biased technological change” and it’s pretty clear in the data. Like, the idea isn’t that production has suddenly gotten way more efficient; rather, the idea is that continued gains in production efficiency lately come from changes in the set of tasks that workers do. This working paper explains the concept in a relatively non-technical way. The abstract:
Job polarization refers to the recent disappearance of employment in occupations in the middle of the skill distribution. Jobless recoveries refers to the slow rebound in aggregate employment following recent recessions, despite recoveries in aggregate output. We show how these two phenomena are related. First, job polarization is not a gradual process; essentially all of the job loss in middle-skill occupations occurs in economic downturns. Second, jobless recoveries in the aggregate are accounted for by jobless recoveries in the middle-skill occupations that are disappearing.
So it’s a bit more of a subtle shift than the usual growth accounting measure of technology. I think it’s pretty persuasive but all my macro-level PhD courses were taught by people who think it’s pretty persuasive so probably there’s some bias here.
take a long look at its causes then we will talk about minimum wage and the absurd pretense that its increase is a panacea.
1. Increasing the minimum wage to $15/hr will not cause inflation to skyrocket. Inflation will barely be affected by raising wages. There is very little historical data that confirms an increase inflation tied to increasing the minimum wage. There is very little data to support any negative economic effects of increasing the minimum wage, actually. There is no negative effect on job creation from raising the minimum wage. This has been demonstrated time after time.
2. Increasing the minimum wage to $15/hr will basically pour money into the economy. When you give rich people money, they sit on it, they don’t spend it. They save it, and that money does no work. It doesn’t grow the economy, it stagnates. When you give poor people more money, they spend it right away — they’ve got no other choice. So that money will turnover and create more value, and more growth. Which is a good thing. (And a job creator.)
3. Raising wages matter. Your argument seems to be that raising wages will simply cause the value of money to drop, and that all our money will lose value, meaning that everyone will suffer and that poor people won’t be any better off. If that’s the case, why raise wages at all? Surely, a wholesale rise in the wages of the working poor will have absolutely no impact on the living standards of people. since inflation plays such a pernicious role. Except wait, it doesn’t. Providing decent living wages is what finally lifted large sections of the working class into the middle class, in the 20th century. (This was largely due to the advocacy of unionized labor, by the way.) Paying people more has been proven to improve the way people live. Look at China right now.
4. Moderate inflation isn’t the worst thing in the world. Yes, it will, over time, decrease the value of your money. No, this does not mean you will be taking wheelbarrows of money to the grocery store to buy a loaf of bread. It’s the side effect of growth in the economy. Fiscal conservatives seem to be so scared of inflation and debt that they’ll do anything they can to make sure both are low — including sacrificing the health of the economy, and the livelihoods of our poorest and most vulnerable workers.
5. Not providing a minimum wage increase is actually a wage reduction for the working poor. Inflation has steadily risen over the last thirty years, and wages have remained stagnant. The working poor have experienced a 20% reduction in the minimum wage simply due to Congress’s inability to tie wages to inflation. This is absolutely unacceptable.
Oh my goodness yeah this all sounds totally reasonable to me.
I mean I don’t know about the impact of raising the minimum wage to $15/hour (we don’t have good enough data to extrapolate that far) but within the range of more limited minimum wage hikes there is no compelling evidence that raising the minimum wage measurably changes unemployment rates. I totally understand the intuition for why higher minimum wages would boost unemployment rates (and really it’s not well-understood why there isn’t a stronger effect there)! However labour costs don’t work like gasoline or butter or hard drives - labour is not a homogeneous input, search costs are very high, and in many cases low-credential workers are operating in environments of limited information and limited competition.
In terms of inflation - right now, the United States is in more of a situation of too-low inflation than too-high. Very low inflation means weaker incentives for companies to borrow money (which is a key aspect of economic expansion) and makes life more difficult for households with debt (obviously a big chunk of all households). This is exactly why the Federal Reserve (along with other big central banks around the world) has been taking unprecedented steps to raise inflation over the last five years or so.
So I mean of course all the necessary improvement in conditions for the working poor can come from a higher minimum wage alone. (In particular, reforming the way tips are counted, eliminating the exemptions for workers with disabilities, and making it illegal to ask about previous arrests that didn’t result in charges and/or conviction would be super helpful.) And raising the minimum wage too much will almost definitely raise unemployment, because beyond some point you’ve driven the profit margins for big minimum-wage employers to zero. At some point, I think you need to have additional transfers to supplement wage income for the poor. But the notion that incremental upwards revisions to the minimum wage are somehow going to cause big macroeconomic meltdown is kind of silly.
I’ll probably be submitting it later this evening unless I fall asleep? Which is kind of weird and kind of cool.
Does this race-to-the-bottom stuff happen in Canada too? My understanding is that a big cause for this is how much is delegated to the states, and Canada delegates quite a bit to the provinces too, right?
Things are a bit different in Canada, because the big industrial firms driving relocation in the United States hardly exist in Canada. Like, heavy manufacturing is almost all in southern Ontario very close to the US border, and it’s so integrated with US supply chains it can’t move. In other parts of the country manufacturing is concentrated more on raw material refinement (e.g. pulp mills) and this also can’t be easily moved.
The one industry where there’s been a bit of a race to the bottom is in terms of film and TV tax production. Currently Vancouver is “winning” in terms of total expenditure on film and TV production but we might lose that as other provinces (especially Ontario) enact more generous tax credits? This was kind of an issue during the last election here, but the party proposing that BC outbid Ontario in terms of tax credits lost pretty spectacularly to the party that didn’t want to change things.
actually, alabama is an interesting choice because AirBus is setting up shop there as well. I have heard they may go back to the machinist’s union in Seattle again at some point.
Wait which “they” do you mean? Because if you mean Boeing then yeah their shortlist includes just staying at the current Everett location.
And states like Alabama with low wages and low taxes and very strong restrictions on union power are super competitive for this kind of big manufacturing project. Basically a race to the bottom in terms of job quality in order to secure a few very large employers.
Don’t they already have a huge facility in AL? My friend is an electrical engineer for Boeing in Huntsville but he’s more on the research side.
The current Boeing facility in Huntsville is more on the defense side, no? I’m not sure how integrated that is with their passenger program. Also not sure whether that’s all research or if they also do manufacturing there.
Are you kidding me? 50-60k? I worked for an aerospace manufacturer in a “right-to-work” state and the pay rate topped out at 35k for a lead mechanic. With benefits maybe 45k tops.
Right. But divide the tax breaks Washington is offering by the number of jobs created and you get $50-60k. So directly mailing out cheques would actually be more efficient in terms of transferring money to potential employees than providing incentives to Boeing. Do you get what I mean?