Jay Reding on the minimum wage:
The left wants to argue that the minimum wage is a transfer of assets from the rich (business owners) to the poor. The reality of the minimum wage is that it ends up being an asset transfer between poor people — or more likely an asset transfer between disadvantaged people and less disadvantaged people. Any increase in the marginal cost of labor tends to be felt most strongly at the bottom — if labor costs rise, businesses are less likely to hire workers who have a higher likelihood of producing less value for their costs. That means people who have families, less reliable access to transportation, or other personal problems. Single mothers, ex-convicts, people on drug treatment, all of those groups that are the most disadvantaged.
Increasing the minimum wage is pure political theater. All it does is assuage the guilt of wealthy white liberals while doing little to nothing to help people.
On the upside – how many of those “first 100 hours” did Pelosi and Company waste on this “lack of wealth” transfer?
If it was so easy for a business to raise prices they would already have done so and pocketed the profit.
Your mistake is to assume that low productivity workers will always so remain. (It is part of the general conservative view that the ‘lower orders’ should keep in their place.) A higher minimum wage forces business to invest in the training and education of their workers so that they become profitable employees at the new higher minimum wage. Higher minimum wages and stronger workplace laws are part of the reason European workers are more productive per hour worked than U.S. workers.
This helps not only the working poor, but the general increase in worker productivity means that the whole society gets more goods for less labor cost.
A higher minimum wage forces business to invest in the training and education of their workers so that they become profitable employees at the new higher minimum wage.
How, Rick? Fly them off to seminars?
A higher minimum wage forces business to pile more work on the employees it deems capable and lay off the rest. Hell, that’s not limited to a higher minimum wage; I see it all the time where I work.
It is part of the general conservative view that the ‘lower orders’ should keep in their place.
Really? And here I thought it was the liberal wing, what with their constant welfare programs, that encourage the lower orders to stay in the lower orders.
RickDFL Said: “If it was so easy for a business to raise prices they would already have done so and pocketed the profit.”
No. Because a business that did that would soon loose customers to others that undercut those profits. If my neighborhood coffee shop raised prices, I would drive a little farther up the street to the next one who chose not to raise their prices.
But, if my neighborhood coffee shop has to pay higher wages they have to raise prices to pay their bills and make acceptable profits (owner’s salary). They no longer have to worry about the price increase chasing customers down the street because that shop will have the same increases to their expenses and will also have to raise prices. Now with both prices increased, I may just decide to start making my own coffee.
To point of this piece, the majority of employees in America are not employeed by big business, but by small business. The minimum wage increase is going to hit the woman who owns my neighborhood coffee shop or the corner bar owner much harder than it will a Best Buy as minimum wage employees are a bigger percentage of her small business’ expenses.
Not only that. I thought DFL’ers believed sending jobs overseas was a bad thing. An increase in minimum wage, which will increase other wages, and the cost of U.S. goods in general, is going to drive of thousands of more jobs overseas.
RickDFL said: “Your mistake is to assume that low productivity workers will always so remain.”
Quite the opposite. That is the DFL assumption. That if someone is born poor they will stay poor. That they are in that “class”. Conservatives rarely even think in terms of people being in classes. Conservatives realize that the majority people who are making minimum wage will not be doing so in five years. That the vast majority are high school and college students with the next largest group being people working in a transistional job on their way to a better situation.
Please, before Dems make any economic policy, could they at least show that they grasp the simplest of economic principles.
And before you stereotype this conservative as being from some “privelaged class”, my mother was a hotel maid and house servant to a wealthy family, then a homemaker who did photo re-touching from home (self-taught) for some extra bucks and my father was a school teacher. Several years our family income would have qualified us for government assistance. Of course, my parents would never have taken it. Instead they cut costs, saved more, worked harder and taught their kids the values that enabled them to pull themselves slowly into an “upper middle-class” life.
Yossarian:
“Fly them off to seminars?” Wow – I bet waiters spit in your soup all of the time.
“business . . . pile more work on the employees it deems capable and lay[s] off the rest” Sounds like you need to be a man and join a union brother.
Nordeaster:
You are correct. My simplified scenario was just a response to Mitch’s simple ‘they get laid off’ scenario’. Real world business is far more complicated than Econ 101.
In truth your hypothetical coffee shops will have a variety of options. One shop might raise prices on the assumption that every other shop will follow suite. But one shop might forgo a price raise and try raise the productivity of their workers. They might even keep prices the same and run at a loss for a few months while they implement the new strategy. If the second shop does increase productivity enough, they will be able to continue with those lower prices and still be profitable. The first shop will have to follow suit, increase productivity and lower prices, to stay competitive.
There are all kinds of ways to work this at the micro level, but the macro results are clear. Nations like those in Europe with higher minimum wage laws and more pro-union work rules have greater worker productivity.
business . . . pile more work on the employees it deems capable and lay[s] off the rest” Sounds like you need to be a man and join a union brother.
Yeah, then I get to pay union dues and be part of a hierarchical system within a hierarchical system within a hierarchical system. . .
Think I’ll pass.
“Nations like those in Europe with higher minimum wage laws and more pro-union work rules have greater worker productivity.”
Again, not correct. In terms of GNP/GDP per employee the U.S. is still considerably ahead of the EU. Even using the more “liberal” definition of GNP/GDP per hour worked the U.S. still leads the EU in productivity.
Should always check the source before I write:
Here is the data – “In 1970 GDP per hour in the EU was 35 percent below that of the US; today the gap is less than 7 percent and closing fast. Productivity per hour of work in Italy, Austria, and Denmark is similar to that of the United States; but the US is now distinctly outperformed in this key measure by Ireland, the Netherlands, Norway, Belgium, Luxembourg, Germany, …and France”
Europe vs America, Tony Judt NY Review of Books 2/10/05
He cites -Andrew Sharpe, Appendix Table 2, “Output per House Levels in the OECD Countries Relative to the United States” for 2003; Centre for the Study of Living Standards, International Productivity Monitor, No. 9 (Fall 2004)
I should have been more precise, I was not talking about the whole EU just the core of France, Benelux, and Germany. Notice the UK, with it’ more U.S. style labor laws, does not make the list.
Guess it’s open to interpretation.
“Behind these strong numbers is high productivity growth that has made our economy the strongest and most robust in the world. It is the common thread that ties all positive economic news together.”
” The United States is the most productive large economy in the world. Output per capita is approximately 30 percent higher here than in the developed European countries and Japan. U.S. productivity growth and output per hour worked are among the highest in the world.”
“Growth in American productivity has been impressive in recent years. The Bureau of Labor Statistics reports that U.S. productivity growth since the end of 2000 has been 3.0 percent per year, outpacing the 2.6 percent average from 1996 to 2000. The current growth rate is substantially above that for the period between 1973 and 1995, when productivity growth averaged only 1.5 percent (see Figure 1). Our growth rate is remarkable for a country that is already at the top of the productivity pyramid. Raising productivity would seem to be easier for countries that can learn from technological improvements made by other countries. But for the country that leads the world in productivity, a high growth rate is even more impressive.”
Business Economics, Oct, 2006 by Edward P. Lazear
Sorry Swiftee:
The U.S. has a higher GDP per person simply because Americans work longer hours. If A and B are equally efficient and produce the same output in a given time, A can become more ‘productive’ just by working more hours than B. The real skill is to produce more goods in less time, so the best measure on an economy’s productivity is GDP per hour worked.
As the data you cite says : “U.S. productivity growth and output per hour worked are among the highest in the world” but we happen to fall short of the countries I cited. The reason they get more done in less time is because they have better labor laws.
The data you cite contradicts nothing I said.
From the CIA world fact book:
Ireland:
GDP – real growth rate: 5.2% (2002 est.)
GDP per capita: (purchasing power parity) – $30,500 (2002 est.)
Population below poverty line: 10% (1997 est.)10% (1997 est.)
Unemployment rate: 4.3%
France:
GDP – real growth rate: 1% (2002 est.)
GDP – per capita: purchasing power parity – $25,700 (2002 est.)
Population below poverty line:6.4% (1999)
Unemployment rate: 9.1% (2002 est.)
Germany:
GDP – real growth rate: 0.4% (2002 est.)
GDP – per capita: purchasing power parity – $26,600 (2002 est.)
Population below poverty line: NA% (not sure why the CIA says this is NA)
Unemployment rate: 9.8% (2002 est.)
UK:
GDP – real growth rate:1.6% (2002 est.)
GDP – per capita:purchasing power parity – $25,300 (2002 est.)
Population below poverty line: 17%
Unemployment rate: 5.2% (2002 est.)
USA:
GDP – real growth rate: 2.45% (2002 est.)
GDP – per capita: purchasing power parity – $37,600 (2002 est.)
Population below poverty line: 12.7% (2001 est.)
Unemployment rate:5.8% (2002)
“The U.S. has a higher GDP per person simply because Americans work longer hours.”
BS. Americans don’t work 50% more hours than Europeans.
Paradoxically there does seem to be a correlation between hi job security and hi unemployment. You don’t have to have a PhD in economics to know that, on the margins anyway, higher costs per employee=less hiring of new employees.
“BS. Americans don’t work 50% more hours than Europeans.”
From the same NY Review article I cited: “according to the OECD a typical employed American put in 1,877 hours in 2000, compared to 1,562 for his or her French counterpart.” (That 40 more work days a year – 8 weeks to spend with your family!) So an American works 20% more hours in a year than his French counterpart. So a large bulk of the difference in GDP per person is hours worked. In addition, I think (but can not find the data) Europe has a lower over all labor force participation rate. So not only do French workers work fewer hours, but fewer French people work (lots more stay at home moms and students).
Unemployment statistics will have to wait for another day.
But, no matter how you account for the difference, nothing in the data you cite contradicts the fact that French workers are more productive per hour worked than Americans. Yes we produce more in total per person, but that is not because we produce more in an equal period of time.
So where do all the highly unemployed “disgruntled French youths” that are engaging in nightly carbeques fit into this wonderful model?
I think Swiftee has it right. I think the productivity growth rates are largely due to the rapid globalization of technology. And while the U.S. is still a leader in innovation it is not doing so to the degree it once did. We need more engineers and fewer art history and sociology majors.
As to the unit of GDP per hour worked versus per worker, I’m not sure. As for me, I’m salaried. I can see the benefit for ME if I work fewer hours, but I don’t see that it makes a difference for the economy if I do it in 36, 44 or 50 hours. It’s all the same cost and all the same output. All I lose is my free time, which honestly I sometimes would just as soon spend doing a little extra work.
That may be a cultrual thing, that a good portion of us Americans enjoy our work more and our leisure less than our European counterparts. Or, maybe it’s that they don’t get as big a reward for greater work because promotions get based on things like senority rather than results and a much higher percentage of what they earn gets ripped back out of their hands.
Krugman wrote a piece taking the RickDFL line about French productivity. RickDFL, like Krugman, prefers not to bring the high French unemployment rate into the discussion.
Productivity per hour worked aside, the French do seem to have traded more economic security & a less work oriented lifestyle for greater economic opportunity. I imagine that workers in the US who find that deal attractive become public school teachers or get some other government job 🙂
Nordeaster:
“So where do all the highly unemployed “disgruntled French youths” that are engaging in nightly carbeques fit into this wonderful model?”
Many of them are students who enjoy low/no tutition and free health care. They are not exactly like an out of work U.S. workers.
“I don’t see that it makes a difference for the economy if I do it in 36, 44 or 50 hours”
That is why you are not an economist. The difference it makes to the productive capacity of the economy is huge.
Terry:
“French do seem to have traded more economic security & a less work oriented lifestyle for greater economic opportunity”
If only it were true:
Check out – Generational Income Mobility in North America and Europe
Edited by Miles Corak
From a review (word press has trouble with links)
“Despite the widespread belief that the U.S. remains a more mobile society than Europe, economists and sociologists say that in recent decades the typical child starting out in poverty in continental Europe (or in Canada) has had a better chance at prosperity. Miles Corak, an economist for Canada’s national statistical agency who edited a recent Cambridge University Press book on mobility in Europe and North America, tweaked dozens of studies of the U.S., Canada and European countries to make them comparable. “The U.S. and Britain appear to stand out as the least mobile societies among the rich countries studied,” he finds. France and Germany are somewhat more mobile than the U.S.; Canada and the Nordic countries are much more so.
Even the University of Chicago’s Prof. Becker is changing his mind, reluctantly. “I do believe that it’s still true if you come from a modest background it’s easier to move ahead in the U.S. than elsewhere,” he says, “but the more data we get that doesn’t show that, the more we have to accept the conclusions.””
Many of them are students who enjoy low/no tutition and free health care. They are not exactly like an out of work U.S. workers.
Really?
So the riots are just disgruntles students?
Got a source on that?
No. I just assume that any social event in a modern society composed mostly of 15-25 year olds, will include many students or potential students. If you have some interesting info on the composition of French riots let us know.
My point was the ‘unemployed’ in France includes a large number of students who enjoy free or very low tuition, subsidized housing, and, like everyone in France, free health care. Whatever their grievances, they are likely to be far different from those of what we normally think of as the ‘unemployed’ here is the U.S.
RickDFL-
“My point was the ‘unemployed’ in France includes a large number of students who enjoy free or very low tuition, subsidized housing, and, like everyone in France, free health care.”
All this _plus_ flaky pastry and over 400 varieties of cheese? I’m outta this podunk country.
Seriously, class mobility studies measure achievement, not opportunity, and the numbers are badly skewed because the US studies don’t look at the achievements of recent immigrants but do show the effect of low skilled immigrants on the earning power of low skilled native workers.
Terry
“class mobility studies measure achievement, not opportunity”
Are Americans somehow less able to take advantages of opportunity than the French? Are you saying were are inferior?
“the US studies don’t look at the achievements of recent immigrants but do show the effect of low skilled immigrants on the earning power of low skilled native workers”
Do you have any evidence of this? Which studies are flawed in this way? Plus, France seems to have a fairly large problem of an immigrant underclass too?
Does anyone know if dual income households are as prevalent in Europe as they are in America? It seems like it would have a huge bearing on a GDP versus GDP per hour discussion.
I’m a strong believer in equal opportunity (as in, two people producing identically should be compensated identically regardless of gender or race) although I’d prefer to see it enforced socially than “by law” for non government jobs. However, I think one of the huge negative fallouts of the women’s right to work movement in this country is that after we’ve adjusted to it, it seems that instead of one person supporting the household financially, both have to for most households to be financially successful.
IF this is what we’re trading for our higher GDP, I think its a bad trade. It is my opinion that maintaining a household, raising a family and working full time can be managed by the highly motivated and selfless but becomes overburdensome for many and corners get cut.
The latch-key epidemic of the 80’s has become an accepted standard – do you think this has an impact on the youth that come home to empty houses? I’d have to guess so – especially in families and communities that are “on the edge” to begin with.
Full family sit down meals “made from scratch” are quite uncommon. Why do I care about “made from scratch”? Highly refined carbohydrates may be fast cooking but they’re brutal on your body and directly lead to diets resulting in obesity, diabetes and heart disease.
I know that in spite of these sorts of things, many dual income (or single parent) households are successful and work well. That’s a testament to the people who manage it. I think the transition to nuclear families being followed by the transition to all adults being in the work force has made it a harder thing to accomplish.
RickDFL-
In general US class mobility numbers track a selected group of individuals over decades. I believe in the US the economists study two cohorts, one that started in the 60’s and one that started in the 70’s. That’s why here lot of comparisons in these studies between now & the 1970’s & that’s why the effects of (relatively) recent immigration doesn’t show up the way it should. I found this out in a quarter hour of web browsing. And no, the web sites I looked at were not ‘right wing’. There are many, many more liberals writing on the subject of class mobility in demographic terms than their are conservatives.
Demographers looking at class mobility divide a population into income quintiles and then measure how many families changed quintiles or stayed in the same quintile. This may tell you something about intergenerational class mobility but it doesn’t say anything about individual opportunity. We let close to a million people a year in this country legally and at least double that illegally. These people are not coming here to starve.
You really should read those studies that your chosen authors cite. You might learn something.
“These people are not coming here to starve.”
But many immigrants are coming here and filling up the lower quintiles. If anything the influx on immigrants into the lower rungs of the economic ladder should lift lots of native borns out of those quintiles and create a greater mobility effect.
How would immigration lower the appearance of mobility?
Sure cohort studies “don’t capture the experiences of recent immigrants or their children, many of whom have seen extraordinary upward mobility. . . .
Nonetheless, those two surveys offer the best way to measure the degree to which Americans’ economic success or failure depends on their parents. University of Michigan economist Gary Solon, an authority in the field, says one conclusion is clear: “Intergenerational mobility in the U.S. has not changed dramatically over the last two decades.””
Finally, in order to disprove the thesis that France has greater class mobility than the U.S., you would need to find not just a flaw in the U.S. studies (no study is perfect), but a flaw that would affect the U.S. but not France. As I pointed out earlier, France too has a serious immigration problem.
Very difficult to get into without this comment running to excess length. I’ll do my best to respond briefly.
-Keep in mind that I am not a statistician
-Inherited wealth is a large factor in keeping people from moving _down_ a quintile in the US
-Are the studies measuring income, spending, or total assets? How are intangible assets such as government and private pensions being accounted for?
-Family size needs to be taken into account
-Immigration needs to be taken into account. Currently in the US the lowest quintile is being flooded with low and unskilled immigrant labor. While this is a benefit (obviously) to the immigrants, it has the effect of depressing wages in the lowest quintile.
Finally:
-Class mobility != a healthy society
-Class mobility != greater individual opportunity
And a google search using the terms “problems class mobility studies” returns 1,750,000 hits.