danivon wrote:

danivon wrote:Quite why the minimum wage has not kept pace with at least inflation is an interesting question. Could we track unemployment against the real value of the minimum wage to see if there is any correlation at all?

Someone already did it:

The Impact of Increasing the Minimum Wage on Unemployment: No Evidence of Harm

He also focuses on whether a rise in the minimum wage disproportionately hits the young.

The guy has excellent credentials, but I'm disappointed in his graph. As I learned in introductory economic statistics, you have to take into account lag effects. There's a lag between raising the minimum wage and resulting unemployment. I would also posit that good economic times may lead to higher minimum wage legislation since there is less resistance. So it is hard to tease apart cause and effect. Finally, there may be other variables involved including the international economic environment, business cycles, other government policies, impacts of wars, etc. There are many variables in play here.

Here's a CBO study on the impact of the considered changes in the minimum wage rates. There are pluses and minuses to this.

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

Hmmm. How do you know he didn't look for lag effects. Is there one you can spot that he has missed?

And yes, there are a lot of factors. The main ones would relate to the economic cycle. And indeed cause an effext are complicated. So, basically, I am looking to see what you havetoback up theclaim that increasing the minimum wage would cause problems.

Because I don't see evidence either way, and then it comes back to other effects like whether it incentivises work to have a minimum wage that is declining in real terms.

I am looking to see what you havetoback up theclaim that increasing the minimum wage would cause problems.

I think you should look at the CBO study.

I still like Romney's idea of having it track inflation since doing nothing is effectively lowering the minimum wage on a real basis. Overall, I think after a base level which we currently have it should be up to the states. We would be more cognizant of local conditions and there would be a lot more information on what works and what doesn't.

freeman3 wrote: I am most concerned that poor people do not get taken advantage of

Wage and employment is only a small part of poor people getting taken advantage of. And while there are very real individual level cases where this happens, in economies like the US, wage is not where the poor really get hosed. It's with the institutions that prey upon the poor: check cashing, payday lenders, pawn shops, certain bank practices; state governments with casinos, lotteries and high taxes on things like cigarettes. As a percentage, most of this revenue come from those who can least afford to pay for them, and if you really want to help, look at these practices.

Not that I disagree with you that government should not do more to stop these practices, but I think wages are more fundamental. When a worker is being deprived of being paid higher wages because of unequal bargaining power he is subject to forces beyond his/her control. A poor person can avoid the practices you are talking about; he can do nothing against the power of Wal-Mart, however..

freeman3 wrote: A poor person can avoid the practices you are talking about; he can do nothing against the power of Wal-Mart, however..

Hmm. Addiction is tough Freeman. Governments balance their budgets off the backs of addictions to gambling, nicotine, and alcohol, who's victims are, predominately, the poor (or soon to be poor.) I've never known someone to be addicted to their job. So, yeah, I disagree.

freeman3 wrote: A poor person can avoid the practices you are talking about; he can do nothing against the power of Wal-Mart, however..

And don't think of the government, at any level, as the good guys here, and WalMart is the bad guy. Our public institutions have been attacking the poor at every leve for a generation or more. Beyond shitty schools, but dangerous and harmful schools, huge incarceration rates, terrible housing. What Congress is doing to the few public housing authorities left may be literally criminal: If any private landlord maintained housing in such poor condition they would likely be shut down and imprisoned. Add to that the huge addiction taxes mentioned previously, it seems to me that minimum wage is the least of problems affecting the (very) poor.

So getting into more detail, as a nation we spend more on welfare, but less of it goes to the very poor. This graph shows spending on welfare, and what we see are increases in things like the Earned income tax credit but decreases in things like aid to families with dependent children.



It comes from this:
http://www.citylab.com/politics/2014/05/us-spending-on-social-welfare-programs-is-way-up-but-far-less-of-it-goes-to-the-poorest/371124/

Which also says:

a family of four earning $11,925 a year in 2014 likely gets less government aid than a same-sized family bringing home $47,700.

In effect with the increase in the EITC, it counteracts the effect of the stagnant minimum wage. If you have a job, you have wage protection, unemployment insurance, and it's (far) more easy for you to get substantial help of one kind or another.

If you don't have a job, can't get a job, well, we as a nation say, screw you, you bum. Get a job! There is a huge difference between the employed and unemployed poor in this nation, and the minimum wage debate is a red herring.

Interesting data. I will note that EITC really does not help those who don't have children. . WIth regard to families I just don't have the time to go through and assess whether the EITC makes up for a low minimum wage. A nice table showing what those with various levels of income get in EITC would be helpful.

I still think that we should fight to make sure minimum wage levels are adequate, especially since they are at least partially the result of unfair bargaining power (I believe). That is money that is earned, not a government hand-out. In general, people like to feel that they earned the money they receive.

I'm not sure the focus on incentivizing the poor to work is a bad thing.

freeman3 wrote:I'm not sure the focus on incentivizing the poor to work is a bad thing.

It's not, it's a good thing. But to pay for it, if you're taking from the the very poor to give to the working poor, well, what happens to the very poor?

Geo - what are you saying would take from the very poor to give to the poor? I'm not clear.

The thing seems to me to be about several questions. One is whether it makes sense for taxpayers to subsidise wages through credits. Because that looks like taxpayers helping low-paying employers.

Just changing the minimum wage alone is not going to solve all problems. It probably does need to be combined with better targeted support for the poor, and perhaps less support for the middle class.

Ray Jay wrote:I think you should look at the CBO study.

I am reading it now. Not found the hard evidence behind their projected estimates yet but not finished looking through it.

I still like Romney's idea of having it track inflation since doing nothing is effectively lowering the minimum wage on a real basis.

That does make sense on face value. However inglation is different at different levels of income - the standard 'basket' of goods and services would not necessarily apply to low income households. By the way,does inflation not also vary by State?

As indicated in my earlier posts, I would not simply leave it to inflation, it would be related to the basic cost of livibg, on general welfare rates, and on the principle that work should pay. It should also reflect changes in wages, so that it does not crash up into them.or leave a large gap at the bottom.

Overall, I think after a base level which we currently have it should be up to the states. We would be more cognizant of local conditions and there would be a lot more information on what works and what doesn't.

Are you saying that the current Federal level is fine and we should just freeze it in real terms? Or do you see scope to increase it first?

As I said, I don't have a great interest in the Federal-State question. The real question is how it should be set by whoever does it. However, if low wages are being subsidised by welfare, does that mean that States which keep minimum wage rates low are effectively getting the Federal taxpayer to pick up.the tab? Are they keeping general wage rates down through the same mechanism, thus meaning they are having a more negative effect on Federal budgets (lower incomes = lower tax)?

In that sense, it is not just a State problem, and as 'cognizant' State legislators and governors may be of local conditions, they may be ignoring wider impacts, or trying to undercut other States.

danivon wrote:Geo - what are you saying would take from the very poor to give to the poor? I'm not clear.

I'm saying that's what has happened. Programs to help the working poor are growing. Programs to help the non-working poor are shrinking, so if you're working at minimum wage, you're not really working at minimum wage with the EITC. If you're not working, you're screwed.

geojanes wrote:

danivon wrote:Geo - what are you saying would take from the very poor to give to the poor? I'm not clear.

I'm saying that's what has happened. Programs to help the working poor are growing. Programs to help the non-working poor are shrinking, so if you're working at minimum wage, you're not really working at minimum wage with the EITC. If you're not working, you're screwed.

That is all by design from Clinton's overhaul in the late 90's. Johnson's war on poverty did not work. I think social security and Medicaid have some plusses, but AFDC had some huge problems. We created a culture of dependency where there was no incentive to work. Have a child and the state will pay you money. Repeat. The EITC is an attempt to both encourage work and subsidize the working poor. It's a reasonably good approach because there are limits to how high you can raise the minimum wage. For the non-working poor, we still have SSI. I believe this is designed for people who are just unable to work as opposed to people who have no desire to work.

I think tying the minimum wage to the national hourly wage would work. If you set it at 50% of the national hourly wage currently the minimum wage would be $12.15. As Dan noted, if we are going to use inflation first we would have to set it an appropriate level then we could use tie to inflation.

I think you might be underestimating the ability of the poor to adapt to the social welfare programs that are being offered, Geoge. Ok, so you can't get welfare, anymore. You can still get Section 8 which subsidizes the cost of your residence. If you are disabled you can still SSI disability payments. There is quite a bit of money to be made in providing home health care for your elderly relatives. There are still food stamps.

on balance I don't think the EITC is a bad way to go. Trying to make sure that the very poor get taken care of without just giving them incentives to do nothing is a difficult balance. Better to put assistance to the poor in a slot that rewards work than anywhere else. Human beings will adapt. You can take money out of the welfare slot and you wind up paying more disability claims. I would be more concerned if overall assistance to the poor was going down.