RE: Living wage
June 27, 2015 at 3:15 pm
(This post was last modified: June 27, 2015 at 3:59 pm by Aristocatt.)
Not sure if I agree with the notion that increasing the minimum wage modestly will seriously increase unemployment. With regards to underemployment, I think paying people more to work less is desirable.
http://www.cepr.net/documents/publicatio...cation=ufi
This is the most comprehensive study I am aware of. Granted, CEPR is certainly a liberal think tank.
The notion that Small business owners would suffer disproportionately is an odd one too.
http://asbcouncil.org/sites/default/file...140709.pdf
My general opinion is that the standard model does not do a sufficient job explaining the many ways in which firms respond to wage hikes. With modest wage increases there are many different ways in which firms can and do respond to wage hikes, some of them undesirable, some of them desirable. However the most undesirable ones don't seem to happen on a massive scale, which is I imagine when they become unacceptable trade offs. That is, the issue with wage increases is not as much about the short term aggregate effects on demand or production, but instead in the long term distributional inefficiencies of the market. I don't think there is much risk in long term distributional inefficiencies when dealing with modest wage increases.
I agree that incremental wage increases and follow up impact assessments are the best way to go about wage increases. Extrapolating data of incremental increases and then using it to justify a 30% increase in wages, or a near doubling($15 an hour) of wages, could work, but it could also destroy the political will for wage hikes in the future.
I also agree that states are better prepared to make appropriate wage hikes than the nation. I do not think that many states that could and should be increasing their wages have the will to do so, however.
That being said, I would choose to increase minimum wage to $10/hour as opposed to no change at all. And would also choose to increase to $10/hour if I felt as though a small wage hike would give people the idea that the issue has been solved for the time being.
Inflation doesn't really offset wage hikes. Not everyone gets a wage hike, and the increase in the cost of a good(presumably to offset profit margin reductions) has to be considered with the price elasticity of the product. Also you need to account for the implicit wage compression that occurs when prices increase. Basically all consumers absorb the shock of a price increase that is instituted to offset the wage hikes of some consumers. This also implies that firms would respond to wage increases by only increasing prices to maintain the same profit margin.
http://www.cepr.net/documents/publicatio...cation=ufi
This is the most comprehensive study I am aware of. Granted, CEPR is certainly a liberal think tank.
The notion that Small business owners would suffer disproportionately is an odd one too.
http://asbcouncil.org/sites/default/file...140709.pdf
My general opinion is that the standard model does not do a sufficient job explaining the many ways in which firms respond to wage hikes. With modest wage increases there are many different ways in which firms can and do respond to wage hikes, some of them undesirable, some of them desirable. However the most undesirable ones don't seem to happen on a massive scale, which is I imagine when they become unacceptable trade offs. That is, the issue with wage increases is not as much about the short term aggregate effects on demand or production, but instead in the long term distributional inefficiencies of the market. I don't think there is much risk in long term distributional inefficiencies when dealing with modest wage increases.
I agree that incremental wage increases and follow up impact assessments are the best way to go about wage increases. Extrapolating data of incremental increases and then using it to justify a 30% increase in wages, or a near doubling($15 an hour) of wages, could work, but it could also destroy the political will for wage hikes in the future.
I also agree that states are better prepared to make appropriate wage hikes than the nation. I do not think that many states that could and should be increasing their wages have the will to do so, however.
That being said, I would choose to increase minimum wage to $10/hour as opposed to no change at all. And would also choose to increase to $10/hour if I felt as though a small wage hike would give people the idea that the issue has been solved for the time being.
(June 26, 2015 at 5:21 pm)Mister Agenda Wrote: But it will be temporary. Thanks to inflation brought on by the wage hikes it won't be long before $15 an hour doesn't get you any more than $8 an hour used to, and all those folks will be as desireable for employment at $15 as they were at $8; but they still won't be any closer to being middle class than they were before. The work experience they missed in the meantime might have brought them closer to being middle class though.
Inflation doesn't really offset wage hikes. Not everyone gets a wage hike, and the increase in the cost of a good(presumably to offset profit margin reductions) has to be considered with the price elasticity of the product. Also you need to account for the implicit wage compression that occurs when prices increase. Basically all consumers absorb the shock of a price increase that is instituted to offset the wage hikes of some consumers. This also implies that firms would respond to wage increases by only increasing prices to maintain the same profit margin.
