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Originally Posted by ContrarianEcon
Taxing and paying are two very different things.
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In the case of a law that mandates the minimum a willing employer can pay a willing employee, it is a tax and a subsidy. The job and the worker would have a fair market wage of $X. Then the government passes a law to interfere in the market. The new statutory minimum wage is $X+$D.
This is a "tax" on the employer of $D paid directly to the employee as a subsidy that shows up in her paycheck. The MW employee receives a wage of $X and a subsidy of $D paid directly by the employer.
That employee did not
earn $(X+D) anymore than everyone who competes in a track & field event
earns a 1st place trophy. She only earned $X, and simultaneously received a statutory subsidy of $D that shows up in her paycheck, paid by the employer. That extra $D was not earned; it was a statutory subsidy. The paycheck is for $(X+D).
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If we limit those things that are done to a value above $15hr ...
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Is that the "Royal
We"?
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...and we do enough of them to achieve the same unemployment rate as with the limit set at $7.25hr.
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Again with the "Royal We."
Nope. The "Royal We" intervened in the marketplace causing a distortion in the efficient allocation of capital, lower total employment, lower business formation, lower GDP, slower GDP growth, and lower GDP per capita than would have resulted if the "Royal We" just let the market decide.
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Then productivity will be higher. Roll that higher productivity over into worker compensation and you get higher growth in GDP per capita.
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Did the "Royal We" turn into a "you?"
Again, not possible. The "Royal We" intervened in the marketplace causing a distortion in the efficient allocation of capital, lower total employment, lower business formation, lower GDP, slower GDP growth, and lower GDP per capita than would result if the "Royal We" let the market decide. The "Royal We" precluded some jobs from being done because it disturbed "Royal We's" sensibilities. "Royal We" decided some people should be unemployed. "Royal We" decided some businesses should not be formed.
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You are bumping up against a problem.
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No, I'm not.
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The problem is this, schools of though in economics start with a political agenda and then make the math fit.
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"Hello Pot? This is Kettle calling..."
Economists are people, and people sometimes have political agendas. See, for example,
normative economics
or
economic progressivism. It is the economics of "what ought to be."
Economics, in the absence of a political agenda, is
positive economics. Everything I've written in this thread is positive economics - economics without an agenda. It is the economics of "what is."
Those in favor of raising the minimum wage are starting with a political agenda -- "what ought to be."
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You are talking about the dead weight loss. That and the unemployment rate correlate. The FED targets 5% unemployment. The capital required to achieve the higher productivity will simply be printed.
Dead weight loss ~ unemployment rate. The FED targets 5% unemployment rate.
Dead weight loss ~ unemployment rate. The FED targets 5% unemployment rate.
Dead weight loss ~ unemployment rate. The FED targets 5% unemployment rate.
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The U.S. Congress established three key objectives for monetary policy in the Federal Reserve Act: maximizing employment, stabilizing prices, and moderating long-term interest rates. The first two objectives are sometimes referred to as the Federal Reserve's dual mandate.
The largest impediment to achieving full employment is the statutory minimum wage. Removing the statutory minimum wage would result in many businesses creating new jobs below the current statutory minimum, and those jobs would be filled by people looking for work.
Raising the statuory minimum wage just makes the FED's job that much harder. There will be fewer jobs, more unemployment, a distortion in the efficient allocation of capital, and worst of all lower GDP and per capita GDP than would be the case absent the Royal We's meddling.
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I could give a crap about theory.
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I think you've made that abundantly clear. Just a reminder, this is an
economics forum.
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In the real world the FED will loan out enough money to get a 5% unemployment rate. The working capital required to achieve the higher productivity will simply be printed.
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If only it were that simple we would have been at full employment all along. You may have heard the expression "you can't push on a string." Monetary policy has shown it works fairly as a choker on the economy, but it hasn't worked very well at all as a stimulator since 2008.
In any event, no tools at the FED's disposal can counteract the overall negative effects of raising the minimum wage.
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The text book theories do not model the real economy.
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Yes, they do, although imperfectly. Each year, the data collection gets better, the models get better, the math gets better, and the econometric techniques gets better,
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In the real economy fewer people employed = higher unemployment rate.
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Nope. The unemployment rate is about people looking for work who cannot find it. In the real economy, there are many people who are not looking for work for any number of reasons, including:
- They have dropped out of the workforce
- They are discouraged and stopped looking for work
- they are retired
- they are full time students
- They are taking a break
- They voluntarily chose not to work
- they are too sick to work
- they are mentally ill
- they are taking care of someone else (e.g., aging parent)
- etc
None of the above are employed. None show up in unemployment rates.
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The FED targets 5% unemployment rate. There is not a dead weight loss from a higher minimum wage, there is a dead weight loss from higher debt load in % of GDP.
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With the statutory minimum wage:
Fewer people are employed.
More people are unemployed (looking for a job and can't find one)
Fewer new businesses are formed.
Capital is misallocated.
Investments occur in the wrong places.
GDP is lower
GDP growth is lower.
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The problem with capitalism is that unregulated it leads to one person having 100% of the resources and everyone else having 0%.
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I get that you're frustrated, but that assertion is just silly and you know it.
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Rolling gains in worker productivity over into worker compensation gets you higher growth in GDP per capita. You can use the minimum wage law to do this.
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Both the theory and the facts are counter to your argument. You seem to have taken to heart the writings of Carl Sandburg, paraphrased as follows:
"If the facts are against you, argue the theory. If the theory is against you, argue the facts. If both the theory and the facts are against you, pound the table and yell like hell."
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