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I don't suppose it would ever occur to you that the increase in the federal minimum wage from $5.15/hour to $7.025/hour in part caused the Great Recession.
Really? You are trying to blame rampant commodity speculation and real estate bank fraud on people making minimum wage? Here's a clue, Schmoo. It wasn't poor people who tanked the economy.
Originally Posted by Supposn:
Mircea, are you referring to the federal minimum wage rate or something else? The federal minimum wage rate is $7.25 per hour.
Quote:
Originally Posted by Mircea
If you're not smart enough to understand that the federal minimum wage was $5.15/hour then you probably shouldn't be posting here. ...
Mircea,
If you don't make mention of it, I cannot guess what you have in mind. I don't keep the September- 1997 federal minimum wage rate taped to my keyboard.
You're correct. In July-2007, minimum wage workers received an increase that reduced the minimum's loss of purchasing power from 47.16% to 39.98% . Certainly, the purchasing powers of low-wage workers improved after President Obama's administration increased it in July-2009; but the minimum's purchasing power still remained and is now poor.
President Obama reduces the loss of purchasing power since February-1968 to 28.04% in July-2009. The last report for June-2019 has it as a loss of 39.48% since February-1968; the year of 1968 wasn't any particularly good year to be a lower-wage employee. There's no good year for that.
... Your imitation of Herr Josef Göbbels is spot-on.
The federal minimum wage law wasn't enacted in February 1968.
The federal minimum wage law went in effect October 1938 or about ~30 years prior to the date you deceitfully cherry-picked.
So, out of 696 months, you cherry-pick one single month to make a baseless argument on a subject you don't even understand.
Mircea, refer to post #12 of this thread for details. I have previously responded to you on this question.
Quote:
Originally Posted by Supposn
Mircea, ...I chose the month of February 1968 because then, during President L. Johnson's administration, the purchasing powers of the federal minimum wage rate, and generally all other USA wage rates peaked in value. The point is our minimum rate's purchasing power has been permitted to decline in excess of 39% of its value. That month was,(as you described), “cherry-picked”. Why do you find fault with the obvious rather than devious choice of month?
... Purchasing power is irrelevant and not the reason the original law was enacted.
There's no Law, Theory, Theorem or Corollary in the Law of Economics governing wage distribution. ...
Mircea, regarding your post #9:
Purchasing power [of the minimum rate] is irrelevant and not the reason the original [federal minimum wage rate] law was enacted?
Lower-wage rate earners compromising much more than 20% of USA's wage earners are irrelevant?
Quote:
Originally Posted by Supposn
Mircea, due to the concept of wage differentials, the federal minimum wage rate's purchasing power's effects are critical upon all lower-wage, and substantial upon all medium-wage rates, (i.e. the minimum's rate effects upon no less than 40 percentile of USA's wage earners is no less than substantial).
Lower wage earners far outnumber medium wage earners.
Employees earning no more than exactly $7.25 per hour are a small minority of USA's lower-wage rate earners. …
Regarding wage differentials: I suppose there are employers that are unaware of the term “wage differentials”. I also suppose that anyone employing multiple employees with differing attributes as applied to their tasks do conduct their employment in some manner that applies the concepts of wage differentials.
... I don't suppose it would ever occur to you that the increase in the federal minimum wage from $5.15/hour to $7.025/hour in part caused the Great Recession. ...
Mircea, regarding increasing the minimum wage to $7.25 per hour causing Bush's great "credit crunch" it never occurred to me.
The increased to $7.25 was enacted by the Obama administration on July 24, 2009. The Bush administration enacted the increase to $6.55 one year prior to that. The federal minimum wage rate has always been, and I suppose will continue to be increased gradually so as to not “shock” our economy. Republicans wish us to believe Democrats have or would do it otherwise.
Excerpted from https://www.dol.gov/whd/minwage/coverage.htm
"The 1996 amendments increased the minimum wage to $4.75 an hour on October 1, 1996, and to $5.15 an hour on September 1, 1997. … The 2007 amendments increased the minimum wage to $5.85 per hour effective July 24, 2007; $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009".
... The Export Industry directly and indirectly lost 3 Million jobs because of the minimum wage increase.
It made it much more difficult to compete against others, like Romanians who currently only earn $310/month.
In spite of the fact that the average wage is $310/month or $1.78/hour, 98% of Romanians own their own home or apartment (yes, in other countries you can buy apartments instead of renting them). ...
Mircea, higher-wage nations are disadvantaged within global trade. I'm not questioning your posting we're competing with a nation that pays their employees the equivalent of $1.78 per hour.
But are you advocating we reduce the purchasing power of USA wages in order to compete with $1.78/Hr. Wage rates?
Trade deficits are always net detrimental to their nation's gross domestic product and numbers of jobs. I'm a proponent of the improved trade proposal described by Wikipedia's “Import Certificates” article.
I suppose you're are or will be opposed to that.
It would be economically net detrimental for our nation to reduce the purchasing power of our wage scales in order to compete within global trade.
People also buy apartments in the United States. I owned one.
a term that has a specialized meaning in a particular field or profession
Thus, a dictionary won't help you understand it, but the BLS website will:
Hedonic quality adjustment is one of the techniques the CPI uses to account for changing product quality within some CPI item samples. Hedonic quality adjustment refers to a method of adjusting prices whenever the characteristics of the products included in the CPI change due to innovation or the introduction of completely new products.
The use of the word “hedonic” to describe this technique stems from the word’s Greek origin meaning “of or related to pleasure.” Economists approximate pleasure to the idea of utility – a measure of relative satisfaction from consumption of goods. In price index methodology, hedonic quality adjustment has come to mean the practice of decomposing an item into its constituent characteristics, obtaining estimates of the value of the utility derived from each characteristic, and using those value estimates to adjust prices when the quality of a good changes.
The CPI obtains the value estimates used to adjust prices through the statistical technique known as regression analysis. Hedonic regression models are estimated to determine the value of the utility derived from each of the characteristics that jointly constitute an item.
To illustrate the mechanics of a hedonic quality adjustment, it helps to begin with the generalized form of the hedonic regression equation:
Where the dependent variable, lnP, is the natural log of price, ß are the coefficients estimates of the independent variables (Xk), and e is the error term. The coefficients are a measure of the percentage change in price associated with a unit change in the characteristic. If the item being modeled is men’s shirts, the independent variables might be sleeve length and fiber composition; a simplified version of a hedonic model for men’s shirts might be:
Here all shirts are either short sleeve or long sleeve and either cotton/poly or 100% cotton. After doing the statistical processing BLS might estimate that ß1 = 0.15 and ß2 = 0.25. This indicates that a long sleeve shirt is 15 percent more valuable than a short sleeve one and that a 100% cotton shirt is 25 percent more valuable than a cotton/poly blend shirt.
If the BLS data collector is forced to replace a short-sleeve cotton/poly shirt in the CPI sample with a long sleeve 100% cotton shirt, the CPI would attribute 40 percent of their price difference to increased shirt value (15 percent for sleeve length and 25 percent for fiber). The CPI would treat the remaining 60 percent of the price difference as pure change.
If the price of the original shirt had been $20 and that of the replacement shirt $30, rather than using a $10 increase in price for that sample observation, the CPI would use a $6 increase, attributing the other $4 of the price difference to difference in the quality of the two shirts.
Quote:
Originally Posted by Supposn
How do you relate this to the question, “how inflationary is the federal minimum wage rate”?
My post was in response to someone else's comment.
There are two separate economic phenomena to consider:
A) How inflationary is the federal minimum wage (about which you inquire)
B) How is inflation actually measured, and is it measured in such a way as to pick up any inflation related to the federal minimum wage? (that's where Hedonic Adjustment fits in)
I've answered (A) earlier on this thread, but you might have missed it: Inflation, an increase in the general price level, is almost exclusively a Monetary phenomenon. What I mean by that is it is the result of changes in the money supply, various Fed interest rates, the velocity of money turnover and the like.
The Federal Minimum Wage is not a monetary phenomenon, therefore the existence or absence of the Federal Minimum Wage is 100% orthogonal to inflation. The Minimum Wage is irrelevant with respect to inflation. It. Does. Not. Matter.
Regarding measurement of inflation, as I've posted previously in this thread, the current measures are at about 2% give or take a little. And they are wrong: true inflation is running at zero, and perhaps slightly negative.
Last edited by RationalExpectations; 08-02-2019 at 11:43 AM..
a term that has a specialized meaning in a particular field or profession
Thus, a dictionary won't help you understand it, but the BLS website will:
Hedonic quality adjustment is one of the techniques the CPI uses to account for changing product quality within some CPI item samples. Hedonic quality adjustment refers to a method of adjusting prices whenever the characteristics of the products included in the CPI change due to innovation or the introduction of completely new products.
The use of the word “hedonic” to describe this technique stems from the word’s Greek origin meaning “of or related to pleasure.” Economists approximate pleasure to the idea of utility – a measure of relative satisfaction from consumption of goods. In price index methodology, hedonic quality adjustment has come to mean the practice of decomposing an item into its constituent characteristics, obtaining estimates of the value of the utility derived from each characteristic, and using those value estimates to adjust prices when the quality of a good changes.
The CPI obtains the value estimates used to adjust prices through the statistical technique known as regression analysis. Hedonic regression models are estimated to determine the value of the utility derived from each of the characteristics that jointly constitute an item.
To illustrate the mechanics of a hedonic quality adjustment, it helps to begin with the generalized form of the hedonic regression equation:
Where the dependent variable, lnP, is the natural log of price, ß are the coefficients estimates of the independent variables (Xk), and e is the error term. The coefficients are a measure of the percentage change in price associated with a unit change in the characteristic. If the item being modeled is men’s shirts, the independent variables might be sleeve length and fiber composition; a simplified version of a hedonic model for men’s shirts might be:
Here all shirts are either short sleeve or long sleeve and either cotton/poly or 100% cotton. After doing the statistical processing BLS might estimate that ß1 = 0.15 and ß2 = 0.25. This indicates that a long sleeve shirt is 15 percent more valuable than a short sleeve one and that a 100% cotton shirt is 25 percent more valuable than a cotton/poly blend shirt.
If the BLS data collector is forced to replace a short-sleeve cotton/poly shirt in the CPI sample with a long sleeve 100% cotton shirt, the CPI would attribute 40 percent of their price difference to increased shirt value (15 percent for sleeve length and 25 percent for fiber). The CPI would treat the remaining 60 percent of the price difference as pure change.
If the price of the original shirt had been $20 and that of the replacement shirt $30, rather than using a $10 increase in price for that sample observation, the CPI would use a $6 increase, attributing the other $4 of the price difference to difference in the quality of the two shirts.
My post was in response to someone else's comment.
There are two separate economic phenomena to consider:
A) How inflationary is the federal minimum wage (about which you inquire)
B) How is inflation actually measured, and is it measured in such a way as to pick up any inflation related to the federal minimum wage? (that's where Hedonic Adjustment fits in)
I've answered (A) earlier on this thread, but you might have missed it: Inflation, an increase in the general price level, is almost exclusively a Monetary phenomenon. What I mean by that is it is the result of changes in the money supply, various Fed interest rates, the velocity of money turnover and the like.
The Federal Minimum Wage is not a monetary phenomenon, therefore the existence or absence of the Federal Minimum Wage is 100% orthogonal to inflation. The Minimum Wage is irrelevant with respect to inflation. It. Does. Not. Matter.
Regarding measurement of inflation, as I've posted previously in this thread, the current measures are at about 2% give or take a little. And they are wrong: true inflation is running at zero, and perhaps slightly negative.
Where are you getting the notion that, "true" inflation is ~0 or maybe even negative?
I'd disagree here. Increases in productivity and technology have been a tremendous deflationary force that has largely counteracted price increases that would be expected with given such a large increase in the global monetary base. Prices would be rising 5%+ for the last few decades rather than 1% to 2% without these productivity increases.
I also tend to think a minimum wage increase is somewhat deflationary since it changes the ROI for additional labor vs. investment in labor saving technologies. These labor saving investments drive productivity gains which are very deflationary over the long term.
With the increase to a $15 minimum I haven't noticed any deflationary effects. All I've seen is price increases in restaurants, the laundromat, and other low profit margin businesses.
Really? You are trying to blame rampant commodity speculation and real estate bank fraud on people making minimum wage? Here's a clue, Schmoo. It wasn't poor people who tanked the economy.
I never laid blame, I simply said it was a factor, and a factor you wouldn't recognize, because you don't read financial reports published by industries.
"Rampant commodity speculation" did not cause people to lose their jobs.
People lost their jobs, because certain sectors of the economy were unable to compete globally with new entrants in the global market like China, Vietnam et al.
Defaulting on a mortgage does not cause one to automatically lose their job, but losing their job may cause one to default on their mortgage and in a household with two wage-earners dependent on making mortgage payments, the loss of a job by one or both wage-earners negatively impacts their ability to make mortgage payments.
If you did not have rampant job losses, then the mortgage crisis never happens and you would be none the wiser.
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