• Quick note - the problem with Youtube videos not embedding on the forum appears to have been fixed, thanks to ZiprHead. If you do still see problems let me know.

$9/h minimum wage

WildCat said:
Since when are employee needs the basis for employee pay? Does the financial analyst at the bank "need" more than the teller?
Click to expand...

OK, I definitely see your point there. Demands are important, not needs. But surely needs are an important factor of demands, at least at the lower end of the scale.
 
TubbaBlubba said:
I agree that it doesn't affect demand of labour. But it affects supply of labour. Suddenly there will be workers who are willing to work for less than whatever was the lowest rate labour was supplied at before because of the government subsidies (who may, for instance, be currently unemployed).
Click to expand...

I'm still perplexed at why you would think this is as it assumes that labor is only concerned with achieving $x rather than wanting more than $x.

People don't accept pay cuts because they inherited money, won at blackjack or came into it in some other manner. And they don't accept pay cuts because of a subsidy, tax rebate etc either.

Aside from that, earned income credits have empirically been successful at lifting low income earners out of poverty, not just creating a substitution of who pays their wages.

Although I would advocate going farther with it and not tie it to work, rather replace existing redundant and ludicrously wasteful welfare schemes with a streamlined negative tax that can accomplish the same goals at much lower costs, it would just need to be phased out in a way that always encourages work. Earned income credits and welfare reforms that encourage work are smaller versions of the same idea,
 
respect said:
I'm still perplexed at why you would think this is as it assumes that labor is only concerned with achieving $x rather than wanting more than $x.

People don't accept pay cuts because they inherited money, won at blackjack or came into it in some other manner. And they don't accept pay cuts because of a subsidy, tax rebate etc either.
Click to expand...

Hmm, I think I'm starting to get it. The marginal value of each hour worked will actually decrease up to a point because you effectively only earn 50 cents on the dollar. So if anything the labour force might demand HIGHER salaries, because they get subsidized on the dollars they don't earn.
 
TubbaBlubba said:
Hmm, I think I'm starting to get it. The marginal value of each hour worked will actually decrease up to a point because you effectively only earn 50 cents on the dollar. So if anything the labour force might demand HIGHER salaries, because they get subsidized on the dollars they don't earn.
Click to expand...
I read that 5 times, and still can't make any sense out of it.
 
TubbaBlubba said:
If earning a dollar gives you only 50 cents more due to the government subsidy, then you'll want more dollars for the same amount of work.
Click to expand...
Sorry, still not making any sense.

What happened to the other 50 cents, and what is this subsidy you're speaking about?
 
WildCat said:
Sorry, still not making any sense.

What happened to the other 50 cents, and what is this subsidy you're speaking about?
Click to expand...

If you earn 1 dollar more, the government will pay you 50 cents less, assuming a 50% negative income tax subsidy rate and that you're below the breakpoint.
 
TubbaBlubba said:
If you earn 1 dollar more, the government will pay you 50 cents less, assuming a 50% negative income tax subsidy rate and that you're below the breakpoint.
Click to expand...
I have no idea wat you're talking about. Is this a Swedish thing?
 
TubbaBlubba said:
We're discussing negative taxes as an alternative to welfare/minimum wage.
Click to expand...
Oh, I see. You appear to think that the value of any job must be at minimum equal to a living wage (however you are defining that)? It would be nice if that were true, but ultimately the value of a job is the value that employee provides to the company.

You still seem to be under the impression that employee "needs" determines the value of their labor?
 
WildCat said:
Oh, I see. You appear to think that the value of any job must be at minimum equal to a living wage (however you are defining that)? It would be nice if that were true, but ultimately the value of a job is the value that employee provides to the company.

You still seem to be under the impression that employee "needs" determines the value of their labor?
Click to expand...

That's the side of demand for labour, but there's the supply of labour side as well. Ultimately they must meet, and exactly where, and the resulting value created, result profits etc depends on many things in the market.

What I'm trying to understand is exactly how a government subsidy would affect the supply of labour. Initially I thought that it would push down wages and increase the supply - but this is clearly absurd as the subsidy will not cause employees to place less value on their work hours.

However, up to the breaking point where the taxes stop taking effect, every extra marginal dollar earned will only bring 50 cents worth of value to the employee, as the government will subsidize 50 cents less. This should have some, however small, effect causing the labour force to actually value their labour hours higher. This of course is the case with any welfare.
 
TubbaBlubba said:
That's the side of demand for labour, but there's the supply of labour side as well. Ultimately they must meet, and exactly where, and the resulting value created, result profits etc depends on many things in the market.

What I'm trying to understand is exactly how a government subsidy would affect the supply of labour. Initially I thought that it would push down wages and increase the supply - but this is clearly absurd as the subsidy will not cause employees to place less value on their work hours.

However, up to the breaking point where the taxes stop taking effect, every extra marginal dollar earned will only bring 50 cents worth of value to the employee, as the government will subsidize 50 cents less. This should have some, however small, effect causing the labour force to actually value their labour hours higher. This of course is the case with any welfare.
Click to expand...

Where are you getting fifty percent from? Can I assume you Googled up video of Milton Friedman explaining the idea? Fifty percent doesn't have to be the number, it is just very useful for illustrative purposes as it makes the math extremely easy. IIRC, the US Earned Income Tax Credit is phased out at 10-16% (it has been a long time since I looked at that, the exact numbers may be slightly different) depending on various factors. And at this level of income most people will see a significant incentive to earn more.
 
WildCat said:
I have no idea wat you're talking about. Is this a Swedish thing?
Click to expand...

He is talking about the phase out of schemes like the American Earned Income Tax Credit. Empirically they have been much more successful at reducing poverty than market distorting schemes like minimum wage laws that have a tendency to create poor to poor wealth transfers.
 
Last edited:
respect said:
Where are you getting fifty percent from? Can I assume you Googled up video of Milton Friedman explaining the idea? Fifty percent doesn't have to be the number, it is just very useful for illustrative purposes as it makes the math extremely easy. IIRC, the US Earned Income Tax Credit is phased out at 10-16% (it has been a long time since I looked at that, the exact numbers may be slightly different) depending on various factors. And at this level of income most people will see a significant incentive to earn more.
Click to expand...

Yeah, it was just an example I got off a webpage explaining the idea.

And, as I look closer at it, there really doesn't seem to be any problem with it that doesn't already exist with standard welfare.
 
TubbaBlubba said:
Yeah, it was just an example I got off a webpage explaining the idea.

And, as I look closer at it, there really doesn't seem to be any problem with it that doesn't already exist with standard welfare.
Click to expand...

But it cuts the cost significantly of administering welfare. If a country actually adopted it they could pay more welfare at less taxpayer expense if they chose to do so.
 
respect said:
But it cuts the cost significantly of administering welfare. If a country actually adopted it they could pay more welfare at less taxpayer expense if they chose to do so.
Click to expand...

Works for me. But it seems to be a recurring problem that the "best" kinds of taxes tend to be politically infeasible to implement.
 
Has the President posted a justification for setting the national minimum wage at $9 hr? Anyone who proposes something that will interfere with the market bears the burden of proof of showing that the interference will actually work.
 
fdbrian said:
OnlyTellsTruths said:
Does anyone have a chart of the price of 1 gallon of gasoline to minimum wage ratio over the course of time?
Click to expand...

not a chart but in 1986, the minimum wage was $3.35 and I remember buying gas for 75 cents a gallon or less a lot.
Click to expand...


I assume no one else could find a chart either (I looked too).

Has the minimum wage to a gallon of gasoline ratio every been this high? I don't remember a gallon of gasoline ever being more than half of the minimum wage.

Except perhaps during that crisis in the 70s...

Right now 1 gallon of gasoline is $4 and minimum wage is $7.25.
 
respect said:
Although I would advocate going farther with it and not tie it to work, rather replace existing redundant and ludicrously wasteful welfare schemes with a streamlined negative tax that can accomplish the same goals at much lower costs...
Click to expand...
Now we are on the same wave length.

respect said:
...it would just need to be phased out in a way that always encourages work. Earned income credits and welfare reforms that encourage work are smaller versions of the same idea,
Click to expand...
I guess not :boggled:
 
You must log in or register to reply here.

Back
Top Bottom