State of the Union

[Ziggurat]

The fact that $90 an hour for minimum wage is absurd does not argue in the slightest against Obama's proposal for $9/hr.

Logically speaking, you are correct.

But there's an additional problem here. No real argument has been put forward for why $9/hr is the right level. Arguments have been made that it's currently too low, but those arguments don't indicate what would be too high. Clearly it can be too high, and you and I probably both conclude that $90/hr would be too high, but where's the cutoff? If you don't know the answer to that, if you can't say that this number is too high, then you can't have any confidence in the assertion that the proposal won't raise it too high, or even that it isn't too high already.

 

[monty1]

In America even the poor and middle class citizens talk themselves out of fairness. The 'american way' brainwashing has been highly successful.

The country with the highest per capita income and the country with the second highest income inequality, second to only Mexico.

$9 bucks an hour minimum wage? Outrageous! What greedy takers who think they have a right to not livein poverty!

 

[Puppycow]

Logically speaking, you are correct.

But there's an additional problem here. No real argument has been put forward for why $9/hr is the right level. Arguments have been made that it's currently too low, but those arguments don't indicate what would be too high. Clearly it can be too high, and you and I probably both conclude that $90/hr would be too high, but where's the cutoff? If you don't know the answer to that, if you can't say that this number is too high, then you can't have any confidence in the assertion that the proposal won't raise it too high, or even that it isn't too high already.

There are basic common-sense thought experiments you could do which would suggest how high might be too high.

First of all, you have to know some basic facts about the current situation:

What is the median wage, what is the wage for someone in say the tenth percentile, the 20th, and so on. It seems likely that the more current employees are actually affected by the change, the more likely it is to have a market-distorting impact. $90/hour would probably affect more than 90% of workers. That's why it's too high.

I would guess that something that only affects no more than the bottom 10%-20% would be a reasonable first guess. So find out what the wage is for the person in the percentile you are looking for and start there.

Then there are empirical studies:
The Research Case for a Higher Minimum Wage

For a much more persuasive run of the basic argument you really want to read Arindrajit Dube, T. William Lester, and Michael Reich "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties" which is able to take advantage of a much larger dataset. The basic method is that since some counties are adjacent to counties that are located in different states, we can take advantage of variation in state minimum wage laws to assess the employment impact. The finding is that there's zero employment impact within the actually occuring range of variation (this does not rule out, obviously, that a $50 minimum wage would cause job losses).

A related paper from Syliva Allegretto, Dube, and Reich titled "Do Minimum Wages Really Reduce Teen Employment?" concludes that no they don't.

Finally we can consider the cases of other countries. Take Australia:

Australia's minimum wage is $15.96 per hour or $606.40 per week. Generally, employees in the national system shouldn't get less than this.

Since one Australian dollar is essentially equal to one US dollar (it's currently $1.04), this suggests that $9 or even more would probably not be a problem, as their unemployment rate is currently 5.4%, compared to our 7.9%. One difference is that Australia's rate is changed annually, so the change in any one year probably shouldn't be too large, but then congress often goes many years without changing the US minimum wage, even to adjust for inflation.

 

[daredelvis]

Logically speaking, you are correct.

But there's an additional problem here. No real argument has been put forward for why $9/hr is the right level. Arguments have been made that it's currently too low, but those arguments don't indicate what would be too high. Clearly it can be too high, and you and I probably both conclude that $90/hr would be too high, but where's the cutoff? If you don't know the answer to that, if you can't say that this number is too high, then you can't have any confidence in the assertion that the proposal won't raise it too high, or even that it isn't too high already.

It gets it close to where it was in constant dollars when we were all living in St. Ronny's utopia. That is all you need to know.

Daredelvis

 

[Ziggurat]

It gets it close to where it was in constant dollars when we were all living in St. Ronny's utopia. That is all you need to know.

Daredelvis

I don't agree with Puppycow's position on minimum wage, but he took my question seriously, and he backed up his answer with evidence and an argument. You, though? Your response is as shallow as they come.

 

[Puppycow]

Republican reaction:

Obama’s Agenda Seen as Dead in the Water by Republicans

President Barack Obama last night called for a higher minimum wage and stricter gun laws, proposed making preschool available to all 4-year-olds, and asked Congress to rewrite U.S. immigration law.

Today Republicans in Congress made clear that little of it will happen.

House Speaker John Boehner, Senate Minority Leader Mitch McConnell and rank-and-file Republicans opposed many of the details Obama set out in his second-term agenda in his State of the Union address to Congress. They signaled that the political fights of the past aren’t over yet.

Boehner dismissed the president’s proposal to raise the federal minimum wage. Republicans also gave a negative response to Obama’s call for new legislation to curb greenhouse-gas emissions that scientists say drives global warming.

“When you raise the price of employment, guess what happens? You get less of it,” Boehner, an Ohio Republican, told reporters at a news conference today in Washington. “Why do we want to make it harder for small employers to hire people?”

I have to say I like Obama's idea about making preschool available to all 4-year-olds.

Kids who go to preschools are less likely to end up on welfare or in prison, and earn higher wages as adults. In the long run it saves more money than it costs. (And it's not a mandate, big government snatching your babies, just making it available).

 

[Ziggurat]

Kids who go to preschools are less likely to end up on welfare or in prison, and earn higher wages as adults. In the long run it saves more money than it costs. (And it's not a mandate, big government snatching your babies, just making it available).

Does it? That depends upon whether preschool is causative of better outcomes, or if it's simply correlated with all the other factors which lead to success (such as having successful parents). If it's merely the latter, then we could end up wasting a whole lot of money subsidizing a marker of success rather than a cause of success, something we've done quite a lot of before with nothing to show for it. I'm willing to be convinced that preschool is causative of success, but I am not willing to take it on faith.

 

[Puppycow]

Does it? That depends upon whether preschool is causative of better outcomes, or if it's simply correlated with all the other factors which lead to success (such as having successful parents). If it's merely the latter, then we could end up wasting a whole lot of money subsidizing a marker of success rather than a cause of success, something we've done quite a lot of before with nothing to show for it. I'm willing to be convinced that preschool is causative of success, but I am not willing to take it on faith.

Studies have been done on this question. I agree that it's important to figure out whether the correlation is causative or simply a marker.

If you are willing to listen to a podcast, some evidence that convinced me is explained:

Episode 411: Why Preschool Can Save The World (Planet Money)

On today's show, we meet a self-described robber baron who decided to spend his billions on finger paint and changing tables. We revisit decades-long studies that found preschool made a huge difference in the lives of poor children. And we talk to a Nobel prize-winning economist who says that spending public money on preschool produces a huge return on investment.

If you prefer to read the actual study, it's here (PDF):
A New Cost-Benefit and Rate of Return Analysis for the Perry Preschool Program: A Summary

Here's why the study suggests that it's causative, and not just a marker:

Only disadvantaged children living in adverse circumstances who had low IQ scores and a low index of family socioeconomic status were eligible to participate in the Perry program. Actual participation was determined by a toss of a coin. Beginning at age 3 and lasting 2 years, treatment consisted of a 2.5-hour preschool program on weekdays during the school year, supplemented by weekly home visits by teachers. The curriculum was based on supporting children's cognitive and socio-emotional development through active learning in which both teachers and children had major roles in shaping children's learning. Children were encouraged to plan, carry out, and reflect on their own activities through a plan-do-review process. Follow-up interviews were conducted when participants were approximately 15, 19, 27, and 40 years old. At these interviews, participants provided detailed information about their life-cycle trajectories including schooling, economic activity, marital life, child rearing, and incarceration. In addition, Perry researchers collected administrative data in the form of school records, police and court records, and records on welfare participation. Schweinhart, Montie, Xiang, Barnett, Beleld, and Nores (2005) describe the program and the available data.

It's done by University of Chicago economists. See the paper for questions about methodology and conclusions. The estimated rate of return on investment is 7%-10% annually, higher than the historical average for the stock market. The summary is less than 20 pages total.

We account for locally determined costs, missing data, the deadweight costs of taxation, and the value of nonmarket benefits and costs. Our analysis improves on previous estimates by accounting for compromise in the randomization protocol, by developing standard errors for the estimates, and by exploring the sensitivity of estimates to alternative assumptions about missing data and the value of nonmarket benefits. Our estimates are also robust to a variety of alternative assumptions about interpolation, extrapolation, and deadweight losses. In most cases, they are statistically significantly different from zero. This is true for both males and females. In general, the estimated rates of return are above the historical return to equity of about 5.8% but well below previous estimates reported in the literature. Our benefit-to-cost ratio estimates support the rate of return analysis.

etc.

 

[Robert Prey]

No. Why would you think that? If a glass of wine is healthy, would 10 glasses of wine be healthier?

The fact that $90 an hour for minimum wage is absurd does not argue in the slightest against Obama's proposal for $9/hr.

Any minimum wage is absurd. How many more unemployed are needed? Especially low skill teenagers and minorities? A minimum wage is an example of the utopian fallacy that you can dictate what the market will bear. You cannot. The market always wins. It's another example of the visible as versus the invisible in economics. The visible effect is that some low wage workers get slightly more. The invisible is the many more unemployed due to market forces that will dictate value regardless of dumb laws that seek to over-rule the market place.

 

[jj]

Any minimum wage is absurd.

Appeal to facts not in evidence

How many more unemployed are needed?

Relationship to previous bald assertion unestablished, thererfore suborned logic.

Robert, do you have any evidence at all for your various claims, or do you just make them up as a matter of convenience?

 

[Shalamar]

Appeal to facts not in evidence

Relationship to previous bald assertion unestablished, thererfore suborned logic.

Robert, do you have any evidence at all for your various claims, or do you just make them up as a matter of convenience?

If Obama came out in favor of breathing, I would bet that Mr. prey would immediately hold his breath.

 

[rcfieldz]

tsotu

Brain squeezer.