Wednesday, May 15, 2013

Economically Illiterate: Demanding a “Living Wage”

Don Walker of the Journal-Sentinel, who wrote an absurdly biased story about attempts in the state legislature to rein in some of the excesses of Milwaukee government, has followed it up with an equally biased story about a demonstration by local union activists demanding a “living wage” at local fast-food restaurants.

It’s basically a puff piece, quoting only activists and people sympathetic to the activists, and giving no indication that anybody but an evil greedy capitalist might oppose the notion.

But in fact, anybody who is serious about public policy will oppose the notion.

Typical of what liberals who know some economics think is this column by Christina Romer, who was chairwoman of President Obama’s Council of Economic Advisers. Dealing with President Obama’s proposal to raise the minimum wage to $9.00 per hour (far less radical than the $15 that the activists want), she goes through the evidence on various related issues. Being a liberal, she bends over backwards to find good in the policy, but still comes out against it.
. . . businesses pass along some of the cost of a higher minimum wage to consumers through higher prices. Often, the customers paying those prices — including some of the diners at McDonald’s and the shoppers at Walmart — have very low family incomes. Thus this price effect may harm the very people whom a minimum wage is supposed to help.

It’s precisely because the redistributive effects of a minimum wage are complicated that most economists prefer other ways to help low-income families. For example, the current tax system already subsidizes work by the poor via an earned-income tax credit. A low-income family with earned income gets a payment from the government that supplements its wages. This approach is very well targeted — the subsidy goes only to poor families — and could easily be made more generous.
Just how generous the welfare state is for low income workers in Wisconsin can be seen by going to the website access.wi.gov.

There, one can enter a hypothetical person or family, and see what sort of aid they would get if they worked for the current minimum wage.

Suppose, for example, we posit a family with a single mom and two children.  She is working 30 hours per week (it’s easier to get a part-time job than a full-time job) at the current Federal minimum wage ($7.25 per hour).  Her children  are both school age (8 and 11).  She pays $500 a month for an apartment, and has to pay a heating bill.

What does she get, according to the official state website?
  • Her earnings are $935 per month
  • She can get a minimum of $430 a month in food stamps
This works out to $16,380 per year.  In addition she can get yearly:
  • A minimum of $5,236 Federal Earned Income Tax Credit
  • Wisconsin Earned Income Tax Credit of $575
  • At heating benefit of at least $210
  • A benefit toward her electric bill of at least $166
Thus her actual income (if you count food stamps as “good as cash”) is $22,567. (Given the complication of some of these programs, this is actually an approximation, but it’s most likely on the low side.)

In addition to these benefits, her family can get:
  • BadgerCarePlus Standard plan
  • Help paying for child care
  • Free school lunches for the children
  • Summer meals for the children
Note that her cash income ($22,567) is well above the $19,530 that is the Federal Poverty Level for Wisconsin for a family of three.

A Rational Welfare State

What we have here is a rational welfare state. It’s not perfect, and it’s probably a bit too generous, but what it does is help workers with little human capital (and thus little earning ability) without distorting labor markets.

Then why are the labor and left activists such yahoos about the issue?

They would not admit it (perhaps not even to themselves), but they want labor markets distorted. When a high minimum wage causes unemployment, that is an excuse for more stimulus spending. When income inequality increases because poor people are put out of jobs, that’s an excuse for more redistribution. When poor people have trouble affording food because prices have been driven up, that’s a reason to spend more on food stamps.

Of course, an extremely high minimum age reduces the incentive for employers to resist unionization. That goes to the fundamental agenda behind the whole “living wage” movement. It’s not really about low-wage workers at all. It’s about unionizing the workforce, since unions are the key organizational backbone behind the Democratic Party. This isn’t humanitarian politics at all. It’s about giving more power to leftist elites.

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47 Comments:

Anonymous Anonymous said...

I'm going to continue my comments from the previous post about climate change on this post. As you recall, you described opposition to the minimum wage as "orthodoxy among economists." I linked to a survey of top economists from a range of ideological perspectives showing that very few economists actually think they way you imagine they do. Rather than responding to this survey, all you did was link to wikipedia. Nothing wrong with wikipedia, but you might want to read the section again, because nowhere does it say what you think it does. Yes, most economists agree that the minimum wage could have negative effects on employment (though the preponderance of recent studies show this effect to be miniscule). But as a scholar of public policy you should know that policies are not to be judged only by their costs, disregarding their benefits. Economists can - and usually do - believe that minimum wage increases may slightly increase unemployment, but the policy is still desirable because of the increased income for the employed. This is especially true with low wage jobs because of how frequently they turn over. Not one of the surveys you linked to reports a majority of economists believing the costs outweigh the benefits of a minimum wage. You smugly deride liberals as ignoring the costs of a program, right after you ignore the benefits.
I don't even know where to start with your conspiracy about liberals and their nefarious motives for wanting to increase the minimum wage. I'm friends with one of the union thugs organizing the fast food workers. She graduated with a business degree from Marquette and turned down much more lucrative positions to work for a cause she believes in. Impugning her motives is baseless and pathetic. You lose credibility when you make such outlandish claims.
Before you say things like "anybody who is serious about public policy" I suggest you take a look at what experts in the field are writing. It is simply not true that all the "serious" people oppose minimum wage increases, as is evident from the survey I posted (the one you ignored because it proved you wrong).

1:13 PM  
Blogger John McAdams said...

Rather than responding to this survey, all you did was link to wikipedia. Nothing wrong with wikipedia, but you might want to read the section again, because nowhere does it say what you think it does.

Yes, it does. There is nothing like a majority of economists who favor the minimum wage.

I'm friends with one of the union thugs organizing the fast food workers. She graduated with a business degree from Marquette and turned down much more lucrative positions to work for a cause she believes in. Impugning her motives is baseless and pathetic.

But it's OK for you leftists to impugn the motives of businesses who won't pay the wage you want them to?

You leftists don't get any special treatment. Your motives are subject to being analyzed.

Economists can - and usually do - believe that minimum wage increases may slightly increase unemployment, but the policy is still desirable because of the increased income for the employed.

Actually, no. Some economists believe that, but more agree with Romer, that increasing the minimum wage is not a good way to help the poor.

Did you even read Romer?

When people like your leftist union friend ignore this kind of logic, and demand a wage that would terribly distort markets, I do question their motives.

3:25 PM  
Blogger John McAdams said...

Economists can - and usually do - believe that minimum wage increases may slightly increase unemployment

If they increase unemployment only "slightly" it's because we usually don't have a minimum wage far above the market-clearing equilibrium wage.

A minimum wage of $15 per hour is vastly above the market-clearing equilibrium wage.

Why do you think unemployment is so high in the Eurozone? Especially, why is youth unemployment so high?

It's because people like you have been in power.

It's not humane to put people out of work. It does serve your political interests to have them on welfare.

3:29 PM  
Blogger John McAdams said...

Let's remember how this got started.

You said that any student who doesn't accept man-made global warming should be flunked.

I wouldn't flunk a student who believes in a minimum wage -- not even a $15 per hour minimum wage.

So it's your intolerance of opinions that you dislike that started this thread.

3:31 PM  
Anonymous Anonymous said...

I don't know how to use italics on here, but I'm going to adopt your method of dealing with individual claims separately. I'll put your claims in quotations.

"Yes, it does. There is nothing like a majority of economists who favor the minimum wage."

Uh, no, it doesn’t. Please name one single survey included in Wikipedia that shows a majority of economists opposing the minimum wage. There isn’t a single one. You can’t just state things as fact and think that’s the end of it. I provided a survey showing a majority of economists believing the benefits of raising the minimum wage outweigh the costs. You have not provided a single survey backing up your position.

"But it's OK for you leftists to impugn the motives of businesses who won't pay the wage you want them to?"

When did I do that? Never.

"Actually, no. Some economists believe that, but more agree with Romer, that increasing the minimum wage is not a good way to help the poor.
"

Again, you’re stating this as fact without backing it up. I provided actual evidence. You have not. Go back to the surveys you linked to and tell me which one says that a majority of economists oppose the minimum wage. Not one does. More importantly, try to find one such study conducted in the past ten years. Most economists have changed the way they think about the minimum wage in the past decade based on new research showing minimal effects on employment. You aren’t aware of this because you spend too much time fighting culture war battles and not enough time keeping up with academic research.

4:36 PM  
Anonymous Anonymous said...

"Why do you think unemployment is so high in the Eurozone? Especially, why is youth unemployment so high?

It's because people like you have been in power."

Are you kidding me? You simply don’t know what you’re talking about. Much of Europe is in recession because of austerity policies. Those are the policies that conservatives favor. It has nothing to do with the minimum wage or safety net. Countries with larger safety nets have actually fared much better than those with smaller safety nets (compare the Scandinavian countries to places like Spain and Ireland). You clearly have done zero research on this topic. Greece is an exception, but most of the countries in deep recession (depression in some cases) had small and shrinking debt levels in the years preceding the downturn. You are flat out ignorant when it comes to macroeconomics.

"Let's remember how this got started.

You said that any student who doesn't accept man-made global warming should be flunked."

No, I did not. After you find a survey from the list you cited that actually says what you claimed it did I would like you to find the quote where I said dissenting students should be failed. You won't find either.

4:37 PM  
Anonymous Owen Goldin said...

John, you will remember that last year we had quite a bit of give and take about this issue, especially as regards Marquette's policy that suppliers and vendors pay a living wage, which, according to the document, the minimum wage is not. I worked with Amy Glasmaier at MIT, a specialist on the notion of a living wage, to validate the policy. We went back and forth at committee meetings talking about the numbers, down the rabbit hole. I suggested that neither you nor I were experts in such economic analysis, and we moved on to other things.

At any rate, I just wanted to flag that your account of whether the Wisconsin "welfare state" guarantees a living wage to all is contested,and is so complex that one can't simply crunch a few quick numbers in a blog entry to resolve it. A better strategy might be to ask some minimum wage workers how they are getting by financially.

But as a reader of your blog, I am surprised to read that you think that Wisconsin's welfare programs are, in general, rational. You here suggest cuts might be a good idea, albeit not radical ones. This surprises me, given your general support of the economic policies of Walker and Ryan. They advocate major cuts, and sometimes talk as though providing a "safety net" is not a core responsibility of government. So -- just for the record -- would you say that it is appropriate and legitimate for state and federal governments to ensure minimum standards for food, health, and housing?

5:04 PM  
Blogger John McAdams said...

Owen,

Nice to have you posting here, but of course I still disagree with you. :-)

your account of whether the Wisconsin "welfare state" guarantees a living wage to all is contested,and is so complex that one can't simply crunch a few quick numbers in a blog entry to resolve it. A better strategy might be to ask some minimum wage workers how they are getting by financially.

Really? If you find that minimum wage workers say "I would like to have more money" that means that the minimum wage should be increased?

Owen, you'll remember that your leftist "specialist" (Amy Glasmaier) said that a "living wage" for a family of four in Milwaukee is $60,000 per year.

That's absurd.

The only tolerably objective standard is the Federal poverty level.

You can't just arbitrarily decide that you want people to make more money without consequences. Why not say the "living wage" is $30 dollars per hour?

Do you think one can just make up any number one wants?

7:23 PM  
Blogger John McAdams said...

They advocate major cuts, and sometimes talk as though providing a "safety net" is not a core responsibility of government.

No, in fact they don't. They favor limited the growth of programs.

And yes, I agree with them, at least in a general way.

7:24 PM  
Blogger John McAdams said...

So -- just for the record -- would you say that it is appropriate and legitimate for state and federal governments to ensure minimum standards for food, health, and housing?

Yes, but it's possible for governments to spend too much doing this, as we can see in Europe.

I would say that if somebody works full time at the current minimum wage, they should be at the Federal poverty line.

I hope you understand that there are consequences to just ramping up the welfare state without limit.

If you pay people a lot not to be productive, they will respond by not being productive.

There is a trade-off between the welfare "floor" and the slope of the incentive curve above that. Make the floor too high, and there is little incentive to work harder, or longer, or get more human capital.

7:28 PM  
Blogger John McAdams said...

Much of Europe is in recession because of austerity policies. Those are the policies that conservatives favor.

But they had to face austerity because they overspent! Do you really think they can just continue to spend and spend without eventually running out of money?

Countries with larger safety nets have actually fared much better than those with smaller safety nets (compare the Scandinavian countries to places like Spain and Ireland).

The problem is that the countries of Scandinavia are little, relatively homogeneous nations.

The countries more like the U.S. are probably the U.K., France and perhaps Spain or Italy.

They are in trouble because of an overextended welfare state.

Hell . . . we are in trouble because of an overextended welfare state. A lot series of trillion dollar deficits will eventually catch up with us.

7:34 PM  
Anonymous Anonymous said...

I see you completely ignored my request to find a survey showing economists opposing the minimum wage. Is it fair for me to conclude that you have conceded the point and will no longer claim that “opposition to the minimum wage is orthodoxy among economists”? You also ignored my request to quote claims you said I made. The only point you tried to argue is sticking to your guns about excessive welfare state spending being the cause of Europe’s woes. You may have heard it on Fox News, but it is not rooted in sound economics. Did you not read where I said that the European nations in depression (with Greece being an exception) mostly had small and declining debt levels when the crisis began? Debt and safety net spending are much higher in many of the European countries whose economies have done relatively well in recent years. I won’t go into the real causes, mostly because I am certain you don’t understand things like capital flows or real estate bubbles and their effects on economies, but I do challenge you to find academic articles showing that social welfare programs caused the downturn in Europe.
Your point about Scandinavian countries being relatively small and homogenous is a complete red herring. Are Portugal and Ireland large and diverse? Those are two of the most depressed countries in Europe, and both have relatively small safety nets and neither had particularly high deficits before the crisis (Ireland was actually averaging a surplus in the decade before the crisis, and Portugal’s deficits were significantly less than France, Germany, and Austria’s). France and Germany also spend way more on their safety net, yet they have done much better in recent years. Please explain what logic would suggest that high safety net spending leads to crisis, unless a country is small and homogenous.
Maybe you should stick to fighting the culture war after all.

9:45 AM  
Blogger John McAdams said...

I see you completely ignored my request to find a survey showing economists opposing the minimum wage.

No, I posted a link to a Wikipedia article that showed a lot of surveys -- with citations.

I was surprised to find so many economists saying they could tolerate a minimum wage -- I actually read economists, after all.

But there was no majority favoring the minimum wage, and certainly not an increase in the minimum wage.

And certainly not an increase to $15 per hour, which is absurd.

7:37 PM  
Blogger John McAdams said...

I do challenge you to find academic articles showing that social welfare programs caused the downturn in Europe.

I challenge you to find academic articles showing that high national debt does not eventually get a nation into trouble.

Are you actually saying that a 60 year retirement age in France was sustainable? Do you really believe that?

I am certain you don’t understand things like capital flows or real estate bubbles and their effects on economies,

Don't you see that such thing follow from irresponsible fiscal policy?

You are making excuses for irresponsible socialist excesses in Europe.

Are Portugal and Ireland large and diverse?

No, but they have their own particular problems.

The U.S. is more like the U.K. and France, and they have huge problems.

The European socialist model, which you love, is falling apart. They have already abandoned nationalization of industry, and confiscatory tax rates.

And they are beginning to understand that rigid labor market policies are harmful -- look at Eurozone unemployment.

France tried to move the retirement age to 62, and people riot in the streets. That must give you a real thrill.

7:57 PM  
Anonymous Owen Goldin said...

Me "A better strategy might be to ask some minimum wage workers how they are getting by financially."

JM: "Really? If you find that minimum wage workers say "I would like to have more money" that means that the minimum wage should be increased?

Owen, you'll remember that your leftist "specialist" (Amy Glasmaier) said that a "living wage" for a family of four in Milwaukee is $60,000 per year.

That's absurd.

The only tolerably objective standard is the Federal poverty level."

There are several issues here that need to be isolated.

The first is whether the notion of a living wage is meaningful, as a standard different from "not poor," as defined by the federal government.

The federal poverty level was defined as that below which one is "lacking the resources to meet the basic needs for healthy living; having insufficient income to provide the food, shelter and clothing needed to preserve health." That is different from being below the living wage level, as Glasmeier understands it -- she includes such things as bedrooms for the children and routine medical visits. (Note that she gets her data from sources such as the federal Consumer Expenditure Survey, which determines how much people are actually spending on health care, etc -- that is, after state aid. And note that your numbers presume that citizens get all the aid that someone in their shoes might get -- in many cases, as in the single poor, benefits such as Badgercare are given only the the lucky few.) Glasmeier is giving us a higher bar. The question before us is whether it is reasonable for a full-time worker to have a wage that meets the living wage level, as she understands it. The level does not seem extravagant to me. At any rate, readers can try out the numbers themselves at http://livingwage.mit.edu/

My suggestion is not to ask a minimum wage worker whether they want more money, but whether they are able to stay afloat, given their personal and family obligations.

Me: "They [Walker and Ryan] advocate major cuts, and sometimes talk as though providing a "safety net" is not a core responsibility of government."

JM: "No, in fact they don't. They favor limited the growth of programs."

These programs were growing because of the economic downturn. Cutting their growth meant significant cuts in the amount to which a poor family is entitled. You and I could survive similar cuts to our budget, but in the case of the poor, we are cutting into the bone.

At any rate it struck me as worth noting that on the one hand you are pooh-poohing the living wage movement on the basis of how state and federal programs guarantee that basic needs of the poor are met, and on the other hand are advocating major reductions in the extent to which these programs will help meet these needs.

9:50 PM  
Anonymous Anonymous said...

YOU: “I posted a link to a Wikipedia article that showed a lot of surveys -- with citations.”

I guess I have to repeat myself. Not one of the surveys listed in that link shows a majority of economists opposed to the MW. Almost all of them only ask whether there could be a negative effect on employment. This does not mean these same economists necessarily oppose maintaining or raising the MW, as you would understand if you actually read the section, which states:

“In 2007, Klein and Dompe conducted a non-anonymous survey of supporters of the MW who had signed the "Raise the Minimum Wage" statement published by the Economic Policy Institute. They found that… a majority considered disemployment to be a moderate potential drawback to the increase they supported”

Only two of the surveys ask the question germane to our debate, which is whether economists believe that the costs do or do not outweigh the benefits of a MW, and the results of both support my argument. Here’s the first one:

“A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association. Whaples found that 37.7% of respondents supported an increase in the MW, 14.3% wanted it kept at the current level, 1.3% wanted it decreased, and 46.8% wanted it completely eliminated.”

In other words, 52% of respondents wanted to raise or maintain the MW, while only 46.8% opposed it. I’m curious then why you claim that among these surveys “there was no majority favoring the minimum wage.” That is not an overwhelming majority, but it is you who is burdened with supporting the claim that “opposition to the MW is orthodoxy among economists.” You either didn’t read or didn’t understand the link you keep claiming backs you up.

There is one more survey in the Wikipedia that touches on the question at hand, and it hardly suggests that opposition to the MW is orthodox:

“Fuchs et al. (1998) respondents were nearly evenly divided when asked if the minimum wage should be increased.”

Lastly, if you actually read the survey I cited from the University of Chicago, you would see that when asked whether the benefits outweigh the costs of raising the federal MW to nine dollars, 47% agreed or strongly agreed, only 11% disagreed or strongly disagreed, and the rest were uncertain or had no opinion. If you cannot admit you were wrong about the level of support for the MW among economists after the facts you have been presented then I don’t know how you expect readers to believe your views are rooted in sound policy analysis and empirically supported.

On a side note, I’m not sure what the italicized use of ‘read’ was supposed to convey. If you are insinuating that I do not actually read economists I think I will let anybody who reads this debate judge our relative abilities to comprehend economic literature.

10:59 AM  
Anonymous Anonymous said...

Now, on to your continued insistence that the European model of the welfare state is what caused the downturn in the Euro zone. First, you responded by my challenge to back up your claims by challenging me to find an article backing up mine. Am I to take it you could not find any? “No, you prove it!” is not exactly a solid argument my friend. But fine, I will oblige and provide you with a graph showing no clear effect of public debt on economic growth in the United States from 1791 to 2009:
http://www.epi.org/page/-/img/bp271-figurea.jpg
Now could you please find the source I asked you to?

“Are you actually saying that a 60 year retirement age in France was sustainable? Do you really believe that?”
How many times do I have to ask that you stop falsely attributing claims to me? I’m not asking you if you really think a working mom should be allowed to starve to death. And no, I do not think a 60-year retirement age is good policy. But that does not mean I think a strong safety net program is responsible for the downturn in Europe. For you to continue making this claim, please quit ignoring my request that you reconcile the fact that the countries with stronger safety nets are doing much better than countries that had lower safety nets, and countries with low and decreasing debt levels are now in depression while other countries with higher debt and deficits leading up the downturn are doing well. Europe’s woes are rooted in a poorly designed monetary zone, not welfare spending.

You then claim capital flows and real estate bubbles flow from irresponsible fiscal policy. This is pretty hilarious. Again, please explain how, if irresponsible fiscal policy caused Europe’s crisis, countries that were running surpluses and had low debt levels were hit so much harder than countries with larger welfares states and larger debt levels. Check out Chart 2 from the Bureau of Labor Statistics, showing that Belgium, Austria, Finland, and Denmark all have unemployment rates that are a fraction of those in Greece, Italy, Portugal, and Spain. The first four spend considerably more as a percent of GDP on social programs. (Link: http://www.bls.gov/fls/intl_unemployment_rates_monthly.pdf). The same report shows that Canada’s unemployment rate below that in the US, despite the fact that Canada has a more extensive welfare state.

It isn’t sound policy analysis when you literally look at every single economic issue and conclude that the welfare state and taxes are to blame.

11:00 AM  
Anonymous Anonymous said...

After reading my comment I realize a proof read may have been in order. Regardless, do you care to comment? More specifically, have you found the sources I asked you to find? Or are you willing to admit you were wrong when you said opposition to the minimum wage is orthodox among economists?

4:49 PM  
Blogger John McAdams said...

Or are you willing to admit you were wrong when you said opposition to the minimum wage is orthodox among economists?

You cited a study claiming that a majority of economists favor the minimum wage. The citations on the Wikipedia page show that to be untrue.

I was surprised that one can find a fair number of surveys showing a fair number of economists favoring the minimum wage.

But that doesn't not show that they would favor Obama's $9 per hour minimum wage, and certainly not that they would favor $15 per hour.

Did you even read the Christina Romer piece I linked to?

What do you find objectionable about her logic?

6:07 PM  
Blogger John McAdams said...

How many times do I have to ask that you stop falsely attributing claims to me?

Well if you don't favor a 60 year retirement age, you are admitting that the European welfare state (at least in France, when the socialists were in control the time before this) was over extended.

Hold that thought. Build on it.

6:09 PM  
Blogger John McAdams said...

Again, please explain how, if irresponsible fiscal policy caused Europe’s crisis,

Simple: if you spend beyond your means, eventually you can't handle the debt. This is especially true when bankers see that you are unlikely to be able to pay them back, and substantial risk premiums get added to the interest rates you pay.

6:12 PM  
Blogger John McAdams said...

Anonymous,

The trouble with your cross-ntional comparisons is that you have the luxury of picking and choosing countries to make the point you want.

Where people like you were once saying "look at how great socialism works in Europe," you are now saying "look how great socialism works in Europs, excepting Cyprus, Greece, Italy, Spain, Portugal, Ireland, the U.K. and France."

The tide of history is running against you.

6:20 PM  
Blogger John McAdams said...

I will oblige and provide you with a graph showing no clear effect of public debt on economic growth in the United States from 1791 to 2009:

Not the issue. In the first place, that time span to too absurdly long to apply to current fiscal issues.

But more importantly, I don't doubt that a nation can go great guns on borrowed money up to a point.

But what happens when the national debt becomes huge?

Are you really saying that continued trillion dollar plus deficits are not a problem?

6:24 PM  
Blogger John McAdams said...

The federal poverty level was defined as that below which one is "lacking the resources to meet the basic needs for healthy living; having insufficient income to provide the food, shelter and clothing needed to preserve health." That is different from being below the living wage level, as Glasmeier understands it

The problem is the Glasmeier is a leftist academic, and her judgments don't carry any weight.

she includes such things as bedrooms for the children

You mean a "living wage" means that kids don't have to share a bedroom with siblings?

and routine medical visits. (Note that she gets her data from sources such as the federal Consumer Expenditure Survey, which determines how much people are actually spending on health care, etc -- that is, after state aid.

But the poor get Medicaid, and the copays for that are very small.

6:30 PM  
Blogger John McAdams said...

And note that your numbers presume that citizens get all the aid that someone in their shoes might get -- in many cases, as in the single poor, benefits such as Badgercare are given only the the lucky few.)

All the benefits I listed for the hypothetical family are available automatically. I didn't list subsidized housing, for example, because there is a long waiting list for that.

The case of single adults with no dependents is an exception where Badger Care is concerned, but for those people the minimum wage puts the person at the poverty level.

To get to the absurdly high level that Glasmeier wants, you have to have some dependent children.

6:37 PM  
Blogger John McAdams said...

At any rate it struck me as worth noting that on the one hand you are pooh-poohing the living wage movement on the basis of how state and federal programs guarantee that basic needs of the poor are met, and on the other hand are advocating major reductions in the extent to which these programs will help meet these needs.

Owen, do you know about the welfare reform of the 1990s? The welfare rolls were reduced by over 60%, and poverty actually decreased.

You seem to have the idea that every person on any program badly needs the money, and that people would be helpless if benefits were cut back a bit.

In fact, do you believe the economy is going to recover? If so, the reducations in growth might not even requite any reducations in benefits.

6:42 PM  
Blogger John McAdams said...

Owen,

Please give me a straight "yes" or "no" answer to this:

Do you believe Glasmeier's claim that a "living wage" in Milwaukee county for a family of four is $19.66 per hour?

What do you think of the fact that she omits any consideration of the welfare benefits that these families will get?

BTW, has Glasmeier fiddled with the numbers since your were touting them with the committee on which we both served?

6:48 PM  
Anonymous Owen Goldin said...

I am not sure about the details of Glasmeier’s analysis. She invited me to do the real numbers for Milwaukee, and offered to look over what I did, but I lacked time and technical competence. Do her numbers run high? Probably. Or, in yes or no terms, yes. Does $15/hour seem extravagant as a minimum wage? No, not to me.

Again, I don’t know how much Marquette pays its custodians, but I would guess it is around that. If you are friendly with yours, ask him or her how their family is doing in meeting basic needs. (And then take account of the fact that Marquette has generous health care benefits.)

But granted, it is higher than the historical average -- if you look at this chart http://www.dol.gov/whd/minwage/chart.htm
and adjust for inflation you will see that for decades the minimum wage was around ten 2013 dollars.

Obama is pushing for $9.

The entry level workers who are organizing do what negotiators do -- they aim high and then hope to meet in the middle. Obama is aiming for less than the middle, because he recognizes the political reality, and hopes to actually get a raise in the minimum wage accomplished.

The Federal Consumer Expenditure survey amounts track real expenses for families, not hypothetical families that are not getting aid.
“Owen, do you know about the welfare reform of the 1990s? The welfare rolls were reduced by over 60%, and poverty actually decreased.”

This was during a Democratic administration that resisted the temptation to in general slash social programs, and that rejected the principles of trickle-down economics. There was a healthy economy.

“In fact, do you believe the economy is going to recover? If so, thereducations in growth might not even requite any reducations in benefits.”

A big recovery would mean increased tax revenue, which would obviate the need for radical deficit reduction measures.

10:27 PM  
Anonymous Anonymous said...

JM: “You cited a study claiming that a majority of economists favor the minimum wage. The citations on the Wikipedia page show that to be untrue.”


No, it does not. Clearly you never clicked on the link. The Wikipedia page says that a majority thought there could be negative effects on employment. That does not mean a majority favors opposes the minimum wage. How many times do I have to go over this? I’m not sure why you have such a hard time wrapping your head around this basic point.
JM: “But that doesn't not show that they would favor Obama's $9 per hour minimum wage”
Any doubt I had as to whether you read the survey I cited has been eliminated. The Booth School survey explicitly asks about an increase to $9/hour. This fact is also mentioned in the Wikipedia article.
JM: “I was surprised that one can find a fair number of surveys showing a fair number of economists favoring the minimum wage.”
Right, because you don’t know what you’re talking about. You haven’t kept up with the literature on the subject in recent decades, which is why you are surprised to hear that economists have changed the way they think about the minimum wage. You only read sources that you think back up your viewpoint, and even when the source does not support your view, you misinterpret it as doing so (more on this later.) In short, if you had been keeping up with the economic literature on the minimum wage, you would not have been surprised. Having clearly not done so, you are in no position to proclaim “opposition to the minimum wage orthodoxy among economists.” Are you finally willing to concede the point and admit that you were wrong when you made this statement? More importantly, will you stop teaching the minimum wage as if all economists oppose it?

12:47 PM  
Anonymous Anonymous said...

JM: “Did you even read the Christina Romer piece I linked to?

What do you find objectionable about her logic?”
First of all, I think it should be obvious that you are not in any position to ask whether I read the sources you cite. I read the Wikipedia link you first claimed showed economists on your side, only to find that it says no such thing. If you don’t understand what your own sources are saying I don’t know why anybody should trust your judgment on the issue at hand. And yes, I did read the Christina Romer piece. The first thing that struck me is just how much you twisted her argument (not that I was surprised). You selected the few passages that are most critical of the minimum wage, while failing to include her numerous statements supporting the minimum wage. Convenient how you leave out the beginning of the first sentence you cite, which states, “Another reason that employment may not fall is that…” You never once mention Romer’s repeated claim that there is no significant negative effect on employment. Romer also states: “the empirical analysis finds that the overall adverse employment effects are small…Some evidence suggests that employment doesn’t fall much because the higher minimum wage lowers labor turnover, which raises productivity and labor demand… It helps some low-income workers, and the costs in terms of employment and inefficiency are likely small.” She then describes an increase in the minimum wage as a “half-measure” and explains that her opposition to an increase is a result of her belief that there are better ways to fight poverty (policies I doubt you support) – not because she thinks the minimum wage hurts low-income workers. This is hardly the impression one would get if they only read your edited summary of Romer’s piece. I don’t know if it is intentional or not, but you are the worst academic I have ever encountered when it comes to only selecting the arguments that confirm your preexisting preferences. Worse yet, you cite things as supposedly confirming your claims that explicitly contradict what you are arguing for (e.g., linking to Wikipedia to show economists opposing the minimum wage, when the only relevant surveys listed find the opposite).
One last point on Romer: You seem to think she is the authority on this matter. Do you accept Romer’s views on the safety net, taxes, expansionary fiscal policy, and the relative priority of debt reduction? Citing one economist with tepid opposition to an increase in the minimum wage does not prove a whole lot. I could send you dozens of academic articles arguing for the minimum wage.

12:47 PM  
Anonymous Anonymous said...

Now, back to the European downturn.
JM: “Well if you don't favor a 60 year retirement age, you are admitting that the European welfare state (at least in France, when the socialists were in control the time before this) was over extended.”
Believing that one aspect of one country’s welfare state was excessively generous is not the same as believing that excessive welfare states are responsible for the downturn in Europe. Hold that thought.
JM: “Simple: if you spend beyond your means, eventually you can't handle the debt. This is especially true when bankers see that you are unlikely to be able to pay them back, and substantial risk premiums get added to the interest rates you pay.”
You did not reply to the second half of my question. Obviously it is possible for countries to reach debt levels that lead to higher interest rates. Nobody denies that, including myself. But the question at hand is whether excessive public debt resulting from welfare expenditures is the cause of the downturn in Europe. There is no evidence this is the case, and you have not provided a shred of evidence for this narrative. The fact that you talk about the causes of the European crisis without even mentioning the monetary union, asset bubbles, capital flows, and exchange rates tells me you have done zero research on the subject. You want to see it as a failure of the European welfare state, and if there’s no evidence for that, then so be it, it’s your story and you’re sticking to it.
JM: “The trouble with your cross-ntional comparisons is that you have the luxury of picking and choosing countries to make the point you want.

Where people like you were once saying "look at how great socialism works in Europe," you are now saying "look how great socialism works in Europs, excepting Cyprus, Greece, Italy, Spain, Portugal, Ireland, the U.K. and France."”
I am not picking and choosing at all. Your claim is that excessive welfare spending and public debt caused the crises. If that is the case, one would expect that countries with high welfare spending and high debt would be suffering more than those that had lower welfare spending and lower debt in the run-up to the crisis. Do you dispute that? The countries in deep recession (Greece being an exception in all this) had relatively low debt and relatively low welfare spending. Countries in Europe that are doing well had higher debt and higher welfare spending. If you do not see how this undermines your narrative then I don’t know what to tell you.

12:48 PM  
Anonymous Anonymous said...

JM: “The tide of history is running against you.“
If I had been an architect of the EMU or a proponent of expansionary austerity then you would be correct. However, I was not. My side (Keynesians) has been pretty much right on every single issue when it comes to the current downturns in the US and Europe. How is that whole austerity thing working out for Europe? Whose side advocated that policy?
JM: “Are you really saying that continued trillion dollar plus deficits are not a problem?”
You really can’t help yourself, can you? For the millionth time, quit trying to tie me to stupid claims I’ve never come close to making. Deficits during growth years are not desirable per se. I do not think the deficits accrued over the past years are a big problem, however. Deficits are supposed to go up when the economy is weak! Had the US run a balanced budget in recent years the economy would be significantly worse than it is today. But you might want to look into the actual scale of the deficit. Apparently you are unaware that the CBO has revised its deficit forecast for this year to $642 bn, not a “trillion dollar plus.” By 2015 the deficit will be down to 2% of GDP. So no, I’m not freaking out about the debt. Also, I find it ironic that the people who cry loudest about free markets are the most deaf to what the markets are telling us about US public debt. Investors are literally willing to borrow at negative real interest rates, meaning they don’t seem too worried about the apocalypse you seem to think is imminent. Conservatives never cared about deficits in the past, but now they’re using them as a smoke screen to slash the safety net the

12:48 PM  
Blogger John McAdams said...

Anonymous,

You are cherry picking surveys.

The link to the Wikipedia article I posted showed clear majorities of economists saying that the minimum wage has negative effects on employment.

Surveys of Economists

Further, you have failed to address the point made by Romer in the article I quoted: the EITC is a much better way to help low inocme earners.

That is unless the intention is to distort markets.

6:53 PM  
Blogger John McAdams said...

Owen,

This was during a Democratic administration that resisted the temptation to in general slash social programs, and that rejected the principles of trickle-down economics. There was a healthy economy.

But liberals whined and bitched about it, and claimed that there were going to be a million additional children in poverty.

But in fact, poverty (and child poverty) decreased.

That ought to make the point that just continuing to dole out benefits with no restrictions or work requirements is not a humane or compassionate policy.

No matter how good it makes liberals feel to advocate an every-increasing welfare state, history doesn't support that as a good idea.

6:59 PM  
Blogger John McAdams said...

Anonymous Socialist:

Here is what is now happening in your socialist utopia:

Riots

Of course, things like this have happened in the U.S. But it seems that as those little socialist nations become more diverse and less homogeneous, they start having the problems we do.

7:05 PM  
Blogger John McAdams said...

How is that whole austerity thing working out for Europe?

Depends on whether it is cutting spending, or increasing taxes (terrible idea).

Europe, like Obama's America, is paying the price for overspending.

But the question at hand is whether excessive public debt resulting from welfare expenditures is the cause of the downturn in Europe.

It certainly wasn't military spending.

Are you even aware that even liberal elites like Obama will admit that entitlement spending is a problem here that needs to be addressed.

Are you denying that's the case?

We can just continue to spend and spend?

7:23 PM  
Blogger John McAdams said...

And yes, I did read the Christina Romer piece. The first thing that struck me is just how much you twisted her argument (not that I was surprised).

Did she or did she not reject Obama's $9 minimum wage?

You know perfectly well that she did. She admitted that an increased minimum wage would have negative effects on employment (although she said it might be small), but she pointed out that increasing prices hurt the poor, and that the EITC is a better way to help the poor.

She is on my side, not yours.

7:27 PM  
Anonymous Anonymous said...

JM: You are cherry picking surveys.
The link to the Wikipedia article I posted showed clear majorities of economists saying that the minimum wage has negative effects on employment.

ANONYMOUS: What a joke. This is literally at least the fifth time I have had to explain that economists can believe that there are negative effects on employment while still supporting the minimum wage. At this point I can’t tell if you are deliberately ignoring this point – presumably because you are too stubborn to admit you were wrong – or if you are incapable of comprehending it. I have repeatedly agreed that there could be small negative effects on employment, but the benefits of the minimum wage more than offset this cost. If by “cherry picking surveys” you mean I cited those that ask the relevant question (whether economists believe the benefits of the minimum wage outweigh the costs) then sure, I’m cherry picking. This debate got started when you claimed, “opposition to the minimum wage is orthodoxy among economists.” I think we both know that any objective reader of our comments will realize that I have the facts on my side on this one. True scholars, rather than ideologues, are capable of admitting when they are mistaken.

JM: Further, you have failed to address the point made by Romer in the article I quoted: the EITC is a much better way to help low inocme earners.

ANONYMOUS: Do yourself a favor and search “minimum wage EITC complementary.” It’s another area of policy research you clearly have never been exposed to. Your understanding of the minimum wage is no more sophisticated than that held by a Micro 101 student who has just learned about the effects of price floors on the demand for corn.

JM: That is unless the intention is to distort markets.
ANONYMOUS: Duh. The minimum wage increases the share of the economy that goes to low-income workers. Nobody disputes that. Do you not realize that the EITC you advocate is a market distortion? Policies can distort markets in a favorable way. The belief that the market outcome will always be socially optimal is absurd. Taxing polluters distorts the market. There is literally no such thing as a free market. Nobody even tries to argue that the free market exists. Raising the share of economic gains going to low-income workers has benefits for the rest of the economy and provides a socially useful function of reducing inequality. There are normative and positive economic reasons this is the case.

JM: Anonymous Socialist

ANONYMOUS: And out comes the dirty s-word. Nothing I have said was socialistic. Try, for once, arguing as a scholar and not as a talk radio host. No economist or serious policy analyst would read my claims and conclude that I am a socialist. Get a clue.

12:12 PM  
Anonymous Anonymous said...

JM: Depends on whether it is cutting spending, or increasing taxes (terrible idea).


ANONYMOUS: The supposed evidence that tax increases are less damaging is flawed in that it fails to take into account the response of central banks, which have historically been much more accommodating of tax increases than spending cuts. Once this is adjusted for it is not the case that spending cuts are less painful. Macro 101 tells us that spending cuts in a depressed economy are damaging. The IMF recently revised its estimate of the negative multiplier of spending cuts and found that they are indeed quite high.

JM: Europe, like Obama's America, is paying the price for overspending.

ANONYMOUS: You still have not provided a single source demonstrating that public debt was the cause of the downturn. Nor have you obliged my repeated request that you reconcile how, if your narrative is correct, countries with lower debt and lower spending were hit harder than countries with higher debt and higher spending.
Further, are you aware of the timing of the recession? In case you forgot, the downturn began a year before Obama took office.

JM: It certainly wasn't military spending.


ANONYMOUS: I’m amused, given the title of this post, just how bad you are at reading economic arguments. My point is that public debt was not the cause of the crisis. Can you find a single peer-reviewed article making this case?

JM: Are you even aware that even liberal elites like Obama will admit that entitlement spending is a problem here that needs to be addressed.
Are you denying that's the case?
We can just continue to spend and spend?

ANONYMOUS: Yes, I am aware Obama has proposed entitlement reform. Are you even aware that I have repeatedly called you out for falsely attributing claims to me? And you keep doing it? It’s pathetic. You can’t provide any sources to back up your silly arguments, so you try to make it sound like I am saying things I have never even come close to claiming. Long term entitlement spending is indeed an issue that will need to be addressed, but it is largely a separate issue from how to get the economy back on track now. I realize by now that you do not actually read about economics, so I feel safe in assuming you are unaware of how short-term austerity actually worsens the debt problem. In other words, if total public debt is your concern you should not favor austerity in the near term. The evidence is abundantly clear that growth is the only real way to improve the fiscal outlook, and by cutting spending now you are delaying the growth that is needed to reduce spending and increase revenues. Here’s a paper from the IMF making this point:
http://www.imf.org/external/pubs/cat/longres.aspx?sk=40381.0

As far as Christina Romer goes, you ignored my point asking what makes her the authority on the subject. She’s an accomplished and respected economist, but there’s no reason to think she is right on every issue. You yourself acknowledge this through your opposition to many positions she advocates. I don’t believe a survey of economists in and of itself proves anything either, but at the very least I can state that, based on the Booth School survey, economists agree with me when it comes to the $9 minimum wage.

Finally, I’d just like a yes/no answer to these two questions: 1. Were you wrong when you said that opposition to the minimum wage is orthodoxy among economists? 2. In the future will you tell your students that a significant number of economists (you don’t even have to say majority) do favor the minimum wage, and that there is a wide amount of literature suggesting the effects on employment are small?

12:13 PM  
Blogger John McAdams said...

True scholars, rather than ideologues, are capable of admitting when they are mistaken.

I admitted I was surprised that that many economists say the favor the minimum wage, but I knew that ever liberals like the late Paul Samuelson opposed it, and Christina Romer is hardly a conservative economist.

9:56 PM  
Blogger John McAdams said...

As far as Christina Romer goes, you ignored my point asking what makes her the authority on the subject.

She is obviously right about:

1.) there are at least small negative effects on employment
2.) there are effects on prices, perhaps especially prices that poor people pay at places like McDonalds and WalMart.
3.) The minimum wage if poorly targeted, since about half of the affected people are not breadwinners.
4.) The EITC is a far better way of helping low-age workers.

Kindly address THOSE POINTS.

9:59 PM  
Blogger John McAdams said...

If by “cherry picking surveys” you mean I cited those that ask the relevant question (whether economists believe the benefits of the minimum wage outweigh the costs) then sure, I’m cherry picking.

But you are aware that that's a normative, not an empirical question, right?

10:01 PM  
Blogger John McAdams said...

Macro 101 tells us that spending cuts in a depressed economy are damaging.

If you are invoking Keynesian models. But no everybody believes Keynesian models.

If deficits help stimulate the economy, reducing taxes is a better way to do it.

10:03 PM  
Blogger John McAdams said...

Do yourself a favor and search “minimum wage EITC complementary"

I did, and only came up with some political arguments about how Republicans might use Romer's arguments to block a higher minimum wage.

That begs the questions as to whether Romer's arguments are correct.

10:07 PM  
Blogger John McAdams said...

Your understanding of the minimum wage is no more sophisticated than that held by a Micro 101 student who has just learned about the effects of price floors on the demand for corn.

You are going to have to drop the ad hominem, or I'm going to start rejecting your comments.

BTW, why don't you come out from behind the curtain, and post under your real name?

What are you afraid of?

10:08 PM  
Blogger John McAdams said...

Yes, I am aware Obama has proposed entitlement reform. Are you even aware that I have repeatedly called you out for falsely attributing claims to me?

Are you, or are you not, arguing for a European (indeed Nordic) "social safety net?"

If so, you have big problems with the fact that the U.S. is spending too much on social welfare programs.

Now give me an honest answer: are you admitting that U.S. entitlement programs are too expensive, and a threat to our long-run economic health?

10:11 PM  
Blogger John McAdams said...

Nobody even tries to argue that the free market exists.

Of course it does!

At least, relatively free markets exist, and they work a lot better than unfree markets.

You admit that a minimum wage puts some people out of work, but that seems OK with you.

Do you see why I think you want to distort markets? Instead of making markets more free, you want them to be less free.

And out comes the dirty s-word. Nothing I have said was socialistic.

You are arguing for a European-style socialist welfare state. You won't admit that any of the problems of socialist states in Europe are the fault of socialism. You make all kinds of excuses.

I know it's convenient for you to define "socialism" to mean only a Soviet-style economy, but that's absurdly ahistorical.

Try, for once, arguing as a scholar and not as a talk radio host.

You are coming across as an MSNBC person.

10:17 PM  

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