Political Roundtable Part XXVII

[dckingsfan]

Notwithstanding the well articulated ideas on unions (both their benefits and their demise), they haven't been effective at raising wages (Zonk's argument is one of the reasons); productivity over the last decade has been low (and especially low for the bottom two quintiles) and movements of workers has been very low.

One would say we should use unions and a minimum wage to address these issues but I would disagree, see Zonk's argument and add price controls (especially global (country-wide)) are never very successful.

Which does bring us back to federal transfers and the notion of a UBI. And it brings us back to a tax code removing all the carveouts in order to pay for those transfers.

If you look at income adjusted for federal transfers we aren't actually that bad (if you were to remove the top .1%).

[Zonkerbl]

I would go further than duck and say that minimum wage is a *terrible* idea. It's a particularly mendacious platform in the Dem agenda - the minimum wage *never* gets raised until the actual market wage is above it, making it essentially meaningless. Nevermind that it is a price control and all the problems associated with that.

Dems use raising the minimum wage from some previously obsolete number to a slightly higher but still meaningless number and then claim it a huge victory for the working class when they get it. It's a shell game, no wonder the working class feel like the Dems have left them behind. Dems need to get behind the UBI - that actually accomplishes something.

I had to pay $15/hour for a *babysitter* back in the *aughts.* In cities $15/hr is a completely meaningless number. Have no idea what the going wage rate is in the country, but since there are no jobs there anyways I imagine it doesn't matter.

[Zonkerbl]

Well my daughter is getting whatever minimum wage is now at Taco Bell, now that I think about it...

[TGW]

I would go further than duck and say that minimum wage is a *terrible* idea. It's a particularly mendacious platform in the Dem agenda - the minimum wage *never* gets raised until the actual market wage is above it, making it essentially meaningless. Nevermind that it is a price control and all the problems associated with that.

Dems use raising the minimum wage from some previously obsolete number to a slightly higher but still meaningless number and then claim it a huge victory for the working class when they get it. It's a shell game, no wonder the working class feel like the Dems have left them behind. Dems need to get behind the UBI - that actually accomplishes something.

I had to pay $15/hour for a *babysitter* back in the *aughts.* In cities $15/hr is a completely meaningless number. Have no idea what the going wage rate is in the country, but since there are no jobs there anyways I imagine it doesn't matter.

The minimum wage would be obsolete if this country had strong unions, like their european counterparts. So yea, the Swedish model is best. But you have people on the right who want no unions, no minimum wage, and basically a return to slave labor. There has to be SOME middle ground.

As for UBI, it's fine as an addition to the current social programs. Yang foolishly is advocating UBI as a replacement to certain social safety nets and he wants a VAT tax that will almost certainly hurt poor people. It's not a fully fleshed out idea, and like the minimum wage, $1,000 figure is based off nothing. It just sounds good, just like the $15/hour number.

[pancakes3]

after some half-hearted skimming on google, i think the answer to *why* wages haven't kept up with productivity boils down to (1) outdated norms of giving raises meeting (2) dramatic efficiencies gained through technology.

(1) most raises are pegged to inflation, not productivity. you might get a COLA every year but that's just enough for you to keep your purchasing power. short of a promotion, workers don't get raises that are commensurate with their increased productivity.

(2) but even if you're at the same job, same position, same duties, you are in fact becoming more productive. yeah yeah we know about the the computer and the internet but increased fuel efficiencies, air travel. you're roughly 1000x more productive because you're at a desk with a computer connected to the internet but your wages don't reflect that. your company just has a sunk cost of a $1200 computer and a business broadband cost of like $500/mo.

After this, there are ancillary reasons why the problem was compounded - degree inflation, student debt, weakening of unions, etc. but this I think is the genesis of the departure.

[I_Like_Dirt]

Which does bring us back to federal transfers and the notion of a UBI. And it brings us back to a tax code removing all the carveouts in order to pay for those transfers.

I'm not so sure UBI is going to prove to be as useful as people think. It has its positives but it's still relatively limited in what it will achieve, in my view. But yes, reorganizing the tax code would help a lot, though it would have to go quite a bit more than a flat tax to come close to trying to level the power imbalance.

[Wizardspride]

Read on Twitter

?s=19

[Ruzious]

Read on Twitter

?s=19

The cult explanation maybe has some validity. Otherwise, it's just that people are stupid beyond belief.

[dckingsfan]

Which does bring us back to federal transfers and the notion of a UBI. And it brings us back to a tax code removing all the carveouts in order to pay for those transfers.

I'm not so sure UBI is going to prove to be as useful as people think. It has its positives but it's still relatively limited in what it will achieve, in my view. But yes, reorganizing the tax code would help a lot, though it would have to go quite a bit more than a flat tax to come close to trying to level the power imbalance.

I think it should be "the UBI by itself wouldn't be as useful as people think".

I think a combination of UBI + either M4A or MFA + other federal transfers would moves us forward.

[payitforward]

after some half-hearted skimming on google, i think the answer to *why* wages haven't kept up with productivity boils down to (1) outdated norms of giving raises meeting (2) dramatic efficiencies gained through technology.

(1) most raises are pegged to inflation, not productivity. you might get a COLA every year but that's just enough for you to keep your purchasing power. short of a promotion, workers don't get raises that are commensurate with their increased productivity.

(2) but even if you're at the same job, same position, same duties, you are in fact becoming more productive. yeah yeah we know about the the computer and the internet but increased fuel efficiencies, air travel. you're roughly 1000x more productive because you're at a desk with a computer connected to the internet but your wages don't reflect that. your company just has a sunk cost of a $1200 computer and a business broadband cost of like $500/mo.

After this, there are ancillary reasons why the problem was compounded - degree inflation, student debt, weakening of unions, etc. but this I think is the genesis of the departure.

i don't think the technology argument is a strong one. Technology has helped increase worker productivity for a century & more -- most dramatically the introduction of electricity into factories.

Plus, there are no "norms" of giving wage increases to go "outdated!" Management raises wages if they have to & only if they have to.

[payitforward]

Read on Twitter

?s=19

The cult explanation maybe has some validity. Otherwise, it's just that people are stupid beyond belief.

Yup, that sounds right....

[I_Like_Dirt]

I think it should be "the UBI by itself wouldn't be as useful as people think".

I think a combination of UBI + either M4A or MFA + other federal transfers would moves us forward.

Fair enough. I'd agree with this. I'd suggest that UBI would potentially be the least valuable part of that equation, though. It's the other federal transfers part that needs to be extremely creative. Having a few select people essentially own the potential for infrastructure improvements would be a dangerous game and that's the direction things are heading.

The thing is, I think we're heading towards a direction where things worldwide are eventually going to swing back hard towards a more socialist thought process at some point and there is a rather massive amount of wild potential outcomes that could happen when it does. I'm not really interested in seeing another "socialist" dictator that basically runs the economy or whatever and people get what they get and are grateful for it.

I'd rather be preemptive. M4A or whatever is a solid first step but this is going to have to be a fair bit more broad sweeping than that and it's going to be something that makes banks and others that benefit from the financial sector uncomfortable because it won't be safe and it will be them that are forced to adapt along with everyone else. Getting out in front of the coming changes is both necessary for environmental reasons but also to avoid a situation where things swing too far in the other direction - soften the counteracting force when it comes (and it will). Suggestions that don't involve drastic changes in terms of how we think of the economy as it relates to social wellbeing aren't going to work much like anti-nicotine/smoking/whatever ideas from tobacco industries aren't likely to be particularly effective, either.

[pancakes3]

after some half-hearted skimming on google, i think the answer to *why* wages haven't kept up with productivity boils down to (1) outdated norms of giving raises meeting (2) dramatic efficiencies gained through technology.

(1) most raises are pegged to inflation, not productivity. you might get a COLA every year but that's just enough for you to keep your purchasing power. short of a promotion, workers don't get raises that are commensurate with their increased productivity.

(2) but even if you're at the same job, same position, same duties, you are in fact becoming more productive. yeah yeah we know about the the computer and the internet but increased fuel efficiencies, air travel. you're roughly 1000x more productive because you're at a desk with a computer connected to the internet but your wages don't reflect that. your company just has a sunk cost of a $1200 computer and a business broadband cost of like $500/mo.

After this, there are ancillary reasons why the problem was compounded - degree inflation, student debt, weakening of unions, etc. but this I think is the genesis of the departure.

i don't think the technology argument is a strong one. Technology has helped increase worker productivity for a century & more -- most dramatically the introduction of electricity into factories.

Plus, there are no "norms" of giving wage increases to go "outdated!" Management raises wages if they have to & only if they have to.

Withdrawn. Kind of.

I was trying to figure out how to articulate it, and (not that I'm reinventing the wheel here, there are hundreds of articles already written here) after sleeping on it, let me try and explain it better.

Caution, I can already tell this is going to be a slog of a post but indulge me. feel free to ignore:

There was a case back in 1919 - Dodge v. Ford. The Dodge brothers, who were running Dodge already, were also 10% stakeholders in Ford, and sued Ford for taking corporate profits and instead of issuing dividends, raised wages, and built new plants. Part of Ford's motivation was also to not pay out dividends to the Dodge brothers, so they could take that money and reinvest it into a rival car company.

The court in Michigan said that in Corporations (and specifically corporations), the officers and directors owed a duty to the shareholders to maximize their returns. This is called "shareholder primacy." What constitutes a maximization of value is subject to the "business judgment rule" so expanding facilities, in Ford's judgment, could be a long-term investment that yielded results down the line. Good. Paying workers more? Well, like you said - raise wages if and only if they have to.

This was 1919, so how does it fit into the divergence in the 1970s? Well, because of the business judgment rule. Courts pretty much always defer to the business judgment rule, and if not for Ford's motivations to take dividends away from the Dodge Brothers, he could have plausibly said "higher wages result in more productive workers, in my judgment as a businessman" and it would have been fine. So long as a plausible argument that it would result in value added to the shareholder, do whatever you want. Charitable donations have been found to be legally allowable under the BJR as "goodwill" is a form of value. However, these are legal limits, and not a part of corporate culture - yet.

In 1970, Friedman put out a paper titled Shareholder Primacy, and since MBA's don't take law classes, for many future business execs, they were fully indoctrinated into the idea that maximizing value is the only way to go. After all, it's Milton Friedman saying this. Friedman flat out said that a company has no "social responsibility" to the public or society; its only responsibility is to its shareholders and execs picked it up and ran with it.

By milking worker productivity and not reinvesting profits back into workers but rather expansion and profit-seeking, wages and productivity have steadily departed.

There are instances where raises/compensation aren't issued only when absolutely necessary. You can pay out bonuses, you can have revenue sharing, give workers shares of stock so they become a part of shareholder primacy, pay on commission, etc. but for most employees under a corporate structure, it's just not how they're compensated.

I still say the pace and scope of tech advancement in the computer age is much greater than steam power, or electric lights, and has increased productivity a thousand-fold. Email by itself has changed days-worth of man-hours into seconds. Word processing, even.

It's because workers are incredibly productive, and the institutional refusal to compensate workers accordingly that's driven this wedge imo.

The perfect example of this are utility companies. They're blue chip high dividend-yield stocks, but with minimal opportunities for growth. The grid is what the grid is, for the most part, and while energy consumption is on the rise, there isn't much that a utility company can do to "expand" so they pay out dividends. That money can easily go to bonuses for workers but because of primacy, it's shareholders that get the value, not the linemen, plant workers, engineers, etc. And shareholders really mean billionaires. They put in seed money that grew a company to maturity and now they'll collect profit indefinitely.

I don't know man... it's a wack system.

[Zonkerbl]

UBI is, tautologically, the best possible social safety net program. Instead of being restricted to using the money according to what some patronizing white priviliged snot thinks you should be doing with your money, you can use the money for whatever it is that you actually need.

And if you think you can't do this because poor people will use the money on hookers and blow, you are a patronizing white priviliged snot. This is *not* borne out empirically.

When I was a grad student and my son was born, I was on WIC. Rather than giving me the money, I had to buy from a list of grocery items. If I didn't buy it, I had to throw the money away. Well, we were breastfeeding and one of things on the list was infant formula, so a good 20% of the assistance I had to throw because some corporate dairy fascist said I couldn't have the money unless I ignored the health industry's declared best practice.

[payitforward]

i don't think the technology argument is a strong one. Technology has helped increase worker productivity for a century & more -- most dramatically the introduction of electricity into factories.

Plus, there are no "norms" of giving wage increases to go "outdated!" Management raises wages if they have to & only if they have to.

Withdrawn. Kind of....

There's a lot of interest here, & a lot of it would be beyond my ability to comment on with any effect. Even though I did go to the U of Chicago & have a family full of UC economists! But I want to hit a couple of high points where I do have some knowledge.

I was trying to figure out how to articulate it, and (not that I'm reinventing the wheel here, there are hundreds of articles already written here) after sleeping on it, let me try and explain it better.

Caution, I can already tell this is going to be a slog of a post but indulge me. feel free to ignore:

There was a case back in 1919 - Dodge v. Ford. The Dodge brothers, who were running Dodge already, were also 10% stakeholders in Ford, and sued Ford for taking corporate profits and instead of issuing dividends, raised wages, and built new plants. Part of Ford's motivation was also to not pay out dividends to the Dodge brothers, so they could take that money and reinvest it into a rival car company.

The court in Michigan said that in Corporations (and specifically corporations), the officers and directors owed a duty to the shareholders to maximize their returns. This is called "shareholder primacy." What constitutes a maximization of value is subject to the "business judgment rule" so expanding facilities, in Ford's judgment, could be a long-term investment that yielded results down the line. Good. Paying workers more? Well, like you said - raise wages if and only if they have to.

This was 1919, so how does it fit into the divergence in the 1970s? Well, because of the business judgment rule. Courts pretty much always defer to the business judgment rule, and if not for Ford's motivations to take dividends away from the Dodge Brothers, he could have plausibly said "higher wages result in more productive workers, in my judgment as a businessman" and it would have been fine. So long as a plausible argument that it would result in value added to the shareholder, do whatever you want. Charitable donations have been found to be legally allowable under the BJR as "goodwill" is a form of value. However, these are legal limits, and not a part of corporate culture - yet.

In 1970, Friedman put out a paper titled Shareholder Primacy, and since MBA's don't take law classes, for many future business execs, they were fully indoctrinated into the idea that maximizing value is the only way to go. After all, it's Milton Friedman saying this. Friedman flat out said that a company has no "social responsibility" to the public or society...

The classical position out of Adam Smith, & key to the free market economics model, is that maximizing value is the way to create the greatest social benefits. I haven't read the specific paper you are referring to, & I am no fan of Milton Friedman, but prima facie I am guessing that he simply presented that POV, that model, w/ some data chosen to support it.

...I still say the pace and scope of tech advancement in the computer age is much greater than steam power, or electric lights, and has increased productivity a thousand-fold. Email by itself has changed days-worth of man-hours into seconds. Word processing, even. ...

This is specifically incorrect. Steam power was the single greatest advance in productivity. Moreover, 1880-1920 was a period of greater technological change than the era of the PC/Internet. A simple example: in 1880 if you needed to transmit an English sentence from London to a business associate in New York, it took two weeks. In 1920 you picked up a phone.

...I don't know man... it's a wack system.

The older I get the more I think that all systems are wack!

[dobrojim]

https://www.pbs.org/newshour/show/givedirectly-cash-aid-kenya

Heard this story recently and thought I remembered hearing that one key finding was
that the economic multiplier was far larger than expected. The report I heard also
stated that the often stated fears of critics of just giving people money, that those
monies would be spent in harmful or unproductive ways was largely not born out.

however statements here https://www.poverty-action.org/study/impact-unconditional-cash-transfers-kenya
don't appear to my admittedly cursory reading to confirm this.

[Jamaaliver]

The U.S. economy added far more jobs than expected in November and the joblessness rate edged down to a 50-year low. At just 3.5%, the unemployment rate matched September’s level for the lowest in five decades. The total labor force participation was nearly unchanged at 63.2%, just a hair below October’s 63.3%, which had reflected the largest share of the working population employed or looking for work since 2013.

Heading into the report, consensus economists expected that headline employment gains would get a boost from the return of thousands of General Motors (GM) workers, after a 40-day United Auto Workers strike...

Consensus economists held high expectations for the November jobs report as other economic indicators of U.S. employment held firm during the month.

[dckingsfan]

The U.S. economy added far more jobs than expected in November and the joblessness rate edged down to a 50-year low. At just 3.5%, the unemployment rate matched September’s level for the lowest in five decades. The total labor force participation was nearly unchanged at 63.2%, just a hair below October’s 63.3%, which had reflected the largest share of the working population employed or looking for work since 2013.

Heading into the report, consensus economists expected that headline employment gains would get a boost from the return of thousands of General Motors (GM) workers, after a 40-day United Auto Workers strike...

Consensus economists held high expectations for the November jobs report as other economic indicators of U.S. employment held firm during the month.

With respect, I think you should be looking at labor force participation rates; deficits; and adjusted gross income after federal transfers to get a better understanding of the health of the economy. Unemployment rates don't accurately describe the picture.

Our labor force participation rate continues to fall as our country ages; Our deficits are at an all time high due to the last tax stimulus; and the bottom two quintiles didn't make any notable adjustments - actually, with the cut in SNAP, adjusted income of the bottom quintile will fall pretty quickly.

[dckingsfan]

UBI is, tautologically, the best possible social safety net program. Instead of being restricted to using the money according to what some patronizing white priviliged snot thinks you should be doing with your money, you can use the money for whatever it is that you actually need.

And if you think you can't do this because poor people will use the money on hookers and blow, you are a patronizing white priviliged snot. This is *not* borne out empirically.

When I was a grad student and my son was born, I was on WIC. Rather than giving me the money, I had to buy from a list of grocery items. If I didn't buy it, I had to throw the money away. Well, we were breastfeeding and one of things on the list was infant formula, so a good 20% of the assistance I had to throw because some corporate dairy fascist said I couldn't have the money unless I ignored the health industry's declared best practice.

https://www.pbs.org/newshour/show/givedirectly-cash-aid-kenya

Heard this story recently and thought I remembered hearing that one key finding was that the economic multiplier was far larger than expected. The report I heard also stated that the often stated fears of critics of just giving people money, that those monies would be spent in harmful or unproductive ways was largely not born out.

however statements here https://www.poverty-action.org/study/impact-unconditional-cash-transfers-kenya don't appear to my admittedly cursory reading to confirm this.

I am going to take these together. I was not a fan of the Obama stimulus for the reason that most of the money went to the usual channels and wasn't delivered to the bottom two quintiles where they would most certainly spend the money and stimulate the economy.

I think the UBI would also do that in spades. And the most important outcome of this study is:

Economic impacts: GiveDirectly households significantly increased consumption by US$36.18 per month (23 percent), across a range of goods including food, medical and educational expenses, and social events. There was no increase in expenditures on temptation goods, such as alcohol and tobacco. Overall, the UCT had similar impacts regardless of transfer recipient and timing.

The second part of this needs to be healthcare reform - the ACA started down the path (although didn't get into healthcare cost drivers which was a mistake) where everyone has medical insurance. That would allow more job changes and naturally drive up wages. Stagnation of job change is as much a wage suppression tool as anything else.

[Zonkerbl]

Now the important thing to remember is that cash transfer programs in Africa are conditional - there are income criteria you have to meet. Truly unconditional cash transfers require that everyone be registered with the government to get a check, so if a large portion of your population is off the grid, the UBI breaks. So in Africa you have to out in the field and find all the poor people.

With that caveat, yes, there's an enormous amount of research on this issue. If you're wondering if giving money to poor people results in them spending all their money on hookers and blow, well, they don't.

https://siteresources.worldbank.org/INTCCT/Resources/5757608-1234228266004/PRR-CCT_web_noembargo.pdf