Well, there's a straightforward (I don't say easy) way to fix this: you require a high enough minimum wage (and healthcare, and sick leave, and etc.). It's not like the restaurant owner has the option of just deciding to pay twice or three times the labor costs, and trust that their customers will be happy to cover the difference, if their competitors don't have to do the same.
Because, those restaurant (and retail and etc.) business owners are mostly not the ones making big money. Restaurants, in particular, are horribly low margin.
The end result of getting rid of "terrible" jobs, is that everything at the restaurant costs 2-3x as much, and so on at the many other businesses (agriculture?) which rely on cheap labor. Which means all those people in professional class jobs (e.g. programmers) will find that their salary doesn't go nearly as far as it used to.
Personally, I'm ok with that, I think it's the right thing to do. But it's not like it's the small business owners that are standing in the way of it; they cannot pay higher wages if their competition is not, so it has to be mandated. What's standing in the way of it is that this would be, at least temporarily, quite inflationary, and we have a professional class that is accustomed to not having to pay much for anything except houses.
Tying healthcare insurance to employment isn't really the direction we want to be going.
When the individual market was terrible, it made sense to push employers to buy it for their workers, because you got better coverage for less money that way.
Now the state marketplaces are at least mediocre; coverage and costs are similar to what you might get as a small or mid sized employer. We should be pushing people towards marketplace plans, and not trying to continue the employer plan model.
That seems to be making quite a lot of assumptions—first, that even in the better states, costs to the employee are similar if they choose to get insurance individually rather than through their employer. Even assuming that the cost to the employer is similar to the cost I would have to pay out-of-pocket to get insurance on the state marketplace, which is not a safe assumption, just because I choose to do that doesn't mean my employer suddenly decides to give me all the extra money they would have paid for my health insurance in my paycheck.
Even if all that were true, it would only be in the better states. There is massive variation between the states on this, and some have (last I knew) truly abominable plans as the only real options.
No; what we need to be pushing towards is single-payer health care, the way nearly every other civilized nation on earth does it. The market-based system we have is a travesty that literally kills people in order to further enrich the richest among us.
> Now the state marketplaces are at least mediocre; coverage and costs are similar to what you might get as a small or mid sized employer. We should be pushing people towards marketplace plans, and not trying to continue the employer plan model.
I've priced out what a similar plan that I got from an employer would be when I went first bought insurance on the individual market. They are not even comparable.
For example, a similar family plan on the individual market would cost over $30k in premiums, with an $8k deductible and a $17k out of pocket maximum each year with co-pays.
For a similar plan for myself, I'm looking at nearly $10k in premiums, $3k deductible, and an $8k yearly out of pocket maximum, along with co-pays etc.
"According to "Papa" John Schnatter, the cost of providing health insurance for all of his pizza chain's uninsured, full-time employees comes out to about 14 cents on a large pizza."
And this is the reason he gave for not supporting ACA. $0.14 a pizza. To this day, I struggle to understand the psychology behind it.
I think we should be going that direction,where a meal in a simple place is expensive enough to support normal wages with benefits and whatnot. Because right now, whenever someone brings up an argument that people don't get paid adequately, there's always the same 'but but the customer won't pay'. We all seem to love to have cheap meals, cheap uber drivers and cheap cleaners, while at the same time expensive office workers, expensive lawyers and doctors. It doesn't need to be so extreme on either side.
>It's not like the restaurant owner has the option of just deciding to pay twice or three times the labor costs, and trust that their customers will be happy to cover the difference, if their competitors don't have to do the same.
This feels a bit backwards. We don’t know that their competitors aren’t already paying more, we only know that some people can’t seem to get labor at the price they were paying before. I think the numbers here are currently inconclusive, but I conjecture that what we’re seeing is small business owners losing labor monopsonies that they had come to rely on, and consequently a more competitive labor market. Of course competition causes upward pressure on prices, that’s the whole point.
This is tangential but I think America has been too scared of inflation for too long. There’s nothing wrong with a bit of inflation, especially if it means we can get closer to full employment. We haven’t even been meeting the fed’s (very low) target for quite a while.
Remarkably, since the tail end of the Bush administration, it's the opposite: the Fed has desperately tried to get inflation up to its 2% target level, and mostly missing.
The reasons are debatable, but I'd argue that it's mostly because the mechanisms they're using end up inflating the stock market instead of consumer goods.
There are economists terrified of any inflation, but it's an attitude that's more popular with some ideologues than with mainstream economists. You hear a lot about them on TV and the Internet, but not nearly as much in real economics talks. Those ideologues punch above their weight in Congress, but not at the Fed.
The Fed governors aim for a small, controlled level of inflation. Mostly that's to prevent people from just sitting on their money: money stuffed into a mattress doesn't grow the economy. Money in bank accounts isn't much better, since they can be withdrawn at any time. So a little inflation nudges people to either spend their money or invest it. Such is the theory.
The reason is quite clear - the Fed cannot transfer money effectively to the poor/middle class; it's fiscal policy that can do that (and labor unions to some degree, which were gutted in the 80s).
Inflation doesn't happen when you give more to the people that don't consume (and sustained inflation only happens when there is an actual shortage of some good, and arguably we have overcapacity for everything today so inflation will only happen under either a commodity price shock or complete breakdown of supply lines (transitory inflation can happen like it is now - from the COVID shock))
That's absolutely correct, but it has been remarkable the way there's been no money flowing to the poor and middle class.
Supply-side economics clearly doesn't work, but it wasn't totally insane. If money was pumped into corporations you'd expect at least some of it to turn into more conventional demand. Buy a private jet or a yacht (built by workers and maintained by more workers), or start a company that pays wages, or something.
Instead, all of the money just gets shuffled among each other. It's not just that trickle-down doesn't work; it's that it doesn't seem to trickle at all. Even to non-Chicago economists that's a little surprising. Chicago School turns out to be more than just incorrect, but utterly at odds with reality. Rich people simply don't behave the way they imagine they do.
About the closest it comes is messing with the real estate market -- mostly in the form of pricing lower-class renters out. That benefitted the existing homeowners, and maybe that's helped stem middle class decline a tiny bit, but there are too many other forces working against them. Instead, it just trickles more money back up.
It'll be interesting to see what happens as COVID eases off. That's a very unusual kind of shock, and I'm surprised it hasn't been even more economically disastrous than it is. Part of it is that the government has done a weak form of the right thing, pumping money directly to consumers. If not for that we'd have seen a deflationary spiral of truly catastrophic proportions.
Supply side economics works if you have a nation that is doing so many productive investments that it has trouble getting enough financing for everything. By cutting taxes and lowering interest rates you are making it easier for businesses to acquire enough capital to do even more investments.
The US economy is the exact opposite. It's difficult for the investment rate to catch up with the savings rate. Things like home construction are being delayed. Public infrastructure suffers from cost overruns, etc.
>It's not just that trickle-down doesn't work; it's that it doesn't seem to trickle at all.
For obvious reasons. Money doesn't trickle because consumer/worker behavior tends to lag behind business behavior. When a company has a good year, it can wait until the labor market tightens before it has to increase wages. If companies invent automation then they have a first mover advantage where they save a lot of money in the first 5 years and then once competitors join the market the margins are driven down. That delay is costing consumers money and it's costing workers money because the company doesn't employ anyone with it. Business oriented politics also tends to encourage inefficient (from a macroscopic perspective) corporations who lobby for bills that benefit them at the expense of everyone else.
>Part of it is that the government has done a weak form of the right thing, pumping money directly to consumers.
"Despite the cacophony of complaints about "ruinous" budget deficits and "excessive" monetary growth, the headline-grabbing double-digit inflations of 1974 and 1979-80 were mainly of the special-factor variety. Only a minor fraction of each inflationary acceleration can be attributed
to changes in the baseline rate; the rest came from supply shocks from the food and energy sectors, from mortgage interest rates, and from the end of price controls—a whole host of special one-shot factors. It is precisely
this aspect of the recent inflation that this paper seeks to document. Since the paper focuses on the special factors to the exclusion of the baseline rate, it is worth pointing out at the outset that the two inflations are not really independent. Inflation from special factors can "get into"
the baseline rate if it causes an acceleration of wage growth. At this point policymakers face an agonizing choice—the so-called accommodation issue. To the extent that aggregate nominal demand is not expanded to
accommodate the higher wages and prices, unemployment and slack capacity will result. There will be a recession. On the other hand, to the extent that aggregate demand is expanded (say, by raising the growth rate
of money above previous targets), inflation from the special factor will get built into the baseline rate."
This is the difference between the responses to 2008 and 2020. The first was exactly the first example from the paper, and the second is the latter (expansion of demand capacity).
I've concluded that over steer (over correction) is the norm.
My hunch is one big cause is the mismatch of time scales between tenure (employment) and policy outcomes. Meaning that most policy and decision makers have moved on to new roles and jobs before the consequences of their decisions become clear. So very little learning can happen.
Feds tried to induce inflation for the last 20 years, it’s good for them since they can just print more money. They largely failed to do so since dollar is so well propped by international demand.
>it’s good for them since they can just print more money.
That's not good because it means they failed to keep up their mandate.
>They largely failed to do so since dollar is so well propped by international demand.
Actually, the international demand is forcing deficit spending. If money leaves the US and then comes back in the form of treasury bonds then pretty much the only way to tap into the money is to let the government get into debt. If driving yields to near zero was good enough to cause inflation we wouldn't be in this mess.
> The end result of getting rid of "terrible" jobs, is that everything at the restaurant costs 2-3x as much, and so on at the many other businesses (agriculture?) which rely on cheap labor. Which means all those people in professional class jobs (e.g. programmers) will find that their salary doesn't go nearly as far as it used to.
Not 2-3x, more like 0.36% for every 10% increase[1]:
> Many business leaders fear that any increase in the minimum wage will be passed on to consumers through price increases thereby slowing spending and economic growth, but that may not be the case. New research shows that the pass-through effect on prices is fleeting and much smaller than previously thought.
> By looking at changes in restaurant food pricing during the period of 1978–2015, MacDonald and Nilsson find that prices rose by just 0.36 percent for every 10 percent increase in the minimum wage, which is only about half the size reported in previous studies. They also observe that small minimum wage increases do not lead to higher prices and may actually reduce prices. Furthermore, it is also possible that small minimum wage increases could lead to increased employment in low-wage labor market.
Maybe I'm naive, but this seems to have some significant problems:
1. Yes, everything costs 2x more for professional-class people, but also for working-class people. The numbers might get bigger, but the impact for those in the position to consider these terrible jobs is net nil.
2. For anything that doesn't require physical presence, the more you raise minimum domestic labor cost, the more attractive foreign labor looks, so you're also driving outsourcing.
You would absolutely have to back away from free-trade with low-wage countries for this, but in the restaurant/retail side of things it's not as big of a consideration, because not many people cross borders to do that in a country as big as the U.S. But for many industries it is absolutely a consideration (e.g. agriculture).
Because, those restaurant (and retail and etc.) business owners are mostly not the ones making big money. Restaurants, in particular, are horribly low margin.
The end result of getting rid of "terrible" jobs, is that everything at the restaurant costs 2-3x as much, and so on at the many other businesses (agriculture?) which rely on cheap labor. Which means all those people in professional class jobs (e.g. programmers) will find that their salary doesn't go nearly as far as it used to.
Personally, I'm ok with that, I think it's the right thing to do. But it's not like it's the small business owners that are standing in the way of it; they cannot pay higher wages if their competition is not, so it has to be mandated. What's standing in the way of it is that this would be, at least temporarily, quite inflationary, and we have a professional class that is accustomed to not having to pay much for anything except houses.