Oceans Yet to Burn

[Oceans Yet to Burn]

Who captures a wage subsidy?

Basically every benefit we give to the working poor ends up being an indirect subsidy for business - see, for example, employers telling their employees how to obtain food stamps.

One of the complaints about a wage subsidy over a higher minimum wage is that it will just be captured by employers, who will pay their employees less by that amount.  That’s also potentially true of a basic income, and with a minimum wage, employers may opt to gain non-monetary compensation (e.g. terrible hours).

Now, here’s where the limits of my economics education probably show a bit, in that I’m not familiar with the literature on how, empirically, this works out.  (Maybe @xhxhxhx can chime in.)

I realized that this is actually related to the marginal productivity of labor - how much revenue (and thus, potentially, profit) does each additional employee bring in, across the whole economy?  There are limits to this based on the amount of equipment/capital needed for a marginal employee or marginal hours, including facility size, as well as the potential customers it might bring in (e.g. why haven’t they hired additional labor already?).

The reason for this is that to determine the leverage of a low-wage employee under a wage subsidy system, we need to know how many potential jobs our wage subsidy can create, and at what quality.  How easy is it for an employee to just walk right out of the store, walk right in to another store, and get a new job?  Even if the pay is somewhat lower, this creates a much stronger incentive against bad hours, bad bosses, and unsafe practices, about which employees will then either demand higher pay, or just tell the employers to knock it off.

However, that increase in leverage only occurs if enough potential jobs emerge, and this is more or less an empirical question.

The greater the marginal increase in the number of jobs per marginal decrease in minimum wage prior to subsidy, the more of the subsidy that will be captured by the workers.  However, if cutting the minimum wage creates no new jobs, then leverage doesn’t change much at all and employers capture the majority of the subsidy.

If the leverage is high enough, wages may even be driven higher than they were prior to the subsidy, depending on employer margins that they were exploiting leverage over against employees.

However, since employers capturing part of the subsidy is potentially true for all subsidies for the working poor, even rental vouchers or healthcare, it has to be compared with other alternatives (such as basic income).

(For my preferred implementation, the accompanying decrease in minimum wage should be lower than the wage subsidy, and the wage subsidy should be paid directly to the employee, thus at least not resulting in a decrease in effective income even if the entire subsidy is captured.)

[Oceans Yet to Burn]

[mitigatedchaos]

@e8u

Problem: YouTube is owned by Google, who are ad scum. Paying for YouTube gives Google more resources to direct toward producing their primary product, advertisements.

This entire situation happened because people were unwilling to pay for content.  Your plan for this is… to not pay for content.

[e8u]

This seems akin to the, “why do you make me hurt you” defense.

If Eve attempts to derive revenue from manipulating Alice into spending her money unwisely, thereby deriving less benefit from it than she could otherwise, it is bad for Eve to succeed, and it is good for Eve to fail and starve in the street.

Advertisers deserve to be given long prison sentences. I don’t want to do that, because it would violate their freedom of speech. However, they do deserve it.

“Content” that cannot survive without advertising doesn’t deserve to exist.

[mitigatedchaos]

Remember that time when Google took over the government and forced everyone to connect to websites that had advertising at gunpoint?

Well you probably don’t because we’re not in that timeline.  As for myself, I still haven’t forgiven GDN, but fortunately it doesn’t exist yet, and it may never exist.

Look I’m not gonna wring you out for using an ad blocker just because you don’t like ads, but don’t style yourself as a morally superior revolutionary over it.  You aren’t.  This “content that’s supported by ads doesn’t deserve to exist” thing is ridiculous posturing, and on some level you know it. 

Internet advertisements are a form of microtransaction payment that exists due to coordination problems, partially because the value of one read of a webpage is both low and unknown before reading it.  A proper alternative system would be a form of widely-accepted digital currency that made it cheap and easy to send very small amounts of money, perhaps backed by the State if you’re into that sort of thing.

Suggesting that paying money, which is a direct and very expensive signal about not wanting advertisements, is unacceptable, is basically the exact opposite of solving the problem.

[Oceans Yet to Burn]

[xhxhxhx]

voxette-vk replied to your link: Towards the Garfield Left (Away from Basic Income)

Terrible essay.

please elaborate

[mitigatedchaos]

Well, while I’m not ideologically inclined to agree with Voxette, I still think it’s misguided.  The economies with more restricted worker hours below 40 seem to be underperforming and have lower employment, basic income plus fewer work hours simultaneously will cause a bigger hit on the economy, basic income (or other alternatives) already creates more worker leverage to negotiate for fewer hours and safer conditions, and slashing everyone’s Mondays across the board will hit a lot harder than alternatives, because not every worker’s time is equally valuable.  Also, I don’t think it will sell well politically - and business will fight like dogs to prevent it from happening.

Which, is odd enough for me to say, seeing as with executive functioning stuff a 4-day workweek (perhaps leaving out Wednesday instead) would fit me well.

Additionally, just on shear economic cost vs efficiency, I can’t see a reason to prefer a combination of 4-day workweek + basic income in the short-medium term, given that the level of automation in the future is uncertain, over a low minimum wage plus direct-to-employee declining hourly livable wage subsidies.

Wage subsidies + low minimum wage would create lots of new jobs, which is a good sell politically, while also taking a lot of pressure off the poor and lower classes and giving them a lot more leverage.  Businesses won’t fight it as hard, even though it will need a tax increase, since they’ll benefit from lower labor costs at the low end.  It multiplies government spending with private spending for a larger potential effect.  It can also be rolled out incrementally in different amounts to test out just how much economic efficiency is lost.

There are other potential advantages, I really should write a post on it specifically, but it doesn’t seem to be getting much coverage vs UBI.  I think the Republicans might support it as their alternative to UBI come 2024/2028.

[collapsedsquid]

There’s a few points I could make, but one of the great things about giving people time off is that it doesn’t affect the value of time off, and it’s not something that can just cause a decrease in employer contribution leaving people no better off.  Giving money, that’s not as straightforward.

[mitigatedchaos]

Considering it hasn’t seemed to perform well in other countries, I’d rather make simpler overtime rules, then crack down hard on those that don’t follow them.

Anyhow, as part of how I’d sell this, I’d set the starting wage with subsidies higher than the current minimum wage, and since it would make labor relatively cheaper, there’s not much reason to expect a decrease in hours at the low end.

In addition to the risks involved with yanking 20% of the work hours out of the economy, killing Monday also incentivizes workers to work under the table in violation of the employment law in order to get enough money, since the employers can actually cut their salaries to compensate, either directly or through attrition.

With state-backed wage subsidies, there’s no incentive to work under the table, because if the income isn’t reported, you don’t get the subsidy.  Though, it is key for this plan that subsidies taper off more slowly than employer wages increase, but that’s how it should be to prevent a new Welfare Trap.

[Oceans Yet to Burn]

[xhxhxhx]

voxette-vk replied to your link: Towards the Garfield Left (Away from Basic Income)

Terrible essay.

please elaborate

[mitigatedchaos]

Well, while I’m not ideologically inclined to agree with Voxette, I still think it’s misguided.  The economies with more restricted worker hours below 40 seem to be underperforming and have lower employment, basic income plus fewer work hours simultaneously will cause a bigger hit on the economy, basic income (or other alternatives) already creates more worker leverage to negotiate for fewer hours and safer conditions, and slashing everyone’s Mondays across the board will hit a lot harder than alternatives, because not every worker’s time is equally valuable.  Also, I don’t think it will sell well politically - and business will fight like dogs to prevent it from happening.

Which, is odd enough for me to say, seeing as with executive functioning stuff a 4-day workweek (perhaps leaving out Wednesday instead) would fit me well.

Additionally, just on shear economic cost vs efficiency, I can’t see a reason to prefer a combination of 4-day workweek + basic income in the short-medium term, given that the level of automation in the future is uncertain, over a low minimum wage plus direct-to-employee declining hourly livable wage subsidies.

Wage subsidies + low minimum wage would create lots of new jobs, which is a good sell politically, while also taking a lot of pressure off the poor and lower classes and giving them a lot more leverage.  Businesses won’t fight it as hard, even though it will need a tax increase, since they’ll benefit from lower labor costs at the low end.  It multiplies government spending with private spending for a larger potential effect.  It can also be rolled out incrementally in different amounts to test out just how much economic efficiency is lost.

There are other potential advantages, I really should write a post on it specifically, but it doesn’t seem to be getting much coverage vs UBI.  I think the Republicans might support it as their alternative to UBI come 2024/2028.

[Oceans Yet to Burn]

[nuclearspaceheater]

The situation I’m imagining that brings about massive technological unemployment is one in which most workers’ marginal value contains both a positive and negative component. If the net is positive, then the concept of comparative advantage applies and there is always something that they have comparative advantage at that they can trade with the people who own and operate robots, and still come out ahead. This is the standard rebuttal to the claim that technological unemployment is even possible in a decently free economy.

But given that there is a negative component, this does not follow, because it is enough for automation to reduce the positive component to a sufficiently small (but still positive, by comparative advantage) level that it cannot compensate for the negatives of dealing with them and their marginal value as employees becomes zero or negative if you have access to robots instead, which is not a situation normally dealt with in analysis that assumes that the median worker’s marginal productivity is always positive, even if small.

(If we’re opening up net marginal productivity into a positive and negative component, then robots have their negatives to, of course. But I don’t think this affects the point.)

[shieldfoss]

My worry has long been that their marginal productivity is positive (because I’ve made the exact mistake you point out) but that it wasn’t positive enough.

My “comparative advantage” doesn’t matter if it’s small enough that my resulting gain from trade isn’t enough to live on.

[nuclearspaceheater]

Now that you mention it, the concept of comparative advantage only guarantees that you will always be better off under trade than you would be under self-sufficiency. (Except the unlikely situation where you are inferior at everything by the exact same factor, in which case you are still not worse off.)

But a worker is already involved with trade when they sell their labor to an employer. Comparative advantage itself says nothing whatsoever about what might happen to your position when new traders appear in the market to compete with you.

So if your “self-sufficiency” is below sustenance, then comparative advantage, even where it’s assumptions are valid, only guarantees that trade will at worst leave you just as dead but will most likely let your live slightly longer. There is no guarantee that it can raise you above sustenance if you don’t have anything valuable enough on offer.

I’m puzzled that I’d never realized this before. Apparently the main concept used to argue that technological unemployment is impossible doesn’t actually apply to the situation at all? Maybe I’m missing something.

[mitigatedchaos]

I thought this was reasonably obvious, and was continuously surprised on people not noticing this.

See also, my recent post about the issue with the idea of the cost of goods going towards zero.

[Oceans Yet to Burn]

Missing Scarcity?

A number of the “No Robot Jobpocalypse” arguments seem to hinge on the idea that as productivity increases, the costs of goods and services will approach zero.

But this seems based on the assumption that resources are effectively a function of labor.  However, if base resources are largely fixed after some level of labor (e.g., there are only so many iron atoms in a volume of dirt), and there are other potential uses for those resources than feeding the proles, then the laborers must competitively bid for the resources.

In that bidding, they may have to bid with someone several orders of magnitude more productive than they are (either due to owning the robots or just being that much more skilled/productive).  What guarantee is there that, even as the price of goods produced from the resources decreases overall, they are not bid out of the reach of the low-marginal-production workers?

@collapsedsquid

[Oceans Yet to Burn]

Instead, the attempted transformation of the euro area into Greater Germania has simply dumped the persistent surpluses of German-speaking Europe, the Netherlands, and Scandinavia onto the rest of the world. Between 2008 and 2016 the combined current account balance shifted by 0.8 percentage points of world GDP. This can be explained almost entirely by a collapse in consumption and investment in Greece, Ireland, Italy, and Spain. That was mostly a consequence of policy choices pushed by the European Central Bank, the Eurogroup, and the IMF, with strong guidance from Germany and the Netherlands.

https://ftalphaville.ft.com/2017/02/01/2183509/the-us-shouldnt-blame-mexico-for-losing-at-trade-it-should-blame-germany/

AKA: Michael Pettis has been saying this for 2 decades, Mark Blyth’s been on the train since… at least 2012, and now we’re finally catching up.  

Free Trade doesn’t work.  

(via poipoipoi-2016)

Heck, Keynes said it in the 1940s and gave the solution.

(via collapsedsquid)

If this is doing what I think it’s doing, a single country could get part of the way there by having its own currency and applying tariffs at a rate based on its trade balance.  I was kind of hoping the Orange Man might do something like that, but it looks like he won’t and will do per-country punitive tariffs instead.