The incentive effects of the living wage and a carbon tax @BernieSanders
25 Nov 2015 Leave a comment
in applied price theory, energy economics, labour economics, minimum wage, politics - USA Tags: 2016 presidential election, carbon tax, climate alarmism, expressive voting, Leftover Left, living wage, rational irrationality, Twitter left
Why propaganda?
21 Nov 2015 Leave a comment
in constitutional political economy, economics of media and culture, income redistribution, Marxist economics, Public Choice, rentseeking Tags: economics of advertising, expressive voting, rational ignorance, rational irrationality
Margaret Thatcher on the concept of a false consciousness
21 Nov 2015 Leave a comment
in liberalism, Marxist economics Tags: all of communism, capitalism and freedom, class consciousness, false consciousness, Margaret Thatcher, preference formation, rational ignorance, rational irrationality
The inconvenient truths of @AlGore
20 Nov 2015 Leave a comment
in environmental economics, global warming Tags: climate alarmism, expressive voting, political propaganda, rational ignorance, rational irrationality
JFK assassination conspiracy theories are still going strong, unfortunately
19 Nov 2015 Leave a comment
in economic history, health economics, politics - USA, Public Choice Tags: conspiracy theories, cranks, expressive voting, JFK conspiracy theorists, political psychology, Quacks, rational ignorance, rational irrationality, social psychology
..
Trust in media by ideology
15 Nov 2015 Leave a comment
in economics of information, economics of media and culture, industrial organisation, politics - USA, Public Choice, survivor principle Tags: expressive voting, media bias, rational ignorance, rational irrationality, The meaning of competition
@jeremycorbyn @BernieSanders oppose the one path to peace
04 Nov 2015 Leave a comment
in international economics, liberalism, politics - USA, war and peace Tags: British politics, capitalism and freedom, China, expressive voting, free trade, game theory, populists, rational ignorance, rational irrationality, Richard Cobden, World War I
Jeremy Corbyn is in trouble again, this time for describing World War I as pointless.
Corbyn has, for all his life, opposed the only means of securing peace either in Europe or anywhere else. He is against trade agreements, the European Union and NATO. Bernie Sanders is equally as misguided.
Corbyn and Sanders thinks you can make peace just by talking with people. Peace is made by trading with hostile countries to make them depend on you for their prosperity as well as yours. By growing rich through free trade, it’s in no ones interest to go to war or have poor relations with each other or each other’s friends.
Is the living wage a form of indirect sex discrimination?
03 Nov 2015 Leave a comment
in applied price theory, discrimination, gender, labour economics, Marxist economics, minimum wage, politics - New Zealand Tags: expressive voting, living wage, offsetting behaviour, rational irrationality, The fatal conceit, unintended consequences
The living wage will certainly be to the profit of incumbent workers at the time of the wage increase but that is provided that their employer stays in business. The introduction of a living wage will result in indirect sex discrimination because of the higher job turnover rates of women. Women also have shorter average job tenures than men in any particular job.
Source: Worker turnover rate in New Zealand by sex – Figure.NZ.
Any benefit premised on not quitting jobs discriminates against women because of their higher job quit rates. More women than men will have to quit living wage jobs because of motherhood and other changes in their personal circumstances. Isn’t that discrimination?
One in six workers change their jobs every year. That job turnover rate is higher among the workers with less human capital simply because both sides of the job match have less reasons to continue. A job quit or job layoff for a less skilled worker does not result as much of a loss of job specific and firm specific human capital than would be the case if the worker was more skilled with more firm-specific human capital.
One of the iconic empirical facts of the labour market is job turnover rates are higher and job layoff rates are higher for less skilled workers. As workers acquire more job specific human capital, they are more reluctant to quit and their employer hesitate before laying them off. This is because of the firm specific human capital which both invested would have to be written off.
Women quit jobs more often than men, work part-time or switch between part-time and full-time work more often than men and enter and re-enter to the workforce because of motherhood and maternity leave. Women also tend to invest in more generalised, more mobile human capital. Women anticipate a more intermittent labour force participation and more spells of part-time work. As such, women have less reasons to invest in specific human capital if they anticipate leaving because of motherhood and either changing jobs more often are working part-time. If you are changing jobs more often, such as women do, investing in more general human capital and less in specific capital increases options when searching for vacancies.
Any benefit of the living wage will erode faster for women because they quit jobs at a higher rate than men. Is this indirect sex discrimination? This higher job turnover rate is driven by human capital investment strategies and career plans. The living wage, which privileges the incumbent workers at the time the living wage increases implemented, discriminates against female workers because they change jobs more often or are likely to quit sooner after the living wage was initially implemented.
The particular form of indirect sex discrimination at hand arises from the Golden Handcuffs effect of the living wage. Closer Together Whakatata Mai – reducing inequalities explain the Golden Handcuffs effect this way:
You may have noticed in the article it is actually the SAME people being paid the living wage (“all of them have stayed on as staff”). This is how labour markets can work if employers make different choices. If you look at the Living Wage employers – they haven’t hired a whole new set of people – they have invested in the people they already have. The world has not ended and many more people are happy and businesses and organisations are doing just fine.
Even the proponents of the living wage admit that a living wage increase will segment the labour market and create insiders and outsiders with the insiders paid more than what used to be called the reserve army in the unemployed by the same crowd of activists. A reduction in job turnover will increase unemployment durations because there are fewer vacancies posted every period.
Hopefully all the existing employees of the living wage employer are capable of the requisite up skilling they need to match their new productivity targets. Not everyone did well at school. One of the reasons workers on low wages are on those low wages because they perhaps didn’t do as well at school as activists who appointed themselves to speak for them. A harsh reality of life is 50% of the population have below-average IQs.
This up skilling answer to the cost to employers of a living wage increase is a variation of the standard policy response in a labour market crisis. That standard labour market policy response in crisis is send them on a course. Sending them on a course as a response to a crisis makes you look like you care and by the time they graduate the problem will probably have fixed itself. Most problems do. I found this bureaucratic response to labour market crises to repeat itself over and over again while working in the bureaucracy.
The reason was sending them on a course was so popular with geeks as yourself sitting at your desk as a policy analysis, minister or political activist all did well at university. You assume others will do well through further education and training including those who have neither the ability or aptitude to succeed in education. People don’t go on from high school to higher education for a range of reasons that include a lack of motivation to study or a simple lack of ability no matter how hard they try.
The living wage hypothesis about reduced turnover, up-skilling and greater motivation is a small example of the American company that decided to pay a minimum wage of $70,000 a year. Those workers who cannot earn as much of this elsewhere would never quit. Some of his better employers quit because they resented being paid the same as less productive employees. Hopefully, the minority shareholder suing his brother who is the CEO for offering that above market wage doesn’t end up bankrupting the company. As such, the incumbent workers’ fortunes are unusually closely tied to their existing employer if they are paying above the going rate in their industry and occupation.
I suppose you could hold on like grim death but women tend to have more reasons to move on than men if only because of pregnancy and motherhood. These golden handcuffs are of less value to them than to men. Younger workers are also less advantaged because many young New Zealanders take a overseas working holiday of several years, if not more. If they have a living wage job now that have to give up that advantage.
Workers who lack the labour productivity to earn a wage equivalent of the living wage elsewhere will never quit a living wage job, and will have a much reduced incentive to up-skill or seek promotion. There will be less internal reward for undertaking additional training or job responsibilities among low skilled is because the living wage will mean they will not get a wage rise. That wage rise is gobbled up by the living wage increase if you’re already a low-paid worker.
Naturally, as vacancies arise, recruits will be drawn from a much higher quality recruitment attracted by the higher wage at the living wage employer. The less skilled workers who don’t currently work for the living wage employer will miss out completely.
@GreenpeaceNZ @RusselNorman Can We Rely on Wind and Solar Energy? @NZGreens
02 Nov 2015 Leave a comment
in energy economics, environmental economics, global warming, politics - Australia, politics - New Zealand, politics - USA Tags: Big Solar, Big Wind, bootleggers and baptists, expressive voting, green rent seeking, rational irrationality, renewable energy, solar power, wind power
At least the good old days didn’t have the precautionary principle
31 Oct 2015 Leave a comment
in economics of media and culture, economics of regulation, energy economics, environmental economics, health economics Tags: expressive voting, precautionary principle, rational ignorance, rational irrationality, risk risk trade-offs
@Noahpinion wants to use teenagers for policy experiments @arindube
28 Oct 2015 1 Comment
in applied price theory, labour economics, minimum wage, politics - USA, public economics Tags: expressive voting, Leftover Left, rational ignorance, rational irrationality
Noah Smith is OK with local experiments with higher minimum wages such as a $15 minimum wage in San Francisco. At least half of these workers sold out for minimum wage policy experiments will be teenagers and young adults.
Source: Finally, an Answer to the Minimum Wage Question – Noah Smith.
My most grating experience in the public service was reversing the slope of the demand curve for labour and education and training to argue that a minimum wage would increase opportunities for the low paid.
I drafted a briefing to the minister pointing out that minimum wage increases make investments in training less attractive to lower skilled workers. This is because the minimum wage increase increases the opportunity cost of training and reduces the rewards in terms of the wage increase. The would be trainee must give up a higher minimum wage in return for a smaller wage increase because the minimum wage increase swallows part of the wage premium from the now an increasingly pointless investment in training. There is only a small literature on the impact of the minimum wage on investment in human capital.
My manager told me to argue that increases in the minimum wage will make low skilled workers more likely to seek training. That conclusion was based on a consultant’s machine-gun econometrics research showing that the confidence interval was plus or minus regarding the minimum wage and employment training. This study contradicted everything known about the minimum wage and the incentive to invest in human capital. You do not increase of demand for human capital by reducing the rewards for investments in human capital.
Does a higher minimum wage really reduce employment? econ.st/1gp4Jbs http://t.co/WGMZGLKHmI—
The Economist (@EconBizFin) July 30, 2015
Back to Noah Smith. He admits freely that increases in the minimum wage reduce employment. He tries to ride out on the conclusion that that increase in unemployment after a small minimum wage increase isn’t much.
Source: Finally, an Answer to the Minimum Wage Question – Noah Smith.
Obviously the teenagers and adults thrown onto the scrapheap of society by the increased minimum wage don’t count in the brutal utilitarian calculus Noah Smith employs.
It's pretty simple: Minimum Wage = Compulsory Unemployment http://t.co/6xiX6YCp9Z—
Mark J. Perry (@Mark_J_Perry) July 25, 2015
Fortunately, many economists prefer Pareto improvements. This is where after a policy change at least one person gains and no one loses or at least the winners compensates the losers for their losses. Not so bad and isn’t much as suggested by Noah Smith for the welfare consequences of a minimum wage increase on unemployment are not good enough from an applied welfare economics perspective.
Most of the Left over Left are of the same view about the priority of losers and the need to compensate them whenever those evil neoliberals want to deregulate or remove the tariff. The Left over Left are completely preoccupied the fate of the workers who have lost their privileges from regulation or tariff protection rather than the consumers who are now richer. Without missing a beat, the Left over Left changes sides and become brutal utilitarians when it comes to the minimum wage and unemployment and investment in human capital.
Minimum wage advocates fail to take seriously that low paid workers who lose their jobs because of minimum wage increases are real living people who suffer when their interests are traded off for the greater good of their fellow low paid workers, some of whom come from much wealthier households. As Rawls pointed out, a general problem that throws utilitarianism into question is some people’s interests, or even lives, can be sacrificed if doing so will maximize total satisfaction. As Rawls says:
[ utilitarianism] adopt[s] for society as a whole the principle of choice for one man… there is a sense in which classical utilitarianism fails to take seriously the distinction between persons.
What is underplayed in the minimum wage debate is Noah Smith, Arindrajit Dube and other scholars are careful in what they say but politicians and living wage lobbyists don’t listen to those careful qualifications.
The key qualification of these academics is there are policy trade-offs that cannot be avoided when the minimum wage is increased. Some jobs will be lost if the minimum wage increases. Some say this effect is small, others say this effect is large, hardly anyone says it’s zero.
The claims that the minimum wage can be lifted without hurting employment are a long bow from what Andrajit Dube said about small changes in the minimum wage having small adverse effects on unemployment. What Andrajit Dube said is not much different from everyone else on the minimum wage – Nuemark is an example:
a 10 per cent increase in the minimum wage could reduce young adult employment by up to 2 per cent
David Card was always very careful amount about how his pioneering research was about how small increases in the minimum wage not reducing employment in the presence of search and matching costs:
From the perspective of a search paradigm, these policies make sense, but they also mean that each employer has a tiny bit of monopoly power over his or her workforce. As a result, if you raise the minimum wage a little—not a huge amount, but a little—you won’t necessarily cause a big employment reduction. In some cases, you could get an employment increase.
Noah Smith is wrong. We do know what will happen if the minimum wage is raised $15 per hour. Some people will lose their jobs. More importantly, there is a reduced incentive for the low paid to invest in skills to improve their earning power because the minimum wage is already delivered that assuming they still have a job.
In 1965 an editor at Look asked an MIT economist why "liberal" economists hadn't signed an anti-minimum wage letter. http://t.co/ONuQKIWhG7—
Garett Jones (@GarettJones) December 02, 2014
How you handle these casualties of policy changes such as minimum wage increases is a central dilemma of applied welfare economics. This dilemma is usually solved by pointing out that it’s far less risky in terms of employment and welfare improvements and losses to increase the Earned Income Tax Credit (EITC) because that places no jobs at risk.
Now along comes Steve Landsburg to point out that the incidence of an Earned Income Tax Credit (EITC) changes when there is a minimum wage, when there is a price floor. Remember everyone agrees that when there is an earned income tax credit, some of the benefits go to the employer. When you raise the EITC, more people enter the labour market. This increase in the supply of labour drives wages down, which transfers some of the benefit of the tax credit from the workers you intended to help to the employers but not all of the benefits of the tax credit.
Steve Landsburg shows that in any labour market where the minimum wage is above the wage that would prevail but for the minimum wage law, the minimum wage cannot fall to cope with the increase in labour supply induced by the earned income tax credit. For that reason, all of the benefits of the earned income tax credit go to employers. Employers can hire more people without having to increase the wage they offer above the minimum wage. As long as the minimum wage is above the market clearing wage, more people get a job as a result of the tax credit, but no one takes home pay that is higher than the minimum wage.
One of the purposes of applied price theory, the study of economic history and even labour econometrics is to spare us policy experiments that we already know that they will not turn out well.
Malcolm Turnbull sure is popular
27 Oct 2015 Leave a comment
in politics - New Zealand, Public Choice Tags: Australia, expressive voting, opinion polls, rational ignorance, rational irrationality, voter demographics
https://twitter.com/Mark_Graph/status/658769666748346368/photo/1
All the bookies I follow now giving the Coalition >80% #auspol bit.ly/1GwJgc4 https://t.co/2y3iPBnnnn—
Mark the Graph (@Mark_Graph) October 23, 2015
@NaomiAKlein agrees with #MiltonFriedman on Mancur Olson’s theory of how nations escape institutional sclerosis
25 Oct 2015 Leave a comment
in comparative institutional analysis, constitutional political economy, development economics, economic history, economics of bureaucracy, income redistribution, Marxist economics, Milton Friedman, Public Choice, rentseeking, technological progress Tags: expressive voting, interest groups, Leftover Left, logic of collective action, Mancur Olson, Naomi Klein, pressure groups, rational ignorance, rational irrationality, rise and decline of nations, Twitter left
Source: quoted by Naomi Klein in “The Shock Doctrine”.
LA premiere tonight @NaomiAKlein @avilewis @mrdannyglover in person Q&A 7.30pm sundancecinemas.com http://t.co/wRkPFbnUHu—
Changes Everything (@thischanges) October 16, 2015
1. There will be no countries that attain symmetrical organization of all groups with a common interest and thereby attain optimal outcomes through comprehensive bargaining.
2. Stable societies with unchanged boundaries tend to accumulate more collusions and organizations for collective action over time.
3. Members of “small” groups have disproportionate organizational power for collective action, and this disproportion diminishes but does not disappear over time in stable societies.
4. On balance, special-interest organizations and collusions reduce efficiency and aggregate income in the societies in which they operate and make political life more divisive.
5. Encompassing organizations have some incentive to make the society in which they operate more prosperous, and an incentive to redistribute income to their members with as little excess burden as possible, and to cease such redistribution unless the amount redistributed is substantial in relation to the social cost of the redistribution.
6. Distributional coalitions make decisions more slowly than the individuals and firms of which they are comprised, tend to have crowded agendas and bargaining tables, and more often fix prices than quantities.
7. Distributional coalitions slow down a society’s capacity to adopt new technologies and to reallocate resources in response to changing conditions, and thereby to reduce the rate of economic growth.
8. Distributional coalitions, once big enough to succeed, are exclusive, and seek to limit the diversity of incomes and values of their membership.
9. The accumulation of distributional coalitions increases the complexity of regulation, the role of government, and the complexity of understandings, and changes the direction of social evolution.
Source: Obituary: Professor Mancur Olson | Obituaries | News | The Independent
@CarlyFiorina says it all on action to fight global warming @jamespeshaw @AndrewLittleMP @garethmorgannz
24 Oct 2015 Leave a comment
in applied price theory, comparative institutional analysis, energy economics, environmental economics, global warming, Public Choice, rentseeking Tags: 2016 presidential election, climate alarmists, expressive voting, free riding, game theory, global warming, international public goods, rational ignorance, rational irrationality
@SeumasMilne could @jeremycorbyn win?
23 Oct 2015 Leave a comment
in constitutional political economy, Joseph Schumpeter, Public Choice Tags: British Labour Party, British politics, expressive voting, Leftover Left, rational ignorance, rational irrationality, Twitter left, voter demographics
Catch-Up Service: the popularity and unpopularity of Jeremy Corbyn's policies @IndyVoices independent.co.uk/voices/comment… http://t.co/9c9gmHzKFg—
John Rentoul (@JohnRentoul) October 16, 2015
While standard British Labour Party populist policies resonate with the electorate, all the policies that Jeremy Corbyn brings as a socialist, peacenik and renegade Liberal are deeply unpopular and will be used against him as wedge issues by the Tories.
The popularity of individual policies in the Labour Party manifesto didn’t do them any good at the 2015 general election.
Public don't think Corbyn will succeed – y-g.co/1MspFMb http://t.co/4jjHbfsktC—
(@YouGov) September 17, 2015
What matters to the voters at the last British general election was that brand Labour was down on the nose. It was not a credible alternative government.
Peter Kellner: Measuring the gap between Corbyn’s supporters and Labour’s target voters – y-g.co/1izSpph http://t.co/f1NaNL4xgt—
(@YouGov) September 25, 2015
Jeremy Corbyn makes that gap into a chasm because of the vast difference between what his supporters on the left of the Labour Party want and what the voters who must be persuaded to switch their vote for Labour to win in 2020 want as government policies.
Jeremy Corbyn 'twice as left-wing' as Ed Miliband – y-g.co/1LLWUsG http://t.co/no9euWcM2X—
(@YouGov) September 29, 2015
Jeremy Corbyn is much further to the left than Ed Miliband, who lost the election in 2015 rather badly because he was too far to the left for the taste of the British electorate.
Fascinating. Yawning chasm between why Labour members think they lost and why voters think they did. From @thetimes http://t.co/MvhZYI2CTr—
Joe Watts (@JoeWatts_) July 23, 2015
Ed Miliband was rejected in the 2015 British election because he was not a fiscal conservative nor a credible economic manager. The anti-austerity message loses votes.
The heaviest suicide note in history http://t.co/1xDQlnnWU7—
Phil Rodgers (@PhilRodgers) May 03, 2015
There is a yawning chasm between the reasons why the left of the Labour Party thinks their party lost the 2015 British general election and why Labour voters thought they lost the election.
Peter Mandelson in the New York Times on why Labour lost: nytimes.com/2015/05/20/opi… http://t.co/pzbIXOmwpX—
Alex Wickham (@WikiGuido) May 19, 2015
The anti-austerity message was one of the reasons why Labour lost in the eyes of its own voters and would-be voters in the centre of politics
Peter Kellner on Jeremy Corbyn as Britain’s least popular new opposition leader – y-g.co/1LdnNoP http://t.co/Ygyo8gV1uZ—
(@YouGov) October 05, 2015
The deep unpopularity of Jeremy Corbyn cannot be understated as a barrier to British Labour winning the next election.
That deep unpopularity of Jeremy Corbyn sacrifices the one winning advantage that British Labour has under Jeremy Corbyn. That advantage is governments tend to lose elections rather than oppositions win them.
Schumpeter disputed the widely held view that democracy was a process by which the electorate identified the common good, and a particular party was then elected by the voters because it was the most suited to carrying out this agreed common good:
- The people’s ignorance and superficiality meant that they were manipulated by politicians who set the agenda.
- Although periodic votes legitimise governments and keep them accountable, their policy programmes are very much seen as their own and not that of the people, and the participatory role for individuals is limited.
Schumpeter’s theory of democratic participation is voters have the ability to replace political leaders through periodic elections.
Citizens do have sufficient knowledge and sophistication to vote out leaders who are performing poorly or contrary to their wishes. The power of the electorate to turn elected officials out of office at the next election gives elected officials an incentive to adopt policies that do not outrage public opinion and administer the policies with some minimum honesty and competence.
Denis Healey's speech to Labour conference after 1959 defeat. http://t.co/BTdbfJj147—
Stephen Bush (@stephenkb) October 03, 2015
Power rotates in the Schumpeterian sense. Governments were voted out when they disappointed voters with the replacement not necessarily having very different policies.
Here is the Commons motion slamming Corbyn as a threat when the IRA bomber row broke in 1987: sunnation.co.uk/jeremy-corbyn-… http://t.co/KiOEUkqi9a—
Harry Cole (@MrHarryCole) September 19, 2015
The challenge for British Labour is Corbyn cannot win unless he projects minimal competence and stops having policies on defence, foreign affairs and terrorism that outrage public opinion.
Jeremy Corbyn has plenty of outrageous opinions and is yet to show even the most basic competence in running the office of opposition leader, working 24/7 as opposition leader, and showing some ability to win support from members of the Parliamentary Labour Party. If Jeremy Corbyn cannot win votes of his own MPs, what chance do he have with the British people whose interests he claims to champion.
Utopia, you are standing in it! 
Recent Comments