Tuesday, March 19, 2013

Either Bob Murphy is confused or I am confused or it's simply that he is frustrated that progressives don't say something stupid when they have the opportunity to say something stupid

Posted by dkuehn at 9:40 AM
I'm putting even odds on each possibility.

19 comments:

  1. UnknownMarch 19, 2013 at 12:30 PM

    Is there anyone with economics training who actually thinks there are millions of workers generating $22/hour for their bosses, but are only getting paid $7.25/hour?

    Well yes, the evidence of that is overwhelming that is what is happening. In fact, we have record corporate profits and millions un or underemployed.


    And, when one takes a look at actual testimony before Warren which was that an increase to $22 an hour for a McDonald's employee would raise the price of a #11 by 4 cents, from $7.29 to $7.33---well you figure it out.

    Now, my POV is different, in that I have actually read Michael Jensen's papers on earnings manipulation and compensation on SSRN, gone to his talks, sat and asked him questions.

    Well Bob Murphy would never look at the facts or consider the POV of someone like Jensen

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  2. Bob MurphyMarch 19, 2013 at 4:51 PM

    OK Daniel here's at least one guy who made the logical leap that I guess you are saying was the furthest thing from Daily Kos and Warren's remarks. Are you still confused?

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    1. Daniel KuehnMarch 19, 2013 at 4:57 PM

      Wait are you judging what we ought to infer about the entire population of progressives from one of my biggest pseudononymous trolls???

      I'll remember that next time Libertarian Standard Bearer comes by and tries to teach me about libertarians.

      I still don't quite get your post. Warren doesn't embrace a $22 minimum wage... but she does talk about the difference between minimum wage growth and productivity growth... she spends a lot of time on the technicalities of the research... YOU MENTION that she doesn't embrace a $22 minimum wage and that no one has... and somehow out the other end this is great big AH HA! for progressives.

      No, I genuinely don't get how the pieces are supposed to fit together on this one, Bob.

      I'm not speaking for some writer you can dig up at Daily Kos or some troll here who actually might support this... I'm saying I'm not sure how you watch that video and figure anyone is calling anyone's bluff on anything.

      Delete
  3. Bob MurphyMarch 19, 2013 at 5:02 PM

    Hang on Daniel--you were the one who gave me the Daily Kos link, saying something like "very interesting food for thought" or something. What you really meant was, "This guy is totally flaky and inexplicably misunderstood Warren, but disregard his commentary and just look at her literal words"?

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    1. Daniel KuehnMarch 19, 2013 at 5:08 PM

      OK now I am even more confused.

      I have no doubt there are all sorts of ugly instances of economic ignorance lurking in the brain of the author of the Daily Kos piece.

      But what I read did not seem to me to be advocacy of a $22 minimum wage. Did I miss something?

      Actually advocating a minimum wage of $22 would require the translation of economy-wide average productivity rates to the marginal productivity of a much narrower class of workers. That is quite a stretch, which I think is precisely why nobody has advocated a $22 minimum wage.

      It is a very interesting point, first raised by EPI and repeated by Warren. Productivity hasn't stayed still, so even if the real minimum wage is steady the extent to which it is binding has probably declined.

      I just liked how well she managed the two witnesses and how familiar she seemed to be with Dube's research.

      Delete
  4. Bob MurphyMarch 19, 2013 at 5:14 PM

    So what did she mean by the "where did the other $14 go"? She wasn't implying that there are workers contributing $22 in output but only receiving $7.25 in compensation?

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    1. Daniel KuehnMarch 19, 2013 at 5:18 PM

      I didn't get the impression she was making a strict accounting point for restaurants - but that she was making a point about income share trends.

      If she was making a precise point about the marginal product of a minimum wage workers, I would think she'd advocate for a $22 minimum wage, which she clearly didn't.

      If you are able to read her mind on a point she never made out loud, then major props to you Bob.

      Maybe, though, nobody is saying it because nobody thinks it (well, except AH up there I guess).

      One can talk about trends in the wage share of national income without making a specific statement applying aggregate figures to a very narrow segment of the labor market, can't one?

      Delete
    2. Bob MurphyMarch 19, 2013 at 6:54 PM

      Daniel I'm truly not trying to fight here. I want to understand exactly what you think she meant. Are you saying that Warren doesn't believe there exists one single worker in the entire US economy who contributes $22/hour while only being paid $7.25/hour?

      Delete
    3. Jonathan FinegoldMarch 19, 2013 at 7:01 PM

      "She wasn't implying that there are workers contributing $22 in output but only receiving $7.25 in compensation?"

      Or, she might be saying that given the productivity and the min. wage of 1960 then the relative min. wage is W/MPL. So, if we maintain this proportion to 2012, then the minimum wage should be $22.

      Delete
    4. Bob MurphyMarch 19, 2013 at 7:08 PM

      Jonathan but what is "the other $14" she talked about then?

      Delete
    5. Jonathan FinegoldMarch 19, 2013 at 7:42 PM

      $22 - $7.25, I think.

      Delete
  5. UnknownMarch 19, 2013 at 5:51 PM

    Daniel

    If you look at page 95 of this paper by Jensen you will see a chart that is powerful circumstantial evidence that we have no idea what is going on in our corporate economy, as managements' ability to manipulate is stunning.

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=561305

    Accordingly, my answer to the question is yes, the evidence is overwhelming that there are millions of workers generating $22/hour for their bosses, but are only getting paid $7.25/hour? Such is implicit in the power that management has to manipulate earnings.

    Further, such is implicit in the disconnect between wage collapse and ever rising productivity.

    Similarly, the answers that Warren got about the costs of labor to McDonalds support the same conclusion.

    That being said, it does not seem to me that there is much if any connection between the answer and whether raising the minimum wage will help.

    I would rather see an entirely different set of laws, starting with laws requiring employers to post the pay and compensation and benefits of all employees for all to see. I am a strong believer in open book management. Similarly, I would like to see laws that limit the number of hours that officers, managers, and employees may work as well as laws that would effectively eliminate part time and subcontracting.

    I also happen to be a liberal who also wants to eliminate all FICA taxes, both employer and employee, as I am opposed to taxing employment, replacing such with a VAT. The paper work is a killer for small firms. I believe we should end employer provided health care, for the same reason.

    And, I support laws giving everyone a job (the 1/2 pay proposal). In fact, I support unemployment payments only if the beneficiary works, if nothing else at a public park raking leaves.

    In sum, as a liberal, I take very seriously our first obligation to provide everyone work. When people talk about raising the minimum wage as opposed to ending FICA taxes, I look at time as being a crack pot and not being serious about ending unemployment.

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  6. UnknownMarch 19, 2013 at 5:55 PM

    Corrected sentence

    When people talk about raising the minimum wage as opposed to ending FICA taxes, I look at them as being a crack pot and not being serious about ending unemployment.

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  7. Bob MurphyMarch 19, 2013 at 7:59 PM

    This HuffPo piece captures it perfectly. It starts out by saying Warren "made a case" for raising the minimum wage to $22/hour, but then later clarified that she didn't actually support the case. She just made it, that's all. (The snarkiness is mine, but the two statements are literally in the article.)

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  8. UnknownMarch 19, 2013 at 9:09 PM

    Daniel,

    I had a moment and wanted to further explain Jensen's point as such would apply to wages.

    If the wage market is competitive, firms could not "“store” earnings. But, Jensen shows that firms do "store" earnings.

    Earnings should have to be realized now to pay wages now.

    The ability to store earnings shows that the supposed connection between wages and productivity does not hold in fact.

    IOW, there is powerful circumstantial evidence that people like Stiglitz are right and that our problems are systemic and dark.

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  9. UnknownMarch 19, 2013 at 9:10 PM

    Daniel,

    I had a moment and wanted to further explain Jensen's point as such would apply to wages.

    If the wage market is competitive, firms could not "“store” earnings. But, Jensen shows that firms do "store" earnings.

    Earnings should have to be realized now to pay wages now.

    The ability to store earnings shows that the supposed connection between wages and productivity does not hold in fact.

    IOW, there is powerful circumstantial evidence that people like Stiglitz are right and that our problems are systemic and dark.

    ReplyDelete
  10. Bob MurphyMarch 20, 2013 at 1:04 AM

    Alexander Hamilton, are you saying if labor were paid the full value of its product, the return to all capital would be zero?

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    1. AnonymousMarch 20, 2013 at 3:48 AM

      I think that is exactly what he is saying, and I know that it is entirely wrong; but boy, I just can't seem to remember why (haha). I just know it has something to do with some funny word that starts with the letter "i". ;)

      Delete
    2. AnonymousMarch 20, 2013 at 4:12 AM

      Or, if you want to be more pure, it would be that word that starts with an "r".

      Delete

All anonymous comments will be deleted. Consistent pseudonyms are fine.

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