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The "quiet catastrophe" is particularly dismaying because it is so quiet, without social turmoil or even debate. It is this: After 88 consecutive months of the economic expansion that began in June 2009, a smaller percentage of American males in the prime working years (ages 25 to 54) are working than were working near the end of the Great Depression in 1940, when the unemployment rate was above 14 percent. If the labor-force participation rate were as high today as it was as recently as 2000, nearly 10 million more Americans would have jobs.
The work rate for adult men has plunged 13 percentage points in a half-century. This "work deficit" of "Great Depression-scale underutilization" of male potential workers is the subject of Nicholas Eberstadt's new monograph "Men Without Work: America's Invisible Crisis," which explores the economic and moral causes and consequences of this:
Is it an aberration, or a harbinger of things to come?
(Score: 1) by khallow on Sunday October 09 2016, @05:39PM
There's no general evidence a min wage hike stifles economies. We have years of such actual "experiments" to study.
A counterexample is Puerto Rico which has a much lower wage distribution than the rest of the US. When they were put on the same minimum wage laws as the rest of the US (a ten year process which finished in 1987 IIRC), they saw massive migration to the US to the extent that there is now 1.5 times more Puerto Ricans outside of Puerto Rico than on the island. The end result is that there was a massive move of people from low cost Puerto Rico to the US which was almost as big as the current population of Puerto Rico. Can't be good for Puerto Rico's economy to pull away that many workers. Not good for the workers either since they endure the cost of the move just to find a job in a higher cost of living area.
In my opinion the country should try "helicopter money".
Because people who save, invest, or pay down debt don't get punished enough as it is. And where's the evidence this is actually a thing that works? I can point instead to an obvious rebuttal, the stagflation of the 70s to demonstrate that no, it wouldn't work. There is thought to be a modest trade off between inflation and unemployment, but I think we're already in a situation beyond where the model would work. After all, with the monetary policy already in place, we should see significant inflation. But we don't.
And/or fix our rotting infrastructure.
Why would we do that? I think the whole point of Keynesian policy is to monetize government power and generate profit. New construction generates more profit than repair work does. Hence, the priorities.
(Score: 0) by Anonymous Coward on Sunday October 09 2016, @08:06PM
You are cherry-picking situations. Puerto Rico probably needed a more gradual increase.
Experiment. Doing nothing is also an experiment. Try a little. If it fails, don't do it anymore. We can argue theory until the cows come home, but in the end sometimes it's best to actually test.
70's had EXCESS inflation. We have sub-par inflation. Not comparable.
I suppose 110-year-old gas pipe explosions are "profitable".
(Score: 1) by khallow on Monday October 10 2016, @05:19AM
You are cherry-picking situations. Puerto Rico probably needed a more gradual increase.
If ten years is not "gradual" enough, then what time frame would be? Really, what is notable about the Puerto Rico example is that it is an extremely high minimum wage compared to the median wage. I'd say any similarly high minimum wage anywhere in the world will generate the same consequences.
Experiment. Doing nothing is also an experiment. Try a little. If it fails, don't do it anymore. We can argue theory until the cows come home, but in the end sometimes it's best to actually test.
And I think we've already done enough. My view is that minimum wage isn't even worth the effort of implementing it. That's a considerable harm just in itself because employers have to generate non-productive work to comply with regulation, when they could just not have to pay at all in the first place.
70's had EXCESS inflation. We have sub-par inflation. Not comparable.
I guess you missed the real estate crisis. There was a lot of the huffing and puffing you propose in that. But it turned out, we really didn't need a bunch of houses that people couldn't pay for.
New construction generates more profit than repair work does.
I suppose 110-year-old gas pipe explosions are "profitable".
Duh, it should be pretty obvious that emergency spending to completely replace a deathtrap is going to be much more profitable than repairing the death trap in the first place.
(Score: 0) by Anonymous Coward on Monday October 10 2016, @06:35AM
Why did you select Puerto Rico instead of other states/provinces that raised their rates? If one looks at multiple instances, they don't see an average slide in the economy. Specific states may hit bad times, but it's hard to narrow those bad times to min wage changes. That's why it's better to average results.
Sorry, you lost me. What's this have to do with HM theory? You seem to keep picking examples that are not direct HM. Direct HM has not been tried. Further, too much of X may indeed be bad, but that doesn't mean some (mild) X is bad. Too much of anything is probably bad. Too much water, and you drown. That doesn't mean "water is bad" though.
There appears to be a miscommunication somewhere. I thought you mean building new things instead of repairing existing things. I didn't mean keep old specific pipes.
(Score: 1) by khallow on Monday October 10 2016, @11:14PM
Why did you select Puerto Rico instead of other states/provinces that raised their rates?
There are several reasons. First, Puerto Rico is a popular example so there's plenty of analysis about it. Second, the reasons Puerto Rico is such a popular example, is that it has the lowest income distribution compared to any state, has very detailed migration data, and is comparable in population to a regular state (the other territories would be at best small cities in comparison).
If one looks at multiple instances, they don't see an average slide in the economy.
One misses key dysfunction of the policy that way. Forcing people to move to high living cost areas in order to have a job is not a useful application of minimum wage. By grouping your high living cost areas with low living cost areas, you easily hide the migration. For example, if we look at the entire population of Puerto Ricans, we miss that 60% of them don't live in Puerto Rico. They manage to stay gainfully employed for the most part, but they do so by considerable sacrifices.
I guess you missed the real estate crisis.
Sorry, you lost me. What's this have to do with HM theory? You seem to keep picking examples that are not direct HM. Direct HM has not been tried. Further, too much of X may indeed be bad, but that doesn't mean some (mild) X is bad. Too much of anything is probably bad. Too much water, and you drown. That doesn't mean "water is bad" though.
Notice that I quoted a comment about inflation not minimum wage. Let's look at your original comment on the matter:
In my opinion the country should try "helicopter money". Inflation is under par. Machines and 3rd-world workers are "willing" to work more, creating more potential productivity that is not being utilized. Increasing the money supply will use up the slack and generate local jobs such as customization of yards, cars, and houses.
They tried that in the mid 2000s with auto manufacture and real estate construction. Money supply was pumped into these activities and they adjusted the leverage rules on real estate to a ludicrous 1 part collateral per 50 parts borrowed to increase the effects further. The latter market then ballooned enough to cause a massive economic collapse in 2008.
Duh, it should be pretty obvious that emergency spending to completely replace a deathtrap is going to be much more profitable than repairing the death trap in the first place.
There appears to be a miscommunication somewhere. I thought you mean building new things instead of repairing existing things. I didn't mean keep old specific pipes.
What part of "completely replace" means "keep old specific pipes"? I'd say it's quite obvious that it's building a new thing to replace an old thing. I allow in practice that the parts which are in relatively good shape would probably be kept, but it's yet another example of a huge preference for building new things over repairing old things.
(Score: 0) by Anonymous Coward on Tuesday October 11 2016, @05:38PM
Largely because business lobbyists made it "popular". Sample-selection-by-lobbyists is not very scientific, for hopefully obvious reasons.
No they didn't. You are incorrect.
It's only a theory such was/is happening. Everybody has theories.
(Score: 1) by khallow on Tuesday October 11 2016, @07:38PM
Largely because business lobbyists made it "popular". Sample-selection-by-lobbyists is not very scientific, for hopefully obvious reasons.
Ad hominem is irrelevant.
They tried that in the mid 2000s with auto manufacture and real estate construction.
No they didn't. You are incorrect.
I guess this is going to be one of those things like communism where it repeatedly fails because they didn't really do it right.
(Score: 0) by Anonymous Coward on Wednesday October 12 2016, @05:48AM
Who did I call a name? Bad sampling is bad sampling: too small a sample size AND letting biased entities pick the sample. If you disagree its poor sampling, please take some statistics classes. I cannot educate you on proper statistical sampling.
It's not a matter of "doing it right", it's a matter of doing it, period. And compared to "setting up" communism, HM is pretty simple. One is not building an entire society, but printing a little extra money. You are comparing pumpkins to peas.
QE is probably something I'd consider somewhat close, and by most accounts it helped the economy, being we avoided something like the Hoover unemployment rates despite a comparable financial crash just before. However, QE can only be temporary. HM arguably is also, but that doesn't make it "bad".
(Score: 1) by khallow on Thursday October 13 2016, @01:53AM
Who did I call a name?
When you discounted an example "because business lobbyists made it 'popular'". A valid example remains valid no matter who brought it up or why.
Bad sampling is bad sampling: too small a sample size AND letting biased entities pick the sample.
I think you don't get the point of examples.
It's not a matter of "doing it right", it's a matter of doing it, period. And compared to "setting up" communism, HM is pretty simple. One is not building an entire society, but printing a little extra money. You are comparing pumpkins to peas.
And I, of course, don't buy that. Again, I point out what you actually wrote:
In my opinion the country should try "helicopter money". Inflation is under par. Machines and 3rd-world workers are "willing" to work more, creating more potential productivity that is not being utilized. Increasing the money supply will use up the slack and generate local jobs such as customization of yards, cars, and houses.
They tried inflating the money supply via easy credit and increased leverage after 2001 and screwed up the real estate markets in the US and Europe. And come to think of it, they tried that again with easy credit and quantitative easing after 2008. Doesn't seem to be working now either. My view is that the idea that dumping money into an economy in order to have the effects you ascribe to it is magic thinking. There's no evidence that has ever worked. What it does do is allow politicians, bureaucrats, and special interests to obtain public funding for their projects without the need to provide accountability. That's why it remains popular.
(Score: 0) by Anonymous Coward on Thursday October 13 2016, @05:47AM
I don't want mere anecdotes, I want statistically valid info. Cherry-picked examples don't tell the whole story and are thus of very limited use.
The banks created their scheme mostly on their own. Nobody forced them to skimp on employment verification or even be in the residential real estate loan biz.
Faddish bubbles have been happening since long before USA and monetary regulation existed. It's a property of humanity, not monetary policy.
Nobody has directly tried it. Either way, I'd personally vote to try a little bit and see what happens. Doing nothing is also an experiment, and so far the do-nothing experiment is creating world-wide slow growth and sub-par inflation.
The best economies are on average when inflation is around 2.3% a year. If we are stuck at 1.8 for more than a decade, then it's pretty obvious to conclude the money supply "knob" may be set too low and try setting it a bit higher.
Sure, there's a slight risk of run-away inflation, but there's also a risk of run-away deflation, and/or wars due to sluggish economies. Bad economies often trigger wars.
The Fed Reserve actually has more tools right now to deal with high inflation than low inflation, and thus the needle too far to the left on the inflation dial may be a bigger risk than too far to the right.
(Score: 1) by khallow on Thursday October 13 2016, @08:40AM
I don't want mere anecdotes, I want statistically valid info. Cherry-picked examples don't tell the whole story and are thus of very limited use.
I find I'm not interested in providing such when you brush off the statistically valid info I already provided. Frankly, you're already blowing off supply and demand dynamics to start with and now an example of several million people who made choices when their economy was crippled by a high minimum wage.
I also see further on, that you just pull an inflation number (2.3% per year) out of your ass without even reasoning why it's supposed to be a good rate (or for that matter why the allegedly real world rate of 1.8% is supposed to be a bad rate). So yes, not feeling the need to provide this level of evidence when you ignore what was already provided and can't be bothered to reciprocate.
Further, the argument for increasing the minimum wage is that it doesn't hurt anyone until you make it big enough to matter. That's not much of an argument when we could just not do it and let the job market decide for us what minimum wage should be. People aren't going to suddenly work for free.
The banks created their scheme mostly on their own. Nobody forced them to skimp on employment verification or even be in the residential real estate loan biz.
Here's again what you wrote earlier:
Machines and 3rd-world workers are "willing" to work more, creating more potential productivity that is not being utilized. Increasing the money supply will use up the slack and generate local jobs such as customization of yards, cars, and houses.
A massive surge of home building combined with banks who "skimp on employment verification" (which incidentally never was a serious part of the problem) is exactly what that "working more" and "using up the slack and generate local jobs" as generated by easy credit looks like in the real world.
Nobody has directly tried it. Either way, I'd personally vote to try a little bit and see what happens. Doing nothing is also an experiment, and so far the do-nothing experiment is creating world-wide slow growth and sub-par inflation.
What do you mean here by "directly tried"? Do we need to use helicopters for real to drop money on the streets in order to qualify? Again, I find it troubling that you choose to ignore examples of your policy in the recent past.
The best economies are on average when inflation is around 2.3% a year. If we are stuck at 1.8 for more than a decade, then it's pretty obvious to conclude the money supply "knob" may be set too low and try setting it a bit higher.
Doesn't sound like a serious problem to me then. 1.8% is close to 2.3% (it may even be 2.3% or greater actual inflation due to the accounting games governments play with these statistics). And of course, you have no explanation for why 2.3% is supposed to be a good rate of inflation.
but there's also a risk of run-away deflation, and/or wars due to sluggish economies. Bad economies often trigger wars.
Can you point to a real world episode of run-away deflation that isn't actually due to bad things like the finance industry collapsing?
And "sluggish economies" sounds to me like you put far too much weight on economic activity (which is a universal disease among everyone who tries to fix economies via monetary policy). It's a variation of the broken window fallacy. We're going to destroy a little (or perhaps a lot) of the wealth of people who have money. That'll encourage them to spend it and yay, we're not sluggish any more.
But nothing of value is created, just running a little Red Queen race, which is where it becomes the broken window fallacy.
(Score: 0) by Anonymous Coward on Friday October 14 2016, @03:28AM
I already explained why I don't believe it to be statistically valid, or at least its statistically "weak" compared to the alternative of looking at ALL known cases. I see no reason to keep repeating that argument. We'll have to agree to disagree. I don't have patience for argument loops.
That's a valid question, but just ask rather than talking about hind quarters. I cannot locate the research I've seen before. If I find it later, I'll post it.
What do YOU believe the ideal rate is?
I perfectly understand the theory, but observation is more powerful evidence than theory, and many min wage increases have been analyzed.
Directly increase the money supply. Perhaps give some out as middle-class tax breaks, and use some for infrastructure repair. It won't change the deficit numbers because we are not taking the increase from somewhere else.
Such as? I still don't see how the mortgage bubble is sufficiently similar. For one, it was "stimulus" in a very specific product: houses. That's typically the sign of a bubble: one KIND of thing ramps up suspiciously high. HM would be spread about (or at least should be. HM can be used wrong just like any tool.)
That's why the economy is "kind of" okay.
Sorry, I won't subscribe to conspiracy theories without real evidence. Some private institutions publish their own numbers, and they are not much diff than govt's.
That could be a circular request because sluggish economies, possibly contributed to by deflation, tend to trigger financial collapses. Japan is arguably stuck in such a loop.
I agree that different groups will be affected differently by various economic "configurations". That's the art and politics of decision making. Life is generally easier on the middle and lower class when there's high economic activity. If you don't care about making them happy compared to other groups, you may personally want different trade-off parameters. That's a personal/value/religious judgement of who deserves more benefits.
Depends on how one defines/scores "value", again possibly back to personal/value/religious judgement of who deserves more benefits and/or who rates their value.
(Score: 0) by Anonymous Coward on Friday October 14 2016, @04:12AM
ADDENDUM
And could be ramped up and/or released slowly. No need to flash flood.
(Score: 1) by khallow on Saturday October 15 2016, @05:50PM
A second problem is that HM is ephemeral even when working as intended. You put in the money, there is a bump of economic activity, and then it's over. You need to put more in continually to get a continual increase in economic activity.
This leads to the third problem of the economy rapidly adapting to HM. Once, you have a continual flow of HM, then everyone will price their products accordingly. This usually manifests as straightforward inflation. But if the HM ends up concentrated in certain areas (like poor people or residental real estate building), then goods and services oriented to the particular sector of benefit can go up selectively. Giving poor people money just so they can pay more for everything is not an obvious net gain. In addition, after an extended period of HM, a pause or stop results in suppressed economic activity as various parties now have to adapt back to the old world without the HM.
The combination of these three problems leads to what I think is the primary danger of HM. Namely, that it becomes an ongoing inflationary factor rather than a one time economic boost (as intended) because no one wants to risk the problems of withdrawal from HM. That's a universal problem throughout societies of the world today. And once that happens, it's very easy for such a program to balloon out of control when some party wants a little more or doubles down on a policy with rapidly diminishing returns.
(Score: 0) by Anonymous Coward on Tuesday October 18 2016, @12:21AM
By some accounts it did work some, but there were enough other problems such that it wasn't good enough to fix all. They saw small improvements and thus cranked it up too far, hoping to compensate for OTHER problems. Like I said, any tool can be abused if you use it unwisely, but that's not a reason to not use tools. We use interest rates to adjust econ activity. They too could be misused.
That's a theory. But even if it were true, that's not necessarily bad. Maybe once all the major economies get back to a normal pace, they won't need "assistance". They just may need a little turbo to get up to running speed.
That's a theory. There's no evidence it triggers a run-away cycle if used in small amounts.
That's also a theory. I see nothing special to HM that triggers bubbles. Fads are invented by humans, not HM.
View HM as a control valve, just as interest rate is. The algorithm may look something like:
While true
if inflation less than 2.0 and GDP_rate less than 2.5 then
print a little money
if inflation less than 1.5 then
decrease interest rates a little
end if
else if inflation greater than 2.3 or GDP_rate greater than 3.3 then
increase interest rates a little
end if
wait and monitor econ for 4 months
End While
It's an over-simplification, but gives one an idea.
Interest rates used to seem "good enough" to adjust for ups and downs, but stopped working in multiple countries. There's another parameter we can use to adjust.
(Score: 1) by khallow on Friday October 14 2016, @03:18PM
Such as? I still don't see how the mortgage bubble is sufficiently similar. For one, it was "stimulus" in a very specific product: houses. That's typically the sign of a bubble: one KIND of thing ramps up suspiciously high. HM would be spread about (or at least should be. HM can be used wrong just like any tool.)
It was a universal easy credit stimulus for the US and Europe. The money ended up in mortgages because of bubble dynamics not because mortgages were deliberately targeted.
Can you point to a real world episode of run-away deflation that isn't actually due to bad things like the finance industry collapsing?
That could be a circular request because sluggish economies, possibly contributed to by deflation, tend to trigger financial collapses. Japan is arguably stuck in such a loop.
Exactly my point. Runaway deflation doesn't actually happen. It's economic and financial collapses conflated by you with deflation that actually happen in the real world. And incidentally, Japan is a classic example of the futility of the helicopter money approach. They've increased their money supply on numerous occasions since 1990. It's not doing them any good.
too much weight on economic activity...We're going to destroy a little (or perhaps a lot) of the wealth of people who have money.
I agree that different groups will be affected differently by various economic "configurations". That's the art and politics of decision making. Life is generally easier on the middle and lower class when there's high economic activity. If you don't care about making them happy compared to other groups, you may personally want different trade-off parameters. That's a personal/value/religious judgement of who deserves more benefits.
And you have evidence for this? Or is this yet another of your assertions that you never bother to think about?
My view is that there is no "art" to macroeconomics-scale manipulation via monetary policy. And there are plenty of negative consequences for the lower and middle classes for the generations of discouraging investment via higher inflation rates. For example, I consider it a significant contributor to wealth inequality.
Sorry, I won't subscribe to conspiracy theories without real evidence. Some private institutions publish their own numbers, and they are not much diff than govt's.
Such as your monetary policy conspiracy? If we inflate money at certain rates, the economy will magically use resources and labor efficiently? Or higher economic activity is somehow magically good for lower and middle class?
(Score: 0) by Anonymous Coward on Saturday October 15 2016, @05:49PM
But it was transferred from somewhere else, and is largely why so many banks failed: they put all their eggs into the mortgage basket; ignoring diversification wisdom. It was a transfer of resources from other areas into mortgages, and that makes it NOT comparable to HM. Bubbles like that have been happening since long before USA existed. Example: the tulip fad. The tulip fad had nothing to do with money supply.
Runaway inflation doesn't either unless the gov't keeps the printing press running. A gov't can take all the money out and put as much in as they want (perhaps not for good reasons).
I compare to water in a hydraulic system: too little water and everything is sluggish, too much water and equipment is damaged and leaks form. One extreme is not inherently worse than the other. (HM perhaps could have averted WW2 by rescuing the world slump.)
Mostly via QE-like techniques, not direct HM. And their inflation is still below par. If there are any side-effects of these programs, excess inflation is NOT one of them.
Often there are a lot of things going on (changing) at once so its hard to know what is causing what. Thus, it does require some human judgement to make causative conclusions, and different analysts come to different conclusions.
I thought you agreed that different groups are affected diff by changes in money supply, such as savers taking a hit.
Wrong! The size of the money supply is arbitrary. Leaving it "the same" is also manipulation because that's an arbitrary point. Some decision process has to decide whether it's increased or decreased or left the same.
How does inflation discourage investment? Right now co's and investors are sitting on cash because they don't see enough consumers to absorb any expansion. HM would put money in the pockets of consumers.