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That’s a bright idea from Galbraith. Of course the idea is a bit illogical: i.e. a country should not have to adjust minimum wage rates in order to adjust aggregate demand. But he admits it is not 100% logical.
One of the mysteries of the world is how it is that Australia has such a comprehensive social insurance system (universal Medicare and a Social Security system so broad it'd make Dennis Kucinich weep-- and yes they call them "Medicare" and "Social Security") with less govt spending as a percentage of GDP than the US.
Leaving aside we spend more than twice a much per capita on defense, I think a primary reason is that Australia doesn't waste its social insurance dollars (incidentally, Aus$ trades roughly at par with US$) subsidizing low income employers. The US minimum wage is $7.25/hr and if a full-time worker jumps through the right hoops (sometimes on a monthly basis), they can receive means-tested food stamps, Sect. 8 housing voucher, TANF day care subsidy and EITC tax credits, among others. The level and availability of the benefits varies widely by state (ironically, Sarah Palin's oil-rich Alaska has the nation's broadest safety net).
Australia has a minimum wage of $15.51/hr (and 5.2% unemployment). In most US states, a worker paid that much would earn too much to even qualify for means-tested aid. By subsidizing low-income wages, the US govt has absorbed most of the cost of providing the working poor a living wage, in the bargain also driving down the market wage scale (the so-called Speedhamland Effect). By stark contrast, in Australia the cost keeping employees fed and housed is absorbed by their employers, leaving the govt free to target its social spending on things other than subsidizing low-wage employers. http://www.thesocialcontract.com/artman2/publish/tsc_19_3/tsc_19_3_rubenstein_3_printer.shtml
Incidentally, adjusting 1968's $1.60/hr minimum wage by SSA's Average Wage Index-- which is how they normalize wages over the length of a worker's career-- gets you to $12.00/hr. Minimum wage workers today earn 60% less than their counterparts 44 years ago. http://www.ssa.gov/oact/COLA/AWI.html
"This guy sure loves his deficit reduction.... and with the added benefit of saving social security to boot!"
I disagree Matt. Galbraith knows the score, but he also knows that you can't beat the Gospel into someone.
"In 601 A.D., Pope Gregory the First issued a now famous edict to his missionaries regarding the native beliefs and customs of those peoples he hoped to convert. Rather than attempting to obliterate the customs and beliefs of native races, Pope Gregory instructed his missionaries to employ such traditions. For example, if a certain group worshipped a tree, then rather than cut that tree down, the Pope advised that it be consecrated to Christ and its worship be allowed to continue." :o) http://www.novareinna.com/festive/hallow.html
Where does anyone think we got Christmas trees? Or that we celebrate Christmas at the time of the winter solstice? And a whole lot of other things, like the Easter bunny? :o
That’s a bright idea from Galbraith. Of course the idea is a bit illogical: i.e. a country should not have to adjust minimum wage rates in order to adjust aggregate demand. But he admits it is not 100% logical.
ReplyDeleteYes here's a good one:
ReplyDelete"Because payroll- and income-tax revenues would rise, the federal deficit would come down. Social Security worries would fade."
This guy sure loves his deficit reduction.... and with the added benefit of saving social security to boot!
Boy you can't beat that, it's like two birds with one stone!
....This guy is not helping AT ALL. In fact he is a liability at this point, he is making NEGATIVE contributions, this article sets us back.
He should be asking Warren to write the forward to his books...
One of the mysteries of the world is how it is that Australia has such a comprehensive social insurance system (universal Medicare and a Social Security system so broad it'd make Dennis Kucinich weep-- and yes they call them "Medicare" and "Social Security") with less govt spending as a percentage of GDP than the US.
ReplyDeleteLeaving aside we spend more than twice a much per capita on defense, I think a primary reason is that Australia doesn't waste its social insurance dollars (incidentally, Aus$ trades roughly at par with US$) subsidizing low income employers.
The US minimum wage is $7.25/hr and if a full-time worker jumps through the right hoops (sometimes on a monthly basis), they can receive means-tested food stamps, Sect. 8 housing voucher, TANF day care subsidy and EITC tax credits, among others. The level and availability of the benefits varies widely by state (ironically, Sarah Palin's oil-rich Alaska has the nation's broadest safety net).
Australia has a minimum wage of $15.51/hr (and 5.2% unemployment). In most US states, a worker paid that much would earn too much to even qualify for means-tested aid. By subsidizing low-income wages, the US govt has absorbed most of the cost of providing the working poor a living wage, in the bargain also driving down the market wage scale (the so-called Speedhamland Effect).
By stark contrast, in Australia the cost keeping employees fed and housed is absorbed by their employers, leaving the govt free to target its social spending on things other than subsidizing low-wage employers.
http://www.thesocialcontract.com/artman2/publish/tsc_19_3/tsc_19_3_rubenstein_3_printer.shtml
Incidentally, adjusting 1968's $1.60/hr minimum wage by SSA's Average Wage Index-- which is how they normalize wages over the length of a worker's career-- gets you to $12.00/hr. Minimum wage workers today earn 60% less than their counterparts 44 years ago.
http://www.ssa.gov/oact/COLA/AWI.html
I'm sorry I misphrased that last sentence. They earn 60% of what their counterparts earned in 1968 (so a 40% decline).
ReplyDelete"This guy sure loves his deficit reduction.... and with the added benefit of saving social security to boot!"
ReplyDeleteI disagree Matt. Galbraith knows the score, but he also knows that you can't beat the Gospel into someone.
"In 601 A.D., Pope Gregory the First issued a now famous edict to his missionaries regarding the native beliefs and customs of those peoples he hoped to convert. Rather than attempting to obliterate the customs and beliefs of native races, Pope Gregory instructed his missionaries to employ such traditions. For example, if a certain group worshipped a tree, then rather than cut that tree down, the Pope advised that it be consecrated to Christ and its worship be allowed to continue."
:o)
http://www.novareinna.com/festive/hallow.html
Then he has the right to remain silent ;)
ReplyDeleteResp,
@ Beowulf
ReplyDeleteWhere does anyone think we got Christmas trees? Or that we celebrate Christmas at the time of the winter solstice? And a whole lot of other things, like the Easter bunny? :o