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Saturday, August 3, 2013
beowulf — Dealing with stagnant wages the Jason Statham way
The ever-resourceful beowulf comes up with another ingenious plan, this time for a minimum wage by locale that pits employers against landlords and city against city.
There are no rent controls in Nova Scotia. There is a minimum wage. Consequently, the amount of rent a landlord can charge is related to the average income of tenants.
Do lower wages in NS result in a lower cost of living or vice versa?
British Columbia does have rent controls. It's cost of living in terms of rent/housing is among the highest in the country. The minimum wage in BC is lower than in NS.
The mechanism of supply and demand trumps rent controls or the level of the minimum wage. This is due to additional factors inherent in every regional economy.
What wants to live in NS instead of BC? It's like comparing rents in California or Manhattan to Mississippi or Alabama. Rent has to do with land value and land value is higher with desirability of location, which is the driver of demand. The plan takes that into consideration.
That's like asking who wants to live in Vancouver's east side instead of Victoria. The reason isn't exclusively a question of income.
City vs city wouldn't be more effective than pitting BC vs NS. Even at the level of neighbourhood vs neighbourhood there is a tendency to create bedroom communities that segregate where we live from where we work.
City vs city wouldn't be more effective than pitting BC vs NS
IN the US, the states are pitted against each other and bid aggressively for firms to relocate by providing attractive advantages, e.g., tax credits. But states also compete by providing infrastructure, a trained workforce, law & order, etc. Cities also do this, and even towns in attempting to attract firms.
So this market is already in existence in a similar way. So it's not a huge stretch to the beowulf plan.
I am not advocating for it yet, but it does solve issues associated with a countrywide minimum wage in a large country with a great deal of asymmetry. A federal minimum wage of $20 might be paltry in Manhattan and handsome in Mobile.
Enticing large businesses to invest or relocate to another jurisdiction is done in Canada. Large businesses also threaten to leave a location in an attempt to extort the same kind of enticements. It's just another race to the bottom.
How about easing worker mobility with generous moving grants?
Bob, the problem is how to avoid the asymmetry inherent in a federal minimum wage. The minimum wage really needs to be symmetrical with prices in the locale. The beowulf plan is to use rent as the anchor, forcing a tradeoff between rent and wage. There already is a tradeoff between them in most places but it does not reach to the bottom. As a result, low wage business plans like Sam Walton's, which is now the standard, result in subsidies to firms through welfare payments required to supplement a below subsistence wage.
I don't think there is a way to avoid differences in the cost of living. The market 'solution' is to allow booms and busts to occur and then to unwind.
Walmart receives an indirect subsidy due to the social safety net. But even if those supports did not exist, they might still be able to hire people at the same low wages, due to high levels of unemployment.
The Fed currently uses the construction and building materials industries as their buffer stock of workers as they adjust the price of credit to control the economy. And oh boy is it volatile. During the crisis major building materials sales dropped 75-80% for many major suppliers and then a few years later bounce 40 or 50% back or more.
I like this idea because it would reduce the nationwide cyclicality of construction and create smaller cycles between geographic regions and more directly link monetary policy to credit growth to wage growth to inflation presuming real estate credit remains by far and away the largest source of credit.
Right. "The market system" works only for the ownership call and their minions and cronies. Workers are commodities and the objective is to keep wages as low as possible and socialize the externalities involved.
That's why in the end, market solutions don't work. In a democracy where workers have a voice, government has to step in and either with subsidies or regulations.
Neoliberal capitalism aka "the market economy" is incompatible with democracy as government of the people, by the people and for the people.
sounds like a crazy idea
ReplyDeleteThat's what I thought initially about the platinum proof coin.
ReplyDeleteIt turned out to be crazy wisdom.
There are no rent controls in Nova Scotia. There is a minimum wage. Consequently, the amount of rent a landlord can charge is related to the average income of tenants.
ReplyDeleteDo lower wages in NS result in a lower cost of living or vice versa?
British Columbia does have rent controls. It's cost of living in terms of rent/housing is among the highest in the country. The minimum wage in BC is lower than in NS.
The mechanism of supply and demand trumps rent controls or the level of the minimum wage. This is due to additional factors inherent in every regional economy.
What wants to live in NS instead of BC? It's like comparing rents in California or Manhattan to Mississippi or Alabama. Rent has to do with land value and land value is higher with desirability of location, which is the driver of demand. The plan takes that into consideration.
ReplyDeleteThat's like asking who wants to live in Vancouver's east side instead of Victoria. The reason isn't exclusively a question of income.
ReplyDeleteCity vs city wouldn't be more effective than pitting BC vs NS. Even at the level of neighbourhood vs neighbourhood there is a tendency to create bedroom communities that segregate where we live from where we work.
City vs city wouldn't be more effective than pitting BC vs NS
ReplyDeleteIN the US, the states are pitted against each other and bid aggressively for firms to relocate by providing attractive advantages, e.g., tax credits. But states also compete by providing infrastructure, a trained workforce, law & order, etc. Cities also do this, and even towns in attempting to attract firms.
So this market is already in existence in a similar way. So it's not a huge stretch to the beowulf plan.
I am not advocating for it yet, but it does solve issues associated with a countrywide minimum wage in a large country with a great deal of asymmetry. A federal minimum wage of $20 might be paltry in Manhattan and handsome in Mobile.
Enticing large businesses to invest or relocate to another jurisdiction is done in Canada. Large businesses also threaten to leave a location in an attempt to extort the same kind of enticements. It's just another race to the bottom.
ReplyDeleteHow about easing worker mobility with generous moving grants?
Bob, the problem is how to avoid the asymmetry inherent in a federal minimum wage. The minimum wage really needs to be symmetrical with prices in the locale. The beowulf plan is to use rent as the anchor, forcing a tradeoff between rent and wage. There already is a tradeoff between them in most places but it does not reach to the bottom. As a result, low wage business plans like Sam Walton's, which is now the standard, result in subsidies to firms through welfare payments required to supplement a below subsistence wage.
ReplyDeleteI don't think there is a way to avoid differences in the cost of living. The market 'solution' is to allow booms and busts to occur and then to unwind.
ReplyDeleteWalmart receives an indirect subsidy due to the social safety net. But even if those supports did not exist, they might still be able to hire people at the same low wages, due to high levels of unemployment.
This comment has been removed by the author.
ReplyDeleteThe Fed currently uses the construction and building materials industries as their buffer stock of workers as they adjust the price of credit to control the economy. And oh boy is it volatile. During the crisis major building materials sales dropped 75-80% for many major suppliers and then a few years later bounce 40 or 50% back or more.
ReplyDeleteI like this idea because it would reduce the nationwide cyclicality of construction and create smaller cycles between geographic regions and more directly link monetary policy to credit growth to wage growth to inflation presuming real estate credit remains by far and away the largest source of credit.
Right. "The market system" works only for the ownership call and their minions and cronies. Workers are commodities and the objective is to keep wages as low as possible and socialize the externalities involved.
ReplyDeleteThat's why in the end, market solutions don't work. In a democracy where workers have a voice, government has to step in and either with subsidies or regulations.
Neoliberal capitalism aka "the market economy" is incompatible with democracy as government of the people, by the people and for the people.
This comment has been removed by the author.
ReplyDeleteYes, I originally thought the Platinum coin was a joke too. Don't underestimate Carlos's ideas - or the ideas he finds and supports.
ReplyDeleteAlso, Ryan Harris you might want to see my posts on the Real Estate Monetary Standard.