Asymmetrical Information

Why would you waste your time reading the modern equivalent of the communist manifesto? Seems there are better uses of one's time, like, say, picking dandruff out of your hair.

When in doubt, compare liberals to communists! I saw John Stossel doing it last night, called Global Warming alarmists "socialists". It was equally silly then.

You're right, Rickm. It is silly to call Global Warming alarmists "socialists". They are really totalitarian religious fundamentalists. But then so are socialists.

Except in Stossel's case he explicitly included Al Gore and implicitly included the National Academy of Sciences as alarmists, and thus "socialists" who "hate capitalism".

Barbara Ehrenreich is useful as a straw man for the economic illiteracy of the left (someone like Pat Buchannan might fill a similar role on the right.). Her arguments, those that I could understand, seem to disregard most commonly accepted economic principles and the inherent logic of such systems.

For example her claim that workers should be paid enough to live on, neglecting any mention of the value that worker provides to their employer. Calling someone a communist is certainly an insult, but this does strike one like Marx's famous statement "...to each according to his need."

She seems to be arguing essentially on emotion, without a clear understanding of how modern economics works. A good example of why basic economic education should be provided for all citizens.

The fact that Nickel and Dimed is required reading for Freshmen at several Universities is just more evidence of the Left's desire to brainwash our youth with stuff and nonsense. I will give my children a copy of this book before they attend college as a form of inoculation.

Stop giving Ehrenreich so much press...lest my staff read her book and start getting a little upity. Lets give Dickens press as a warning to the poor...."be careful or this could be your fate"

ps. there were writers in Dickens times who always blathered on about "why are they complaining ...they have never had it so good".
Poor houses and debtors prisons anyone?

never mind that she explicitly calls for a class war.

despte your wishes rickm, there really are socialists and communists out there that want to destroy our way of life and seize control from individuals. Kyoto is all about mass transfers of money to China, Russia and other less developed countries, handicapping the US economy, and removing the common freedom to travel as one would wish. Just cause you're a senator doesn't mean that you can't be a socialist or a communist. Look at how Maurice Strong, businessman and Kyoto cheerleader describes himself... as a socialist/communist who wants to end industrial civilisation.

These people are impossible to satyrise or exaggerate, they really are as extreme as we claim they are.

How would Kyoto "the common freedom to travel as one would wish"?

There are also people out there who thing all the worlds ills are caused by gays, but their small size and influence doesn't merit dicussion. Same with those who are being labeled "communists".

As for Ehrenreich, is she really proposing a government policy that different from the economist she was in a discussion with? They both agree on government policies that include transfers to help the poor; obviously she wants more than what the economist is proposing, but its a difference of degree, not kind.

Could their possibly be a better example of liberal arrogance than the premise that you would pretend to be poor to see what it was like? See honey, it's not like it's a game or an amusement park.

From my perspective Ms. Ehrenreich is proposing something drastically different from the economist she was arguing with. The economist was essentially arguing from the viewpoint of most neo-keynesians. That is, we should allow the free market to operate and then use some transfers to smooth out the rough edges, or outcomes we believe for some policy reason are unjust.

Ms. Ehrenreich is asking for a substantial revision of modern free-market economics. Her only specific policy proposal that I recall is her support for the living wage. In her conception, "the living wage" would provode individuals wages not based on output, skills or some measure of value. Rather she would provide wages based on need.

This is a strict removal from free market capitalism system.

I think everyone can agree that their are some areas where the free market fails and government intervention is required, and people of good faith can argue where these areas are. People like Ms. Ehrenreich seem to fundamentally distrust capitalism and would prefer some other economic arrangement.

Rickm and freedom to travel: I believe hey was referring to this EU initiative.

How can Kyoto remove freedom of travel? Easy, by dramatically increasing the price of fuel (would need to triple or more the price of gas to have an appreciable effect on carbon emissions). Al Gore et al really do want to destroy the American way of life, but they just want to do it gradually (just going by their statements on carbon emissions and the damage that the changes in carbon emissions that they desire would cause).

She's the one calling for a class war and wants the government to micromanage the retail market, and wants to bring back the bad old days of the anti-A&P laws. You're more making my type of rhetorical point, saying that there is no major difference between the two.. well there's no major difference between Ehrenreich and Kim Jong Il, just arguing over percentages given to the state (actually, they probably agree more than Barb does with Furman).

Outside of the vestigial crown granted monopolies, Dickensian economies weren't too bad. Developing countries suck, but Engalnd sucked a lot less than most current developing countries, just as most colonies were better off in the 50s than they are now.

"Rather she would provide wages based on need.

This is a strict removal from free market capitalism system."

Not really.

This would only be the case if employers were decreed by the government to pay those based what they need to live. Of course, a "living wage" could be created through a program like the EITC, with employers paying market wages and then the government subsidizing the wage and lifting it up to a specific level.

rickm,

The quote from Ms. Ehrenreich's piece that caught my eye was...

"The technical answer is the same as for any other workers: enough so that they can actually live (indoors) on their wages. "

she also goes on to say,

"I'm all for government spending to help the low-wage poor. Earned Income Tax Credit, universal health insurance, housing subsidies—bring 'em on! And higher wages too!"

By this I assume she means that employers should pay higher wages and we should have transfer programs in place.

Now she may in fact be making a very subtle and clever economic argument, but her lack of understanding apparent in the rest of her statements makes me doubt this possibility.

What did you expect jane?

Barbara simply had to respond in the hostile, beligerant manner, that she did. Jason's position didn't give her a platform with which to argue with him. His position was that any useless, brain dead, 15-year old, can stock a shelf at Wal-Mart. He is correct. They do not need to know anything about their products, and because of that, Wal-mart can oafford to charge very little for their goods. Therefore, Wal-Mart workers are not entitled to higher wages. He left Barbara no where to go except back to her principle that all jobs must provide sufficent earning power to support familes, regardless if that company has suffient profit to warrant those wages.

This debate reminds me of the useless debate that occured between Victor Davis Hanson and Arriana Huffington on whether or not the United States of America is an "Empire" (in the classicla sense.) VDH argued that it wasn't. Huffington argued that Bush shouldn't be President.

Who is against employers paying high wages, qua employers paying high wages? The debate is over how that is to be achieved.

Viewing arguments that support higher wages for the working poor, such as the ones Ehrenreich has made, as thinly vieled arguments for the radical transformation of society into communism is intellectually imprudent, in my opinion.

Well personally I am for employers fair wages. Wages that approximate the value an employee provides to their employer. For those with skills and a strong work ethic this will be high, for others low.

I don't want employers to pay high wages, I want employees to earn high wages.

If as a policy point we decide to insure some minimuim income through transfers, that is a separate issue.

Well obviously Barb disagrees with you, and so do a large number of other people.

And that does not make them commies.

Well obviously Barb disagrees with you, and so do a large number of other people.

And that does not make them commies.

Of course it makes them commies. That is without question.

The work done by the typical Wal-Mart shelf stocker can be accomplished by a 15-year old, high school Sophmore. The fact that "any kid" can do the work drives down the actual value of that work such that it does not warrant a living wage. Therefor, a 30 year old man (with 3 kids and a stay-at-home wife) doing the same job at Wal-Mart, does not entitle him to a living wage just because he needs it. He is entitled to whatever the market would pay. And right now, the Free market has found that a 15 year old can do the same job that he is doing.

So Paul,
if one believes that one should have more income derived from their work that is higher than the wage the employer is willing to pay them, then they are commies?

if one believes that one should have more income derived from their work that is higher than the wage the employer is willing to pay them, then they are commies?

No Rick. But that is not what Barbara was saying and you know it.

If one believes that one should have more income derived from their work that is higher than the wage the employer is willing to pay them, then they have the option to ask for a pay raise. If the employer says "no" (as they often will) then they have the option to LEAVE and find better paying employment. Leave your employer. Just walk out the door. You are "at will" (and that means, at your own will as well.) In a sense, your individual labour "extorts" as much as it can (in the free market) from your employer. If they want your labour back, they will give you more money. That is the way it is supposed to work in a Free market Capitalist Society.

Barbara is saying that the Government should step in and FORCE by LEGISLATION that Wal-mart pay it's people a living wage (whatever that number is.) That makes her a Communist.

rickm,

You are being willfully obtuse. Of course thinking that you should be paid more is not sufficient to make you a communist. However, thinking that the government should mandate that people be paid more - which is undeniably the position of Ms. Ehrenreich - is a catagorical departure from a market system, and is also catagorically different from supporting the EITC. In one case we have freedom; in the other government control. Can you really not tell the difference?

Let me put it another way Rick: unless you work in a sales commision based environment (where your compensation is predicated exclusively on how much product you individually move out the door, like your average Radio Shack where every sales employee gets 7% of all sales) Retail doesn't pay well. And why?

Because kids can do the work. And kids do NOT hold out for a "living wage" when they put in their application at Wal-Mart.

Retail does not require heavy labour or effort. Retail does not (typically) require special knowledge or expertise. Retail does not require the employee to work in dangerous working conditions. What are you doing? You are stocking a shelf. You are "scanning" a good. You are bagging grocieries. You are pushing a broom. You are folding a shirt. Do you really think a Retailer has to pay someone a "living wage" to do these jobs?

"Barbara is saying that the Government should step in and FORCE by LEGISLATION that Wal-mart pay it's people a living wage (whatever that number is.) That makes her a Communist."

Really? Thats not how I read it, maybe you could support, rather than just aver, your claim? Or maybe thats how you read it, letting you preconceived notions of those like Ehrenreich taint your understanding of the text?

Here are the relevant quotes:
"You want to know what Wal-Mart workers "ought" to be paid. The technical answer is the same as for any other workers: enough so that they can actually live (indoors) on their wages. This is what we call a "living wage" and can be calculated on the basis of local rents and other costs. As you know, there's a whole "living-wage movement" afoot in the land, fighting to establish, as a moral principle, that anyone who works (full-time, year-round) should be paid enough to live on."

Not here, all she is doing is claiming there is a moral reason why they should be paid more.

"Do you really think a Retailer has to pay someone a "living wage" to do these jobs?"

No, I don't. Nor have I ever claimed that. Nor do I think that those who disagree with me are commies.

It is my contention is that one can live comfortably on $7 dollars an hour. My girlfriend does it and manages just fine. As any grad student can tell you, it is annoying, but not unbearable, to live on $10,000 a year.

"You want to know what Wal-Mart workers "ought" to be paid. The technical answer is the same as for any other workers: enough so that they can actually live (indoors) on their wages. This is what we call a "living wage" and can be calculated on the basis of local rents and other costs. As you know, there's a whole "living-wage movement" afoot in the land, fighting to establish, as a moral principle, that anyone who works (full-time, year-round) should be paid enough to live on."

Tell me Rick, how do you propose a checkout girl at Wal-Mart gets a "living wage" or as Barbara so bluntly puts it.... "enough so that they can actually live (indoors) on their wages"? The job doesn't pay that. So what do you think should be done?

It is my contention is that one can live comfortably on $7 dollars an hour.

I'm not sure that I agree with you (I know that Barbara wouldn't), but I think you just blew your whole argument. People who work at Wal-Mart often make more than $7/hour.

Hey Paul
Read what I actually wrote. Read what my arguments were. Don't conflate my arguments with which you think my arguments would be, or with Barbara's argument.

My argument is that Barbara never said that government should force business' to pay a living wage, and that anyone who is in favor of a living wage is not a communist. Now, you can chose to read what I wrote, or you can chose to read what you think I wrote.

Don't conflate me with Barbara. And don't conflate those who think wages should be artificially higher with communists.

Don't conflate me with Barbara. And don't conflate those who think wages should be artificially higher with communists.

I asked you a question Rick. I asked you what should be done if the checkout gil at Wal-mart isn't paid a living wage.

You don't have an answer for me. All you have is rhetoric.

And for the record Rick, anyone who thinks that wages should be "artificially higher" (your words, not mine) than what they would be in the Free market, is a Communist. So sorry if you don't like to hear that, but it is true.

Barbara didn't offer anything other than rhetoric. You are saying that Wal-mart should pay more because it is the "moral" thing to do. Let me give you and Barbara a hint that isn't rhetoric: Free Market economics is A-Moral. Just because you think something should be a certain way, it doesn't change anything.

The only way that checkout girl at Wal-Mart makes a "living wage" is through Communism.

"I'm not sure that I agree with you (I know that Barbara wouldn't), but I think you just blew your whole argument"

Paul,
this is further evidence that you did not read or pay attention to my arguments, and conflated them with Barbara's.

"I asked you a question Rick. I asked you what should be done if the checkout gil at Wal-mart isn't paid a living wage."
Nothing. I really don't care what she makes.

"And for the record Rick, anyone who thinks that wages should be "artificially higher" (your words, not mine) than what they would be in the Free market, is a Communist."
The EITC effectively artificially raises wages. By your definition, anyone who supports that is a Communist.

"You are saying that Wal-mart should pay more because it is the "moral" thing to do."
I never said that. Read what I wrote. I implore you.

"The only way that checkout girl at Wal-Mart makes a "living wage" is through Communism. "
or through a program like the EITC.

Yep, regardless of their value to the company and their productivity they "Deserve" a living wage because they "need" it.

So we believe that needs trump value when calucalting wages. That her "feelings" justify Government action, and that the action should be to interfere in an agreement made voluntarily between employer and employee.

Surprisingly as I write, I find myself in agreement with rickm (which wasn't where I was starting)... to proclaim Communism would require the Government to take administrative control of Wal-Mart; not just to regulate some aspects of business.

She is however a "my feelings are more important than your facts" liberal making economic proclamations without education, knowledge, or common sense; which is a good way to get communism, or some other unworkable plan proposed... She isn't there yet though, a better definition of her views would be socialism and nanny-statism than communism. She is definitely not fond of Capitalism; but we aren't at a diametriacally opposed position.

Rick,

I read what you wrote. You wrote that you can survive on $10,000 a year, because your GF can and she is a student. Sure you can live on $10,000 a year. If you have no dependants, you live at home, or if you have 5 room mates (and you share bedrooms) you can live on $10,000 a year. Just like a student, enjoy your Top Ramen. Either way, this "argument" of yours goes a long way in describing to me where your thinking goes.

I think you have a lot to learn.

The EITC effectively artificially raises wages. By your definition, anyone who supports that is a Communist.

We all know about the Earned Income Tax Credit. If you have sufficent dependants and you don't have sufficent earnings, the government gives you money (that you didn't earn) at the end of the year. Of course, the government can only afford to give you that EITC money if they take it from someone else who paid it. There is another term for this that Karl Marx defined perfectly: "From each according to his ability. To each, according to his need."

If you don't want to call that Communism, that is fine with me. I don't care. But I certainly hope that you are not advocating that the EITC be overhauled to the point that all people who don't earn enough be rewarded with enough earnings for a "living wage."

From each according to his ability, to each according to his needs. That's Marxism, folks. I find it very difficult to see how BE's philosophy differs in any material way, but maybe I'm missing something.

I don't care. But I certainly hope that you are not advocating that the EITC be overhauled to the point that all people who don't earn enough be rewarded with enough earnings for a "living wage."

Why not?

"The work done by the typical Wal-Mart shelf stocker can be accomplished by a 15-year old, high school Sophmore."

And in a few years it can (profitably) be accomplished by a robot. (It could probably be done by a robot right now as a proof-of-concept.) Every government-mandated rise in the price of that shelf-stocker's labor brings that day closer.

Why not?

Because it will never be enough Karl. No amount of money given in EITC will bring those millions a living wage, as any increase will simply drive up the costs to live for everyone.

LBJ was dead wrong. You can't wipe out "Poverty." All you can do, is allow that magnificent engine called Capitalism and Free Market Economics to continue to move that Bell Curve to the right, making goods cheaper, and all our quality of life, better. Then, those who are in "Poverty" will live better and better from generation to generation.

"Poverty" (and what it means to live like that) has changed dramatically over the last few decades. 40 years ago, "Poverty" may have meant no TV, no washing machine, no dryer, no car, two changes of clothes (and those were hand-me-downs), and no going out to McDonalds. 20 years ago, "Poverty" may have meant, no Atari, no color TV, no FM stereo, no Cable TV, no Microwave Oven, and no VCR. 10 years ago "Poverty" may have meant no Nike Hi-Tops sneakers, no LapTop Computer, no credit cards, no air-travel, all your new clothes are from Wal-mart, and you eat McDonalds every night. Today, "Poverty" may mean two 10-year-old cars in the driveway, a used cell phone and very limited calling plans, you fly Southwest (and not Delta), and you only have a $1000 limit on your Visa Card. But you are still in "Poverty."

"Poverty" has sure changed a lot in the last 40 years, hasn't it Karl?

Much better is: "From each according to his needs; to each according to his ability."

No amount of money given in EITC will bring those millions a living wage, as any increase will simply drive up the costs to live for everyone.

At first I thought you meant that the EITC would drive up the costs of production, but judging from

"Poverty" has sure changed a lot in the last 40 years, hasn't it Karl?

I assumed you mean that what "poverty" is will shift if we increase the EITC.

The thing is your statement is at odds with the facts. What constitutes the poverty line has not moved since it was created. Poverty in the US is the cost of nutrionally sufficient diet times 3.

The number of American's in poverty after accounting for the EITC has declined dramatically since the 1960s. I see no particular reason why it could not decline further.

Second, however, suppose we did increase the EITC has the economy grew? Would this necessarily be a bad thing?

There is a limit. Not to wax too nerdy but if the EITC becomes greater than the difference between the productivity of an additional Wal-Mart worker and the average productivity of all Wal-Mart workers then we have to become concerned about how many people are on the EITC and whether or not the transfer is sustainable. Short of that, however, such a program can last indefinately and experience regular increases in transfer size.

Paul,
When I implored you to read what I wrote it was in order to show that my arguments did not resemble Barbara's. I am unsure as to why you did not address that in your reply, but rather attacked the example I brought up that showed where it was possible to live on $10,000 a year.
Nevertheless, your statement that I "have a lot to learn" is silly and pompous. As if your financial experiences have led you to a truth that I can only wish for.

Damn, Eric J., you beat me to it. The primary beneficiaries of a "living wage" would be producers of capital goods.

By the way, rickm, reread the previously cited Ehrenreich quote
I'm all for government spending to help the low-wage poor. Earned Income Tax Credit, universal health insurance, housing subsidies—bring 'em on! And higher wages too!
Its pretty clear she's not talking about the EITC when she demands living wage. She demands living wage in addition to things like EITC.

The thing is your statement is at odds with the facts. What constitutes the poverty line has not moved since it was created.

I'm not sure if I agree with that, but okay.

Poverty in the US is the cost of nutrionally sufficient diet times 3.

Well, since food costs take up an even smaller and smaller percentage of our take home pay (than it did in any other time in history), using your definition of poverty, the number of people in poverty would be dwindling. Thank God for Wal-Mart.

However, I was under the impression that "Poverty" is a percentage level of earnings that is dependant on the median income. Median income goes up, so does the poverty line.

Since this thread is touching on the morality of a Wal-mart worker's situation I offer this two cents: If you grant that greed is a spiritual disposition then I submit that Wal-Mart workers would be rather greedy to demand more money than Wal-Mart offers them.

Those who are most often accused of being greedy, the financiers, the business owners etc. -- these folks got wealthy by being generous because they provide stuff -- jobs, housing, goods etc. And the more generous they have been the richer they have become! In contrast, those who want more money and are not willing to give more in return are the greediest of them all.

Karl Smith,

I think that what the poverty line means has in fact changed greatly over time. It is true that on it's initial construction (by some economist whose name I can't currently remember) the poverty line was approximately the nutritional cost to feed a family of 4 * 3, as food was about 1/3 of people's budget.

However, this level has never been reset to account for the generally declining cost of food relative to other goods over the ensuing decades. Instead, they took whatever calculation was made back then and increased it by the CPI annually.

So it is a very odd statistic. It is the approximate cost in the 1960's to feed a family of four raised by inflation. Since nowadays food only accounts for around 10% of most people's budget the statistic is clearly flawed.

One can argue whether it over or underestimates poverty, but it is in the end a rather flawed measure.

It is certainly true that the raw consumption of goods for those in poverty today (who have things like color TV, cars, eat out often, access to information on the internet, cell phones) is more than those who were middle class in prior decades.

lannychiu,
You're right. I hate to sound like Foucault, but one of the reasons we can't understand and thus control poverty is that we don't have rational statistics that accurately measure it.

Don't forget to mention that someone with tons of assets sipping wine in a mansion can have a low enough income to be considered in poverty!

Don't forget to mention that someone with tons of assets sipping wine in a mansion can have a low enough income to be considered in poverty!

Not to mention 8,000,000 full time college students who have little to no income. Technically, they would be in "Poverty" even though they might not consider themselves that way.

And for the record Rick, anyone who thinks that wages should be "artificially higher" (your words, not mine) than what they would be in the Free market, is a Communist. So sorry if you don't like to hear that, but it is true.

No, Paul, anyone who makes that argument is a strong socialist. A communist would propose confiscating ownership of Wal-Mart from Wal-Mart and, nominally at least, dividing the spoils amongst the workers. You might well have your position constructed as to dislike both outcomes equally, and that's fine so far as you can carry water with it, but continued beating of the propaganda drum won't help your standing.

Meanwhile, a large portion of the 'living wage' argument can be shut down like this:

Excluding, for a moment, all the trappings men have built up in the present age, a man's basic lot is subsistence agriculture, else he starves. Nature doesn't give two hoots whether you thought you were doing a reasonable day's work; if the farmer doesn't work in such a way as to provide a sustainable source of food production, accounting even for factors out of his direct control such as climate and rains, HE DIES.

Where to go from there is open to debate, since in the industrial/informational society, it is neither desirable nor sustinable to have everyone working at subsistence agriculture; the abundance of wealth allow us other options. But concomitantly, riches can be destroyed as surely as they were created.

Anyone who cannot keep this appreciation of basic human existence in perspective when making arguments like "living wage" has disconnected themselves from reality.

Rick,

Wow. What a whole bunch of nothing.

From now on, I'm calling you "Rhetoric Rick."

:-D

Oops. I take that back Rick. I didn't see that anony-mouse made that post.

Jane Galt, I also read Nickeled and Dimed and I also disliked the book. What annoyed me the most was the way the author looked down at the other poor people she worked with. The attitude that she was naturally superior to them and her upper-middle-class ways were better than their ways was extremely annoying.

Why couldn't they find a real poor person to write the book instead of a rich liberal pretending to be poor?

So it is a very odd statistic. It is the approximate cost in the 1960's to feed a family of four raised by inflation. Since nowadays food only accounts for around 10% of most people's budget the statistic is clearly flawed.

You are correct that the line is simply moved up by the CPI. However, I don't know that this means it is flawed.

How the line was created is relatively arbitrary.. Whats important is that it moves in a meaningful way. I think adjusting for CPI and CPI alone is pretty meaningful approach.

The problem isn't the CPI so much (though there have been recurrent complaints about just what's in its "shopping basket"), but whether it's reasonable to assume that 33% of a poor family's income goes to food, and how the balance is typically spent. It seems to me that food's gotten a lot cheaper, and housing a lot more expensive, since this metric was first used. Try turning it around: Take what a family of four would eat in a month, double the cost, and see if you could rent an apartment in your locality that would fit a family of four for that price. There might be places you could do it; maybe I just don't live in one of them. And obviously any family has expenses beyond food and rent. Lots.

The question then is where does the balance go? Is it in fact mostly to shelter, or is it to color TVs and video games and cool sneakers and whatnot? Surely there's a lot of that, and any definition of "poverty" that doesn't disregard the stuff people just assume any American ought to own — stuff that didn't even f'ing exist ten or twenty years ago — is silly. Poverty is not not having an iPod.

No worries, Paul, "a whole bunch of nothing" applies equally well to much of your posting material, and so far in this thread, you're waaaaay ahead of me on the word count.

Touche.

en garde!

Half Sigma,

"Why couldn't they find a real poor person to write the book instead of a rich liberal pretending to be poor?"

Because real poor people tend not to have the ability and self-discipline needed to write a book even a bad book. And the ones that do tend to devote it to becoming not poor and writing a book about poor people is not the easiest way out of poverty.

there's no major difference between Ehrenreich and Kim Jong Il

Ehrenreich didn't sing "I'm So Ronery" in the movie Team America: World Police.

It seems to me that food's gotten a lot cheaper, and housing a lot more expensive, since this metric was first used.

This is true. But doing anything other than scaling means that we have to have a firm idea about what "poverty" means. If we scale by CPI then we have a consistent line.

You may think the line is too high, too low or not responsive enough to technology but it is consistent and it allows us to track our progess.

The thing with stats is that you measure "something" precisely. Then you can modify that something to fit your needs.

I.e. I might argue that a "living wage" is 150% of the poverty line. Some may say poverty line adjusted for local housing costs or poverty line plus the cost of transportation.

if one believes that one should have more income derived from their work that is higher than the wage the employer is willing to pay them, then they are commies?

If they believe the government should force this to happen then they are, at the very least, socialists. If they believe it will magically happen without government involvement because it is The Right Thing To Do then they're merely idiots.

The discussion of "what constitutes poverty" is fatuous and sophmoric.

The true test of poverty is not what your income or net worth is but rather what your potential for future income is.

Mike Burke-- a guy who was an entertainment entrepenuer in the 50's and 60's had a classic line about this very topic, he said
"I have been broke many times in my life but I have never been poor!"

I myself have had to declare personal bankruptcy twice in my life and there were times I did not know how I was going to get thru the month but I have never, ever considered myself to be poor. Not even in 1975 when I earned a total of $1100.00 (eleven hundred dollars U.S.) with a wife and 2 kids.

What I am saying here, for those of you who don't get it, is that "poverty" (in a capitalist free market society) is a state of mind, not the amount you get paid per hour.

Of course the opposite of this woud be that, in a socialist or communist society, every one, except the elites, is "poor", because they have no hope of bettering their situation by their own efforts.

thedaddy

Dan, why don't you like socialist?
Do you like democration? By america, of course.

Re: you can have big assets and income-wise, be considered at/below the poverty level.

True dat. My sister and her family are farmers, with huge assets in land, equipment, cattle, and stock holdings (built up multigenerationally). Wealthy peeps, but you can't write a check on this kind of stuff--liquidity issues. Because of the nonturnover of their portfolio, and how taxes depreciate and write off most of their business assets and expenses, they look dirt poor on their taxes and cashflow situation. They have occasional work off-farm for health insurance, cash flow, etc. About a year ago, they were uninsured and wanted to use the state children's insurance program to insure the kids, and it's a pay program. These multimillionaires were told that they made too little money to buy their kids insurance, they had to get free Medicaid for the whole family! They didn't want it, they wanted to pay, but were not allowed to! (Dad is a Republican politician out of office currently but about to run for the state legislature--didn't want welfare!)

Previously, they had bought catastrophic coverage health insurance and paid everything routine, including childbirth. (Remember, the purpose of health-or any-insurance is not to guarantee your health, but to protect against devastating financial losses.) So, they comparison shopped docs and hospitals and negotiated. They sold cows to raise the cash to pay the bill. The hospital business office called social services on them for a home visit and evaluation, assuming they must be drug dealers or something, since NO ONE pays cash at checkout.

Lannychiu: "I don't want employers to pay high wages, I want employees to earn high wages."

Precisely! "Your raise is effective when you are!"

I am an educator, and one of the few that thinks in terms of each office day--have I generated enough revenue to cover my fat salary? I am happy to say yes, for most days--except the ones spent in meetings. Blechhh. I must be worth it to have around, to my employer, and not think I just have a right to my job and pay. Even with longevity and tenure, I tot up my days and earn my money (and enough revenue to cover others' salary too). Never stop hustling and thinking value added!

The restaurant and retail jobs of the world are a part of the opportunity structure. People sort themselves out on this structure, with their choices and actions and results that are entirely their own responsibility, and some people end up on the bottom end of the structure due to their own poor choices. Who works these jobs permanently, trying to support a family? No one with any sense. Having a low end job as a lifelong career shows that the person lacked a shred of intelligence (to figure things out and apply their mind), gumption (to do something to improve one's lot), work ethic (the pro slacker, stick it to the Man attitude), and sobriety (choosing to save one's pennies for a joint instead of more training or a business suit), and character/integrity (people who have no accountability and who take advantage are not trusted with greater responsibility)--a combination of any or all of those things.

Also, the contract has changed for since the Clinton/Republican Congress Welfare Reform. Some folks saw their best economic opportunity as living off the government tit, and now the government says they have to work so many hours per week. A poor, unskilled, uneducated welfare lifer with no work history is not going to walk into a high paying managerial or professional job! Duh! Where are they working? Wal-Mart! BE ignores the fact that there's people working at WM for just the number of hours the government requires them to, to keep their welfare (the check, food stamps, medical card, section 8 housing, etc.); so their pay is FAR HIGHER than their manager's indeed, if the value of all this is added up. When their five year time limit is up and their welfare ends, they move to another state...sign up for welfare again, and work at WAL MART again!

Life is a great teacher and motivator. You can learn the easy way (trust what your parents, teachers, and counselors are telling you) or you can learn the hard way--go out there and let life kick your a$$ until you're tired of the low pay grind. Then you'll be in to see me to sign up for the better education and training you passed on at 18 to try and make a better life for you and the family you're about to have. (Impending parenthood often induces this panic.) --This situation is far preferrable and has much better results over the long term, than the multistate welfare lifer WalMart government slave.

Our poor people are sheltered, fed, clothed, and cared for medically and in many other ways. My parents growing up in 30's England were HUNGRY and mom had to drop out of school at 14 because she didn't have shoes. I have a friend from India who says he wanted to live in a country where poor people were fat. Think about it!

Instead of following BE's plan, we should confiscate the TVs of poor people because it's stimulating their consumer desires for an impossible Hollywood standard of living no one can attain and it's making them miserable. Then they'll learn to be happy and grateful for what they do have. (Tongue planted FIRMLY in cheek.)

I could ramble on more, but I have to go get ready for my high paying job helping others do all the right things to move up the opportunity structure!!! *grin*

there's no major difference between Ehrenreich and Kim Jong Il

The difference is, people like Kim Jong Il call people like Ehrenreich "useful idiots."

The discussion of "what constitutes poverty" is fatuous and sophmoric.

The true test of poverty is not what your income or net worth is but rather what your potential for future income is.

Again - and this is important - you have a point. But your point does not make discussion of the income line fatuous or sophmoric.

You might say what we really need to compare the line to is the interest stream associated with the net present value of potential income (past and future).

There is good reason to think this is an appealing, though terribly difficult to calculate, measure. Indeed, if you take the permnant income hypothesis seriously then you can approximate this with expenditure. This is the grounds for making expenditure rather than income the measure of interest.

However, none of this impacts whether or not a consistently measured line is a useful statistical tool. What you caompare to that line or how you adjust the line may vary but without a consistent line you cannot do comparisons over time.

"My parents growing up in 30's England were HUNGRY and mom had to drop out of school at 14 because she didn't have shoes."

AHH THE GOOD OL DAYS!

"What I am saying here, for those of you who don't get it, is that "poverty" (in a capitalist free market society) is a state of mind, not the amount you get paid per hour."

That's right. I supported a family of four on Air Force E2 pay for a while. It's a little hard to compare because of all the freebies servicement get, but I think that was comparable to a paycheck a little below the poverty line plus Medicaid. We had to budget very, very carefully, but we weren't needy. We even managed to save a little and paid loans off ahead of time. I knew single airmen that got into financial trouble even though they had nearly as much pay and their rent and food were free. I knew higher ranking and better paid Air Force members with the same size family who couldn't make ends meet. But (aside from areas where housing is ridiculously overpriced) if you understand the difference between luxuries and necessities, and if you work at finding the best price for the necessities and making your non-consumable possessions last, you have to be far below the poverty line to actually be poor.

OTOH, there are people with incomes above the poverty line that get their heat shut off in the middle of winter for non-payment. In every recent case that I know of, those people had a TV set in every room, VCRs and DVD players, and a $5/day cigarette habit, if not worse. Forget about the elctronics, $5/day is over $1800 a year. My heat and electricity together don't run quite that much.

I have a friend from India who says he wanted to live in a country where poor people were fat.

Dinesh D'souza?

to me, this debate doesn't even get off the ground because most people seem to ignore that, by any objective standard, there are almost no poor people in the US (as the quote re fat poor people indicates). if you think otherwise, you obviously haven't been to india or brazil or most of africa or etc. put another way, the US does a very good job of providing riduculous material prosperity for almost all of its citizens (and you could argue that those who really have nothing have opted out). people bemoan the stupidity of poor people who buy their food at 7-11 and wear $100 sneakers, but that just shows those people aren't truly poor in any meaningful sense (no one chooses shoes over eating).

the debate also seems odd to me because why would we deal with this "problem" through wages in any event? doesn't it make far more sense to bolster our welfare system, so that the market can set wages by supply and demand, the cost isn't borne by employers, yet those who nonetheless really still can't get by will be provided for? is the current focus on walmart really just a way to backdoor poverty-assistance programs, which the left can't really openly promote after welfare reform by clinton was deemed such a success?

1) Clinton's welfare reform wasn't a success. Welfare rolls are down, but not necessarily because people are leaving because they got paying jobs. Many people who leave are making less money than they were getting while on welfare and/or get recycled back onto welfare. And poverty is on the rise, as is the number of residents at homeless shelters (at least in NYC anyway).

2) I don't know enough about economics to debate it too much, but it seems to me that the problem isn't the salaries people are making. One person makes $10,000 a year and does fine; another person makes $10,000 and feels deprived and gets in debt over his/her head. Isn't all this talk about a living wage/communism/free market capitalism/government control empty if we don't consider corporate morality? Whatever people think about BE's economics, what she's really arguing is morality. Just because a company can make a billion dollars in profit, should it if in order to do so it must pay its employees salaries that don't sustain them? When did it become anathma for a corporation to make only, say, $500 million in profit? And the morality question trickles down everywhere - to CEO salaries that continually skyrocket while their companies continually downsize, and energy companies that vaporize their employees' retirement plans.

3) Yes yes I know - I'm a pinko commie.

public cos have duties to their shareholders. further, if the market doesn't set salaries, how do you do it? that is, why stop at $10 per hour minimum wage? go to $30 and everyone's better off, right? or the workers are at least, until they lose their jobs and the company goes under. unlike (e.g.) a company owned by a single person, walmart is not a thing that benefits if it's employees are underpayed. shareholders may benefit, but there's no "walmart" in a cave somewhere licking its lips over how it's screwing its employees. walmart pays what the market will bear, i'm not sure how it could do otherwise. but leaving that aside, why doesn't the calculus include the extraordinary good walmart has done for the "poor" by keeping prices down (wherever unions can't defeat the opening of a walmart)?

3) Yes yes I know - I'm a pinko commie.

No, more than likely you are cursed with affliction that plagues many people who make these arguments: they don't comprehend how big numbers come into existence; and then when they see them, they try to ascribe morality arguments onto fundamentally amoral entities.

Now and then big numbers involve a tycoon, but typically big numbers come as a sum of small numbers from a big number of people. That's the very basis of a corporation, and hence, the name. In like manner, that is where these metaphorical enormous profits go -- back out into dividends that may be as small as pennies per share.

Note that if the shareholders don't see a desired return, they don't buy shares, the company doesn't have capital with which to make or sell goods and services, and labor can drop all pretense of the 'living wage' and ply its trade at producing goods from non-capital-intensive materials -- mud, rocks, and sticks come to mind.

Belle,

Let's have a peek at Wal Mart's financials.

Wal Mart had roughly $312 billion in sales last year. They made about $11 billion in profit, for a return on sales of about 3.5%. That is not an enormous margin (a little below average, I think), although their high turnover and meaningful but not outrageous debt load makes the return on investment much higher (they quote it at 22.5%).

They don't break wages out, but all expenses including wages, overhead, and advertising total about $57 billion. I suspect the bulk of that is wages, which means they probably spend at least 4 times more on wages and benefits than they make in profits.

Their website also reveals that they have about 1.6 million employees worldwide. (I'll let you find that yourself so I don't get this comment sent to moderation purgatory.)

So, slashing their profits in half, which would cut their return on sales to well below what is normal in American retail, they could pay everyone maybe another $3500 annually. That is by no means insignificant (it might buy health insurance for everyone), but assuming 2000 hour work-year, it is a $1.75 raise. This assumes there would be no change in their ability to raise capital to continue their expansion, which is of course false: lower profits would mean fewer investors and higher interest rates.

And this analysis is retrospective; they didn't know at the beginning of the fiscal year what would happen.

Now, maybe higher interest rates, reduced profits, and crabby investors are worth it to offer a raise that BE would probably consider too small to unemployable teenagers, but it is impossible to talk about it in a vacuum.

Just to further emphasive Rob's good point. I get the following stats from Yahoo Finance

1.8 million full time workers (it is on the profile tab, I couldn't find the 1.6 million number). At 2000 hours a year, that is 3.6 billion worker hours per year.

With 11.39 billion dollars of profit in the prior year.

If we very generously assume that we give all of the profits of the firm away in higher wages, (which, btw would destroy the entire fortune of the walton clan as the stock would now be worth nothing). Then we can provide something like a 11.39 / 3.6 dollar per hour raise.

Or $3.16.

That is the absolute limit as to how much Walmart can raise the wages of it's workers. If we were willing to essentially collectize Wal-mart. Which in the end for all the hand-wringing and rhetoric flying around about Wal-mart doesn't seem like all that much money.

In reality, any pay increase to Walmart workers would be paid for by higher prices, which would disproportionately hurt other low income families. It wouldn't much affect the well-off liberals who who are pushing anti-Walmart laws; they seem to be too snooty to be seen shopping at Walmart.

all this talk about a living wage/communism/free market capitalism/government control empty if we don't consider corporate morality? Whatever people think about BE's economics, what she's really arguing is morality. Just because a company can make a billion dollars in profit, should it if in order to do so it must pay its employees salaries that don't sustain them?

As some people have alluded to, just as a giant coporation may have millions of workers it also has millions of owners. The profit per owner is not that great.

A way to test that for yourself is with the following thought experiment:

The profits to Wal-Mart belong to the shareholders. Anyone can buy Wal-Mart shares. So then why not buy up Wal-Mart share and use your fraction of the profits to send a check to all the workers?

This probably sounds like a silly idea. The question is why is it silly?

Its silly in part becuase there are so many shares to buy. You could not possibly afford it. You could go to the bank and ask to borrow money to buy up all the Wal-Mart shares. This is in fact fairly common and is called a Leveraged Buy Out (LBO). We'll return in a moment to why this is not a feasible option for you.

Another reason its silly is because there are so many Wal-Mart workers. Sending each one a meaningful check would soon add up to a lot of money. As others have pointed out - even using every drop of Wal-Mart profits would not make that big of a dent.

Still, something is better than nothing so why not go to the bank, borrow the money, buy up all the shares and give the profits to the workers.

Well, if you borrow money from the bank they are going to want it back. The way LBOs usually work is that you use the profits from running the company to pay back the loan.

The problem is usually the profits from running the company aren't enough to pay back the loan. Right now it would cost about $200B to buy Wal-Mart. Last year Wal-Mart made about $11B in profit.

Well, the Prime Interest Rate is equal to 8.25%. Thats the rate big trusted companies pay to the bank. So the interest on a $200B loan would be $17B a year.

That means Wal-Marts profits aren't even enough to pay the interest on what it would take to buy Wal-Mart. So, LBO is not an option for you.

What that also means is that shareholders considering buying Wal-Mart today aren't getting much more for their money then they could get from buying Savings Bonds.

Why do they buy Wal-Mart then? They buy because they believe that the Wal-Mart management will keep expanding the company and one day it will make even more profit. If the past is any guide for the future they will be right.

However, management then has a to keep finding these new ways or no one will want to invest in Wal-Mart. Without investors, companies like Wal-Mart could never even have come into existance.

This kind of illustrates the problems facing Democrats. Jason is my kind of Democrat. His policies are my kind of policies. Unfortunately, it sometimes seems as much of the Democrats' base these days has more in common with "Barb". There is coherence in Jason's policies - well maybe not the minimum wage, that works towards improving everyone's standard of living, especially the poor. "Barb's" policies are motivated by hatred for Walmart or Bush or corporations. This hatred blinds them. They don't care what works. They just want to hurt the object of their hate. The voters often see through this and reject the Democrats. Then we are stuck with Bush, DeLay & Co., who don't care.

I just read through the “debate” between Jason and Barb. I must say that Jason’s economic analysis is very similar to what one would hear from a Republican or Libertarian and Barb’s are what one associates with Liberal Democrats. There must be enough economically literate votes left out there to prevent the Barbs from winning elections despite her eloquent emotional appeal.

Republicans differ from Jason in that they recognize that income transfers by the government are working against market forces and if carried too far will undoubtedly result in unintended consequences. Better to concentrate on giving people incentives and, yes, help in improving there ability to contribute to the economy rather than set up permanent ever expanding methods for them to live off the economy while contributing little which, if carried too far, is unsustainable. Does that mean that Republicans don’t care? It just seems that way since they are very cognizant of the moral hazards involved and are the ones who have to say no to keep income transfer schemes from getting out of control.

Karl Smith -- I just wanted to thank you for your terrific and quite cogent comment. It clarified a number of points for me that I had previously understood only vaguely. Of course since I'm a physician and have absolutely no economic/business knowledge take the praise as you will.

It's always amusing to see what passes for conservatives these days attempt to argue that they are recognizing the truths of economics and the way it must be when they can't even get their facts straight. lannychiu calculates costs for Wal-Mart labor based on a completely full time staff and pay for all employees world wide being the same as what Wal-Mart workers in the U.S. are being paid. Of course Wal-Mart currently has 20% of their staff as part time employees and is planning on reducing that number to 60%. Of course one reason they're doing this is because they know that many of the new part-timers won't be able to afford the insurance plan they're being offered. See http://www.washingtonpost.com/wp-dyn/content/article/2006/05/25/AR2006052502162.html

Also the argument is constantly made that all of those poor people just need to work harder and get more training and they will lift themselves up. No, they can't all do that. The capitalist system as currently structured guarantees the impossibility of it. All of you conservatives who gripe about Social Security being a pyramid scheme or a ponzi scheme aren't capable of recognizing a pyramid when presented with one. And that pyramid is the structure of virtually every business. Lots of people on the bottom both in terms of income and influence and an ever smaller number of people the higher you go. No amount of training for those on the bottom will change that basic structure. Some will move up, that's true. But if every person on the bottom end of that structure were to do just what you suggest right now and do it well the only result would be lots of poor people underemployed for their education and holding lots of student loan debt.

So of course Republicans don't care, Robert. In order to keep their ideology pure they completely ignore these basic facts of how business is structured even as they claim to be the ones who are economically knowledgable and responsible.

One feature of the debate that I really liked was that there was no fisking. I think both participants made a good effort to summarize the point they were going to address and then address it. Though no guarantee of thoughtful debate, it does contribute to civility.

Babs kind of jumped the proverbial chicken with her Christmas example though. Smart shoppers, even pretty well off ones, know that WalMart is a great place to go to find silly but often thoughtful and fun gifts for the second-tier of people you buy Christmas gifts for. At WalMart this past Christmas, I found a "throwback" Atari 2600 with 50 built-in games from the era for $25 for my sister and brother-in-law, who loved the nostalgia of it and play it from time to time. I bought two dancing Tiggers ($24 vs. $35 at local Ralph's) -- one for my niece and one for a good friend's daughter, both 1-1/2 and totally spoiled by all their family. A couple other kids I buy gifts for (Christmas and birthdays) -- the video game section at WalMart or ToysRUs is always a winner for less that $30.

Ehrenreich's argument boils down to this: "I care more than you do". Barb cares more than most. Barb cares more than you. Barb even cares about the people who she obviously thinks are too dumb to suspect they should need her care.

Who cares if a "living wage" will mean higher prices on goods for the people who can least afford it. That just means we should create shortages with price controls. Who cares if a "living wage" will throw the most marginally employable people out of work. That just means that we should impoverish the taxpayer with public make-work. Damn the consequences, full speed ahead. The adverse consequences of one policy disaster will just mean more justification for additional recklessness. Barb can rest serenely assured that there will be more people to care about tomorrow.

Small crimes require petty motives, like selfishness or greed. Big crimes require saints. Al Capone was a crook who killed dozens and stole millions. Pol Pot was a saint who murdered millions and stole a whole country. Would that Barb were more like Al. Alas she is a lot like Pot.

Jim S

I think people who believe in the free market (conservatives?) recognize that there will be a “pyramid” in the labor market, only Communists strive to make everyone the same. They also do not have the defeatist attitude that you exhibit about the ability for the economy to adapt to the availability of a more highly productive labor force. What they object to are income transfer schemes that have the side effect of freezing unproductive labor in place rather than encourage it to become more productive.

Steve

While I suspect that Ehrenreich is simply ignorant of the side effects of her policies, there are many liberals that would happily exchange our vibrant productive economy for a stagnant, inefficient one if that would result in a more equal distribution of a lower standard of living. I doubt that any of them would go as far as Pol Pot though.

Jim S.,

I don't see how Wal-mart paying foreign workers in non-US currency affects the calculation. The calculation says that if Wal-mart paid out all it's profits in additional wage each full time worker could receive an approxiamte $3.16 in additional hourly wages. Inherent in this calculation is the assumption that this is US dollars. But Mexican or Chinese can certainly be paid in US dollars, or the equivalent value in local currency. Also the current level of pay is irrelevant, all that is being calculated is potential additional wages available.

As for their use of part-time workers, I did indeed neglect them. Primarily because I didn't have the numebrs immediately available. But if you follow the same methodology and re-do the analysis you will find that the additional wages paid out have to be lower than the number I calculated.

Since we have the same amount of additional cash to distribute, but it is now across a greater number of worker-hours, the raise must be smaller than what I previously calculated. So while I am wrong, I am wrong at the high end of the calculation.

To be fair when I made the calculation I also made another mistake, I neglected to account for corporate income taxes. Since Wal-Mart will now not be paying corporate income taxes, one could also increase the amount of the raise by about 35% (depending on how much corporate income tax is paid). So the final calculation might be

11.39 * 1.35 $ billion (corporate profits plus income tax not paid)

Totals 15.37 billion in additional funds.

1.8 million full time workers (at 2000 hours a year)

.36 million part time workers (at 1000 hours a year)

Totals 3.96 billion worker hours per year

15.37 / 3.96 implies a potential raise of

$3.80 per hour.

Feel free to run your own calculation, but I can't imagine it will be far off.

Robert Brown:

"I doubt that any of them would go as far as Pol Pot though."

Hayek and Rand have both shown why this is inevitable and history has proven you wrong on so many occasions.

thedaddy

Also the argument is constantly made that all of those poor people just need to work harder and get more training and they will lift themselves up. . . But if every person on the bottom end of that structure were to do just what you suggest right now and do it well the only result would be lots of poor people underemployed for their education and holding lots of student loan debt.

Implicit in this is the assumption that education has no impact on productivity. If this true then what you are saying is correct.

There are those economist who argue this point and suggest that education should be taxed rather than subsidized, since everyone becoming educated is simply a losing game.

However, I think there is significant evidence to suggest education does raise productivity. Hence, if everyone becomes educated the entire "pyramid" grows larger. Certainly something causes the pyramid to grow.

Compare for example the United States and Mexico. The median (half above half below) wage in the United States is roughly $15/hr.

A full time worker at $15/hr 2000 hrs a year makes $30K.

The entire Mexican economy only produces $27,600 per worker. That is if every drop of GDP in Mexico went to the workers they still would not recieve what the median worker in the United States recieves.

How can this be?

It is because workers in the United States are more productive. They are more productive for many reasons but one of the reasons is that the United States has a higher average education level than Mexico.

This implies that getting everyone educated may indeed raise everyones standard of living.

Of course Wal-Mart currently has 20% of their staff as part time employees and is planning on reducing that number to 60%. Of course one reason they're doing this is because they know that many of the new part-timers won't be able to afford the insurance plan they're being offered.

How is going from 20% to 60% a reduction?

When companies hire part-time workers the primary reason will always be that workload peaks make it attractive to do so. There are many people for whom part-time work is attractive because of their own schedules, and they are typically people for whom purchasing health insurance is a low priority. When the Teamsters struck UPS 9 years ago to force them to have workers standing around for a few hours doing nothing after the outgoing trucks were loaded, most of the people fired as a result were college students who obtained health coverage thru their schools.

Wow...Jim S, you are killing me! So this time around, you not only distort the definition of a pyramid scheme, but now you have every corporation (or at least Wal-Mart) set up as a distorted pyramid? There are two very good reasons most people don't move up in a corporate hierarchy: Many of them either don't have the drive, and others don't have the interest. Is this a argument really about something else? That annual review didn't go so well, for example?

More seriously, how do you propose to help these legions of deluded conservatives by constantly lobbing slow fat ones in their direction? A home run is only memorable (and educational) if the pitch was skilled. Back to training camp with you.

You don't need an education to make it in this country, but it sure helps. If you are willing to work very hard, that is half the battle. The other half is seeing to it that your hard work rewards yourself first. Hard work pays, ONLY if you are working for yourself. Working hard at Wal-Mart gets you nowhere.

Growing up, my dad worked as a Systems Analyst for AT&T. We lived a modest, middle-class, existance, not rich (or even well-off) but not poor either. Dad worked a 37.5 hour work week. He was home every night for dinner. He worked smart. He did not work hard.

Our next-door neighbor was a high school dropout. He left school in the 9th grade. He married a high school dropout. She left school because her dad didn't see any reason why a woman needed education. Our neighbor only married her because he got her pregnant. That said, they always had a brand new Cadilac in the Driveway (got a new one and traded in the old one, every year.) They always had the newest, nicest, electronic equipment. They had nice vacations. They lived great, (not rich, but quite well-off.)

Why?

Because our neighbor owned his own pool company. He built in-ground, gunite, pools. He did pretty much everything himself, from digging the hole, to laying the steel cable, to laying the pipes for the filter, to spraying the gunite. He worked his f*cking @ss off, sometimes 12 hours a day (plus weekends.)

But his 4 kids lived great. They had everything money could buy. He was well compensated because he did good work and his referals paid off for him, big time.

I'm of the opinion that most people are not willing to work as hard as he did. So an education is essential to make a good living in this country (and not just an existance at Wal-Mart.)

Furthermore, Jim's argument assumes that the economy is a zero-sum game - that there are only so many top spots on the "pyramid" and that really is only one pyramid.

The economy doesn't work that way at all. In fact, 50% of the American workforce is employed by small businesses - not large corporations. Nor are all businesses so hierarchical.

The metaphor of a "pyramid" only works if you assume there's only one pyramid - but the reality is that our economy is infinitely more dynamic than that.

there are many liberals that would happily exchange our vibrant productive economy for a stagnant, inefficient one if that would result in a more equal distribution of a lower standard of living.

Ehrenreich is not a social democrat. Furman is. Barb is a "progressive" (that is, to the left of Stalin). Calling her a "communist" is an insult to communism.

I doubt that any of them would go as far as Pol Pot though.

The road to Cambodia is paved with good intentions.

I like how Ehrenreich recycles the canard that Ford paid his employees more so that they could afford to buy his cars.

It's true that many people were taught this in school; it's not her fault that she heard it and believed it at the time. It is a sign of both her economic illiteracy and basic innumeracy that she still believes this. About five seconds' worth of thought would have revealed to her that this makes no sense whatsoever.

"I'll give them a lot more money, so that they can give some of it back to me. " Uh, yeah. That will work to increase profits. By that logic, maybe he should have paid them $10/day so they could buy two cars from him. He'd really cash in that way.

(I wonder if Ehrenreich realises that the old line about losing money on every sale, but making it up on volume is a joke?)

I'm thinking about starting up a business in which have workers wander along the road looking for old nails. We'll collect them up, straighten them and polish them and then sell them as new. I reckon that I might get perhaps 3 cents in income per hour for each worker.

Tell me - should I pay them a living wage? Or do you hope perhaps I'll start some enterprise that adds value to society? If you picked the second option, then you might try applying it to the 35 year worker with 4 kids and a stay at home wife who persists in doing work intended for teenagers.

(I wonder if Ehrenreich realises that the old line about losing money on every sale, but making it up on volume is a joke?)

It is not a joke. You just don't understand what they mean by "making it up on volume."

If I own a restaurant, and I offer a "special" that is a nice meal at a reduced price, I might be losing money on each sale of that meal. But I make it up on the "volume" of sales of alcohol, soda, appitizers, and dessert (which are not discounted.) Sure, if someone comes in, orders just the special and a glass of water, I take a beating. But most people are not going to do that.

If you picked the second option, then you might try applying it to the 35 year worker with 4 kids and a stay at home wife who persists in doing work intended for teenagers.

Barbara has yet to figure out that people are not entitled to a living wage for doing work that teenagers can do.

“I like how Ehrenreich recycles the canard that Ford paid his employees more so that they could afford to buy his cars”

This has to hold the record as the most often repeated talking point. It must have mutated into Liberal DNA.

Actually Ford should try to sell more of his cars to employees paid by other companies. Assuming he was going to pay for his employees pay raise by reducing his profit margin, he would be much better off to use the same profit margin reduction to lower the price of his cars so that they would be more affordable to all, not just his employees.

Liberals do not want to hear it, but an economy works best when all participants receive compensation near the market value of what they produce.

“Since Wal-Mart will now not be paying corporate income taxes”

AH HAH!!!

Look over here, Barb; more of your tax dollars are being wasted subsidizing the Great Satan’s wages.

It is not a joke. You just don't understand what they mean by "making it up on volume."

No. It is a joke. You just don't understand what they mean by "making it up on volume."" What you're talking about is a loss leader. That has nothing to do with the old joke.

It is not a joke. You just don't understand what they mean by "making it up on volume."

Yes, it is a joke. Though it is a play on real phenomenon. Sometimes if you produce enough units you can spead your capital costs so thin that you become profitable.

However, the joke is that some managers think this is possible even when you are not covering your parts and labor costs. If you are not covering parts and labor, i.e. losing money on each one, there is no amount of volume that can make you profitable.

No. It is a joke. You just don't understand what they mean by "making it up on volume."" What you're talking about is a loss leader. That has nothing to do with the old joke.

Whether or not it is an old joke has nothing to do with it. If you are in the restaurant industry, and you offer a "special" that costs you money on every sale, the phrase often used to justify this is "We make it up on the volume."

That may be an incorrect phrase and calling it a "loss leader" might be more accurate, but it isn't an old joke to them. Those in the restaurant industry understand very clearly what it means to "make it up on volume" even if you don't.

If the free market makes working people poor, starving, unable to make ends meet, then that's the way it should be, and it should be celebrated, because that's the way the market has it. Why should we care about them anyway? They don't contribute anything noteworthy to the economy; of course, these worthless plebeians have tons of opportunities to make something of themselves through our top-notch education system.

Disregard all left-wingers, . Global warming activists, liberal egalitarians and other maniacs who don't care about the important things in life (e.g. corporate profits, a booming stock market and an expanding GDP) are evil.

Furthermore, why is so much attention given to these socialist lunatics, why isn't the plight of the CEO given more attention? These hardworking stalwarts of capitalism have been given a rough time these days in the hideous liberal media, making it seem as though they don't deserve the modest pay packages they receive. But they work so hard! With no help from managers or workers! These beacons of economic advancement are the sole reason for expanding global output and wealth!

“If the free market makes working people poor, starving, unable to make ends meet, then that's the way it should be, and it should be celebrated, because that's the way the market has it. Why should we care about them anyway? They don't contribute anything noteworthy to the economy; of course, these worthless plebeians have tons of opportunities to make something of themselves through our top-notch education system.”

No, we should be concerned if a large number of people are unable to find a way to contribute enough to the economy to support themselves. Free market advocates want to understand the underlying problem (poor educational opportunities due to politically driven monopoly schools, perhaps). Liberals simple want to implement structural redistribution systems which will freeze unproductive people in place and give them a minimal existence while creating more people who cannot support themselves.

Disregard all left-wingers, . Global warming activists, liberal egalitarians and other maniacs who don't care about the important things in life (e.g. corporate profits, a booming stock market and an expanding GDP) are evil.

All people should be suspicious of the motivation of “global warming activists”. The opinion on global warming breaks along party lines so we need to understand that there is probably not a lot of good science involved. Rather, advocates have other motives in mind…reduced human activity for what ever reason and social justice through crippling of industrialized society.

Healthy corporate profits signal that capital is allocated to its best use, that’s a good thing. A Clinton era stock market boom is not good, but a long term growth in asset value reflected in stock prices is a good thing. An expanding GDP is a good thing, it provides options for solutions for to myriad of future problems unavailable to economies with anemic growth.

Furthermore, why is so much attention given to these socialist lunatics, why isn't the plight of the CEO given more attention?

CEO pay is a straw dog used by socialists who do not want to argue on the basis of economics. CEO pay is often obscene (as is pay for athletes and entertainers), but free market advocates do not get exorcized over it since it does not severely distort the free market even though it creates juicy political talking points.

^^

Talk like that will give some poor CEO a heart attack.

Seriously though FREE MARKET EVANGELICAL, why not the Earned Income Tax Credit?

I am willing to replace any loss of earnings to working people through elmination of minimum wage, unions, more free trade, increased immigration, etc with more money in the EITC.

I'll give you loss plus 15%.

I am believe that an unfettered market is effecient enough to make up for this.

Why won't liberals go for this? If I am right there is more for all. If I am wrong then it is the well off who lose.

Karl Smith,

I think you touched on the difference between free market advocates and Liberals. Liberals think there needs to be permanent, structural, relatively large scale income redistribution schemes as part of the economy. Free market folks are generally resigned to the need for some income redistribution as a matter of compassion and mercy even for those who make poor decisions, but they see their need as a negative for the economy that should be minimized.

Those in the restaurant industry understand very clearly what it means to "make it up on volume" even if you don't.

So in other words...if a special and narrow context is applied to the phrase such that the phrase can be understood in a way OTHER than what it obviously says...it suddenly makes sense!

Ah, bless that Internet. It's big enough to include even an argument as small and petty as this.

"The opinion on global warming breaks along party lines so we need to understand that there is probably not a lot of good science involved."

Yet the left has the added benefit of the vast majority of climatologist also believing that the world is warming due to human activity.

Yet the left has the added benefit of the vast majority of climatologist also believing that the world is warming due to human activity.

Precisely the problem -- believeing.

Nobody with an eye on the evidence will dispute that earth is in some sort of warming trend. Where the debate politicizes, and thus becomes almost useless either way, is over (a) the degree to which anthropologic activity is contributory; and (b) what practical options are available, if any, to make a significant difference.

If you want to go and slap around the nitwits in this thread who think they have 'wut all dem libruls think' sewn up in a neat little rhetorical package, have at it. Just don't make the exact same mistake yourself.

Where the debate politicizes, and thus becomes almost useless either way, is over (a) the degree to which anthropologic activity is contributory; and (b) what practical options are available, if any, to make a significant difference.

I'd add to that:

c) if there is a significant anthropological contribution to global warming, how serious are it's long-term effects? Do we really, as Al Gore seems to be claiming, face a planetwide ecological crisis that will end human civilization if we don't make some serious changes in the next ten years? Or does "crisis" really just mean that things warm up another degree or two, ocean levels rise by a foot or two, and a few species of ultra-sensitive plants and animals go extinct?

d) If human industry, as presently carried out, is not in fact precipitating a civilization-ending catastrophe, are we still willing to pay an enormous cost to stop or seriously curtail global fossil fuel usage? That is, if there are no cheap, easy, readily-available alternatives to energy sources that contribute to global warming, do we want to substantially decrease our own standard of living and consign billions in the third world to continued poverty, just so we can have weaker hurricanes, maintenance of wild polar bear habitats, etc.?

Free market folks are generally resigned to the need for some income redistribution as a matter of compassion and mercy even for those who make poor decisions, but they see their need as a negative for the economy that should be minimized.

Well, I see myself as a bleeding heart libertarian who thinks that redistribution is not only necessary but desirable. I just don't see a need to mess up the price system to do it.

If the problem is that poor people don't have enough money then we should give them more money. The beauty of the EITC is that we can target towards the genuinely poor and we can do it in such a way as it enhances the return to working rather than diminishing it.

Karl,

THe problem with the EITC is the huge marginal tax rates it imposes. If we take your "make up the difference between earnings and minimum necessary amount" argument seriously, we're looking at a 100% marginal rate. That is not a good incentive system.

I kinda like Charles Murray's "give everyone $10,000 and eliminate everything else" argument: no effect on marginal rates, a subsistance income, probably cheaper than the current system.

You can turn your back on a human, but you can never turn your back on a drug. Especially when it's waving a razor sharp hunting knife in your eye.

THe problem with the EITC is the huge marginal tax rates it imposes. If we take your "make up the difference between earnings and minimum necessary amount" argument seriously, we're looking at a 100% marginal rate. That is not a good incentive system.

The current EITC nor any system I would suggest would be taxed at a 100% rate.

In fact the current system which I would expand phases in. That is, for small amounts of income the more you make the larger the credit you get. It acts over this portion as a subsidy to labor.

Currently it phases out at about 7.65%. I would go ahead and phase it out through regular taxation.

this is quite somthing...

Israeli Ground Forces Launch New Attacks in Northern Gaza

Karl,

My point about marginal rates was this: picture a system where the government says "everyone deserves $X in income. If you make less than that, we'll cut a check for the difference."

Now, suppose I make half of $X, and the government sends me half of $X. I could take some overtime on the weekends and maybe I could make it up to 3/4 of $X. What then? The government sends me only 1/4 of $X, and I end up with exactly $0 for the extra work I do.

That is a 100% marginal tax rate. There is no earthly reason to work even one second of overtime.

Now, the current system isn't that extreme across its whole width, but I think it does approach a 70% marginal rate (work for an extra $1, take home 30 cents) right near the cutoff.

You can fiddle with rates and cutoff points, but unless you make the subsidy run a long ways into the middle class, you can't avoid a nasty spot with a pretty high marginal rate.

Rob,
Presuming a 'make up the difference' EITC that is structurally similar to the current EITC(ie, tied to what you make) I would expect it to consist of a subidy to the hourly wage. Ie, if I make $1 an hour, the feds would kick in $4.15 an hour to bring me up to the $5.15 an hour minimum. The problem with this is that almost immediately it crowds out market wages below $5.15. If I am looking for an employee, and they are worth $5 an hour to me, I will just offer $0.01/hour to them. The feds will roll that up to $5.15, so it's no skin off my employes nose, but I get a 40 hour work week for $0.40!

Additionally, lets say a particular employee is worth $5 to me, but $2 to the guy down the road. I have no way of communicating that effectively. Whether I pay him $5 an hour, or the guy down the road pays him $2 an hour, he still get's $5.15, why should he care?

And that is of course before we get to the issue of fraud. If it costs $0.01 to shake loose $5.14 in goverment subsidies it get's really attractive to set up scams and split the profit with my scam employees. For example:

1) Pay employees to watch TV for 8 hours a day (at $0.01 per hour).
2) Charge employees $2 for a soda, sell them a soda a work hour at the beginning of the week.

The employee takes home $3.15 for sitting around watching TV and drinking soda. I get $2 an hour for my $0.01 investment (200% return!). And the taxpayer gets milked.

picture a system where the government says "everyone deserves $X in income. If you make less than that, we'll cut a check for the difference."

I understand your point.

I don't honestly intend to promote a system where everyone is brought up to a single line. Nor one which merely supplements the wage up to an hourly line.

I promote phase-in though I am "okay" with lump-sum. It should be noted that lump-sum is mathematicaly no different than a Negative Income Tax.

I like phase-in because it acts as a subsidy to labor. I think there are positive externalities to work that I want to promote. Plus, I think it sits better with the blood-and-soil conservatives.

However, basing anything on hourly compensation is (A) a prescription for fraud and (B) simply a big mess to calculate.

I would do yearly compensation where the credit matches at something like 1.5:1 for the first say 8,000 in income for head of household with one kid. Actual numbers depend on the details and what other policies go in the pot.

After you reach the 8000, which would be $20K with the credit, you are taxed back down at 20%. Which means the subsidy completely phases out at 60K.

Which is fine by me if I get to rip-out most of the deductions in the current system and chuck the personal exemption. My real target is of course the home mortgage interest deduction - anyone can dream can't they?

Based on a system like this a mom working 35 hrs a week a $4.50 an hour can make over 20K.

What I really like though is that a two parent family (with a match of 1.5:1 all the way to 10K) can have one parent working 40 hrs at $7.50 an hr and pull 29K.

Reality check time: "If the free market makes working people poor, starving, unable to make ends meet..." Why don't you go visit some of those "poor starving" working people in their homes? I have. I found fat people sitting around watching cable TV, smoking cigarettes, and drinking beer (if not more powerful drugs). Sure, they have trouble paying their rent and other bills, but their cigarettes alone cost them as much per year as my heating and electric bills. Those unhealthy foods that make them fat cost considerably more than healthy foods - if you take the trouble to buy raw and minimally processed foods and prepare them yourselves. Their nonessential possessions (TV sets, VCRs, boom boxes, video games, etc.) total up to far more than my middle-class grandparents owned above the bare necessities in the 1950's. Their kitchens are probably far better equipped than my grandmother's - but they probably don't use them much.

The free market has made our "poor" richer than the middle class used to be. I don't deny that there are families in dire need, but except for a few genuinely disabled people (who qualify for all kinds of assistance) there are two main causes of that, and they have little or nothing to do with a free market:

1) Foolish spending habits. While I was in the service, my wife and I raised two kids on a fairly low income, and we always looked middle class, had plenty of healthy food, and paid our bills on time. Spend wastefully, and you can get into trouble even on GW Bush's income.

2) Excessively high rents or mortgage payments. There are several factors here:
--Regulations limiting the amount of housing that can be built in an area and raising the cost of building it.
--Too many well-off people able to bid the cost of the houses that do come onto the market into the stratosphere. (This is the only free market factor.)
--Why are poor people living in such areas? 40 years ago, most of them lived in rural areas where housing is still cheap, but federal welfare programs made it easier to get assistance by moving to the cities...
--Rent control discourages building rental units (because if they rent control old units, eventually they'll also impose rent control on newer ones, and so you are unlikely to make back your investment in new rental units). Well-connected middle class families snap up the well-maintained rent controlled apartments, and poor people without those connections wind up either chasing a too small supply of non-rent controlled apartments, or living in a rent-controlled building that the owner has ceased to maintain.
--A large proportion of the poor will do excessive damage to anything they live in, whether carelessly or maliciously. Rents have to be higher to cover repairs.

It's also instructive to look at the difference in leisure between the rich and the poor:

According to the government statistics, men making more than $100,000 per year spend 19.9 percent of their time on passive leisure, compared to 34.7 percent for men making less than $20,000. Women making more than $100,000 spend 19.6 percent of their time on passive leisure, compared with 33.5 percent of those making less than $20,000.

Or to put it differently, the rich have a lot less leisure time than the poor. I wonder why that is...

Because they classify activities like playing golf and having lunch as work.

Karl Smith,

I agree that some sort of EITC is the least damaging to the economy way to give money to poor people. It is prudent, however, to anticipate unintended consequences.

Your sympathetic single mom working 35 hrs a week for $4.50 per hour is contributing labor valued at about $8000 per year to the economy and would receive a labor subsidy under your plan of $12,000, bringing her take home pay to about $20,000. I guess we can feel good about this but what are the possible side effects?

If Mom decides she would have a little better economic life and doubles the market value of her labor by working twice the number of hours or improving her skills and getting a $9.00 per hour job, she will take home $26,400 if I understand your phase out plan correctly. That is a 32% increase in take home pay in exchange for her efforts. Would she not have an incentive to avoid the hassle of increasing the value of her labor and rather find a way to live on her $20,000?

How about the next generation of labor. Would not some high school students be tempted to settle for $20,000 for menial labor rather than preparing for higher skilled jobs?

Is it good policy to subsidize unskilled labor? Does that not prevent the labor market from eliminating those menial jobs that are not really necessary and paying a higher rate for those that cannot be eliminated if there is a shortage of labor willing to work at the market rate?

Is it good policy to subsidize unskilled labor? Does that not prevent the labor market from eliminating those menial jobs that are not really necessary and paying a higher rate for those that cannot be eliminated if there is a shortage of labor willing to work at the market rate?

Yes, this concerned me as well. However, research seems to show that one of the major place workers seem to find skills is at work.

I used to think the learning by doing part of work was overrated and that most skills actually come from education but this is false. The overwhelming majority of skills come from experience.

Not to mention softer skills like learning to be on time, accountability, personal hygine, etc.

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