[shingen]

$20 / hour is a nice thought, but unfortunately what that would do is create massive unemployment and much larger welfare abuse. There's a fine line on just how high you can set a minimum wage (in relation to the economy in question) before you give too much incentive to companies to automate that labor, shrink their business slightly, or offload the costs to the consumer with price increases (net negative result).

Google what happened in New Jersey when they raised minimum wage above the federal level years ago (low paid jobs got wiped out, companies fired workers and attempted to become more efficient, particularly it hammered fast food workers).

Or this:

"Dr. Peter Brandon of the Institute for Research on Poverty studied how raising the minimum wage affect the transition from welfare to work. He found that raising it keeps welfare mothers on welfare longer. Mothers on welfare in states that raised their minimum wage remained on welfare 44 percent longer than mothers on welfare in states where it was not raised"

http://www.house.gov/jec/cost-gov/regs/minimum/against/again...

[ajays]

I understand what you're saying; but the problem here is that 1 state raised the minimum wage. Naturally, jobs will flow to the neighboring states. But what if the Federal minimum wage was raised?

You do understand the point I'm trying to make: that there should be _some_ _significant_ economic incentive for people to get off welfare and on to work! Right now the incentive is minimal at best.

So how do you create the gradient that moves people off of welfare and on to jobs? You can either take away welfare benefits; or you can give much more rewards for working.

[yummyfajitas]

You can either take away welfare benefits; or you can give much more rewards for working.

A third, mostly unexplored option, is to reduce the status/luxuries of people accepting welfare.

I.e., instead of receiving housing vouchers and money to buy food/clothing, they could receive dormitory rooms (no TV or XBox), healthy dormitory meals and government issued grey jumpsuits.

Under such a system, there would be a significant incentive to get a job and no one would go hungry.

[Karunamon]

This sounds eerily like the current Republican platform. Abuse of the welfare system has been explored in the past and found to be a tiny minority of all people receiving it. Let's not punish those people who use the system correctly on account of those that don't, hm?

[yummyfajitas]

Abuse of the welfare system has been explored in the past and found to be a tiny minority of all people receiving it.

Depends on what you mean by "abuse". Most poor people don't work and don't even look for work, preferring to collect free money. That's not "abuse" in the sense that welfare rules allow people to do this, but it is behavior we should try to prevent.

Ultimately I favor eliminating welfare and replacing it with a guaranteed unskilled job having below market pay. That's the perfect way to distinguish between the deserving and undeserving poor - no work, no welfare.

I'm not sure how this relates to the republican platform - as far as I know, the two front runners (Romney and Santorum) are basically democrats on economic issues. But I haven't followed closely, so feel free to correct me.

[Karunamon]

>Most poor people don't work and don't even look for work,

Citation badly needed.

[yummyfajitas]

I'm sure I sound like a broken record for posting this yet again, but here you go:

http://www.bls.gov/cps/cpswp2009.pdf

I exclude children from the numbers here:

http://crazybear.posterous.com/why-the-poor-dont-work

Net result, 36% of poor adults work or look for work at least 26 weeks/year, and 25% of poor adults work full time or look for full time work.

[pault]

I disagree; this form of welfare is increasingly common here in the states. We call it prison.

[yummyfajitas]

Anyone who is down on their luck can walk into prison, receive benefits, and move out as soon as they find something better?

[gregholmberg]

... instead of receiving housing vouchers and money to buy food/clothing, they could receive dormitory rooms (no TV or XBox), healthy dormitory meals and government issued grey jumpsuits.

I am surprised, and a little disappointed, that there has been no mention yet in these comments of Marshall Brain's story "Robotic Nation". It is a well-reasoned exploration of exactly this issue.

  ---------------------------------------------

From "Robotic Nation"

The January 20, 2003 issue of Time magazine notes the trend:

"Cities have lost patience, concentrating on getting the homeless out of sight. In New York City, where shelter space can't be created fast enough, Mayor Mike Bloomberg has proposed using old cruise ships for housing."

This is not science fiction -- this is today's news. What we are talking about here are massive, government-controlled welfare dormitories keeping everyone who is unemployed "out of sight". ...

  ---------------------------------------------

http://www.marshallbrain.com/robotic-nation.htm

[meric]

One thing I still don't get from marshall brain (from his otherwise visionary writing), is: If there is going to be 50% unemployment, who is going to be spending their money on flights. Will people eat as much fast food? If no one is working, who needs robotic tax accountants?

He says there would be many sectors where human jobs are replaced. I'd say many sectors gone, completely. Who needs to go to a fast food restaurant when your robot can make it for you for... the price of bread? Who needs tax accountants when your computer can do it?

[gregholmberg]

I am cautiously optimistic that something will appear to engage the bodies and minds of those thrown out of work by any future waves of automation.

The solution will probably be something that I think is silly today.

An example. I was a fairly early adopter of the Internet. By the time I got around to reading Ender's Game, the leading search engine was Archie, and the web had not been invented. But I recognized Usenet (or something like it) in Card's description of discussion boards.

I thought the idea that anyone might achieve anything practical in the real world based on the strength of electronically published rhetoric was not just silly, but slap-my-knee hilarious.

Just look, I thought, at the laughable impotence of all these "letters to the editor" in newspapers. Surely electronic journalism will be cheaper, easier and much more accessible, therefore much more popular, and therefore of exponentially less value.

I kept chuckling for years, even as blogging gained popularity and influence.

Even though I was quite interested in an outcome like Card predicted, and had even been involved in getting the machinery in place to support a future like he imagined, I still reached a conclusion that was completely unsound.

We will probably be fine.

[ajays]

I think building dorms to house the population would be a significant obstacle to this approach.

[shingen]

The same threshold applies whether at the federal or state level in terms of the consequences. Push it too far at the federal level and you'll wipe out a row of cheap labor jobs, that will either be automated or off-shored; and those that can't be either will result in consumer price increases (which just burdens primarily the poor and middle class).

If you want to incentivize with $20 / hour minimum wage, you'd have to mandate hiring, or change the laws governing firing employees. Businesses would rebel against it immediately otherwise.

Bill Clinton & the Republicans worked together in the mid 1990s to successfully overhaul the existing welfare system by altering the terms of how you could get welfare and for how long and so on. Prior to that, the system was largely resulting in a stagnant perpetual welfare cycle, where people went in and never came out. It seemed to work great right up until the big economic implosion of the last few years.

[ajays]

I disagree that you would have to mandate hiring. The local Walgreens needs 5 people to man the store. Do you think they'll just close up shop? Of course not. They'll have to pay more to their employees, and we (the customers) will have to pay an additional, say, 5%.

As for the welfare reform: people route around obstacles. I think people have been able to game the current system too. "Disability" is one such option; claim a physical disability, and get $1000/month in disability payments (or that's what I've heard). Earned Income Credit is another such option.

My basic point is: just like in any learning algorithm, we need a gradient that will drive people in the right direction. The larger the gradient, the faster the movement. :)

[yummyfajitas]

Do you think they'll just close up shop? Of course not.

Some stores on the margin will be driven bankrupt by the increased costs, and these stores will close up shop.

[ajays]

But every store in that business would see their labor costs rise proportionately, so the net effect would be zero. If Walgreens' costs go up by 5%, so will Rite Aid's, CVS's, etc. Stores will just pass on the costs to the consumers. Plus, the labor cost of stores like Walgreens are very small compared to the merchandise costs. And the high-paying jobs (Pharmacists, etc.) would not be affected anyways, since you're just raising the minimum wage.

Other than Walmart, you'd be hard-pressed to find a business where the minimum-wage employees are a significant cost item in the budget.

[philwelch]

> Stores will just pass on the costs to the consumers.

Which just eats up the increase in minimum wage.

[orangecat]

Stores will just pass on the costs to the consumers.

Which just shows that the minimum wage is a convoluted and inefficient form of welfare. If you want to help poor people, give them money. The end.

[marshallp]

There are counter-arguments to be made.

1. should people be made to flip burgers or stand in cashier booths when society doesn't really need that. You can order off amazon for example, or eat healthier food that you make at home. Those burgers flippers could then instead be training to become engineers. It might take them longer than an academically gifted person, but they'd get womewhere if they didn't need to flip burgers everyday.

2. If you increase the price of labor by increasing the minimum wage, more opportunities for automation come into play. If burger's flippers were too expensive, restaurant chains might install robots that did it instead. Over time, burger slipping would be even cheaper than the previous minimum wage burger flipper.