Perpetual Dickensian Poverty? (2021)
jefftk.com
jefftk.com
Going with the USA, apparently something like 98% of people have managed to get work that pays better than the Federal minimum wage. If people on the minimum wage are being failed by society, there needs to be some reflection on what is happening differently with this 2% and how to change that. Legislating people's favourite lucky number with reference to good literature is not the path to good policy.
Cratchit had enough money to almost-support a family with a sick son in presumably the absence of any sort of social spending - ie, he earned enough money to support 2-4 people in London with food and shelter depending on how sick Tiny Tim was, and had an office job with no physical risk. It is unclear why the default position is someone should (1) be doing the similar work as Cratchit (2) possibly with less responsibilities and (3) earning more money in real terms. I can see an argument why some 20 year old with no family doing similar work could be paid the same amount and that it would be quite reasonable. Especially since it is so much easier to move to a low cost of living area in this era of fantastic communication and easy travel.
In short, I'd question why near-poverty while supporting family is unacceptable as a legal minimum. There are a lot of people who don't have a family.
Though, of course, that doesn't say anything either way about whether minimum wages should be higher or lower, or whether they are a good idea in the first place. (And neither does the somewhat incoherent comment you replied to.)
That said, I believe in a minimum wage. It probably should be higher. Or, what I would prefer, is instead of raising the minimum wage we raise taxes and provide more government services (e.g. free healthcare for all as opposed to raising the minimum wage.)
See https://web.archive.org/web/20220217044208/https://blog.jaib... for why a minimum wage is probably a bad idea.
I firmly believe in a minimum wage.
Minimum wage legislation only concerns you, if you are running a business that offers jobs to poor people. If you automate and hire robots instead: no obligation. If you don't open a business in the first place: no obligation. If you outsource overseas: no obligation.
Do you see how the article I linked applies?
I would suggest that if we want to help poor people via legislation, we give them money financed out of general taxation. Instead of special obligations that effectively act as a tax on interactions with the needy.
> I firmly believe in a minimum wage.
What makes you believe so?
What do you think minimum wage legislation accomplishes? What are the costs and benefits you see?
What empirical evidence, if any, would change your mind?
Also minimum wages are kind of okay because all prices will adjust upwards relative to the lowest price of unspecialized labor.
The real problem is the ability to slow down economic activity below the speed at which most members of society can survive. Imagine starting a siege against a city and running their supplies down until they surrender.
Since money is a monopoly, is necessary for the division of labor and the division of labor is necessary to live a modern life then the ability to stop all money transactions is equivalent to a siege but it can be done to individuals or entire countries. Since those excluded individuals are by definition at the bottom of society they will at some point revolt if they reach a critical mass. So politicians are trying to keep these people busy. They do so by creating jobs and the money for the jobs has to be borrowed from those who have withheld their money. So from a naive perspective it looks like the government is really incompetent and filled with stupid politicians. The moment a "smart" politician stops the "nonsense" (via gold standard, austerity, deregulation) radicalized people will suddenly pop out of nowhere.
In either case the problem is the economic siege, not the response to the siege. Stopping the siege stops the problem.
However, we consider the ability to coduct economic sieges to be a holy cow, after all capitalism has strict private property at its core and private property is by definition the ability to conduct economic sieges. (excluding people from entering your private property).
e.g. If you own an uninterrupted ring of land around a city you own that city.
Withholding money from A to B also interrupts the flow from B to C and C to D. A lot of economic activity may or may not happen because of a single person. This is why debt is exploding endlessly because we recognized the benefit of ignoring the slow people. All we need to do is to make them hurry up.
Huh? Could you please explain what you are talking about?
> Also minimum wages are kind of okay because all prices will adjust upwards relative to the lowest price of unspecialized labor.
Do we have any empirical evidence for this? Would you we could look at price level data for different countries over time and compare that with data on minimum wage legislation? What would you expect to see?
How often have you, yourself, had to deal with the time and money costs of moving a family, including finding suitable housing, sustaining employment throughout, and dealing with furniture and appliances? You're using "easier" here to skip straight to implication of "easy", but it's not, especially not for anyone not already living somewhere with plenty of space like the suburbs.
I've never lived in the suburbs.
Because if he is barely supporting a family in near poverty with a sick child with not system for social spending it follows that he is not able to put money aside for his eventual retirement / sudden death. Thus if he were run over by a horse and carriage and died from his injuries his family would be definitely in poverty and probably go to the poor house.
Also as I recall the story the ghost of Christmas present says that if Tiny Tim does not get treatment he would die, but he is not getting treatment because Cratchit is barely supporting the family as it is.
Finally nobody is saying that social policy should be based on stories like this one, because it is hard to legislate supernatural beings showing up to make misers better people. Stories are used to indicate possible problem areas for which solutions should be formed.
At the end I would agree that near-poverty while supporting family is acceptable as a societal result for a small part of society, as long as there are social systems in place to help in case of the person doing the supporting not being able to support any more or to help in case of severe health problems which near-poverty cannot solve and as long as there exist non-supernatural or not completely luck based means (like winning lotteries) whereby it might be supposed the person doing the supporting might be able to move that family to a middle class lifestyle.
Sometimes this might be the only type of legislation that would have a chance.
Since well before the time of Dickens there have been major organizations controlled by influential elites which have always been dependent on the kind of expolitation that can only be maximized up the chain when there exists at least a certain amount of this type of poverty toward the bottom.
Even when there are more than enough resources to go around.
Even sometimes when there is no maliciousness involved. The tradition is that deeply ingrained.
Employed workers like Cratchit were not suffering as badly from the full prevailing poverty at the time. Their financial disadvantages were great, but not nearly as bad as the vast unemployed had to face in order for their services to be made available to elite ventures when needed at relatively insignificant cost with little notice.
The unwashed masses really are masses and sometimes will need to include white-collar professions more than others. When it becomes possible for enough working-class people to rise financially through mere education and/or merit, then adjustments will be made by those whose control did not arise from merit in order to keep the distance and maintain the status quo.
This seem to be what Dickens was getting at.
Sometimes exploitation can still be the root cause if it extends far enough up the food chain, many business owners can't afford to spend money any more freely than their employees or those at the very bottom.
Because most people only choose to start a family once they already have the financial stability to support one.
If the average 20-something male without a family earned more (or there was a drop in the cost of living), he'd be more likely to start a family, do it earlier and have more (and healthier) children.
US GDP per capita is four times higher than in 1950. People did not have trouble supporting families then. If you want to have a very high standard of living by historical and global[1] standards that is indeed difficult.
> If the average 20-something male without a family earned more (or there was a drop in the cost of living), he'd be more likely to start a family, do it earlier and have more (and healthier) children.
That might be true if women couldn’t work but with two income families it certainly isn’t now. Greater wealth gets eaten up by positional goods, keeping up with the Jones, good schools as detailed in Warren’s Two Income Trap[2]. Wealthier countries don’t have more children.
[1] Only one US state has lower GDP per capita than Germany, Arkansas https://www.stockingblue.com/article/830/per-capita-gdp-by-u...
[2] https://slatestarcodex.com/2014/06/28/book-review-the-two-in...
I may be somewhat biased, as I'm based in Melbourne AU, but I don't think you've given proper credit the explosion in the cost of Real Estate (both rent and mortgage costs; keeping in mind that you cannot lock in a set interest rate for 10+ years in other countries like you can in the US).
>That might be true if women couldn’t work but with two income families it certainly isn’t now.
You're not wrong there, but I was specifically looking at male incomes, which (at least when looking at localised populations) are strongly correlated with fertility.
Haha, unfortunately. Too many people riding the gravy train...
Economics Explained made a video about it a while back: https://www.youtube.com/watch?v=nUFZ1_fC3Kw
It doesn't really matter what the GDP is - you can have a high GDP and have folks barely eating. It more matters how the money gets distributed.
People did not have trouble supporting families then
Yes, they did.
As for the average US household consumption it’s marginally lower than in the city state of Hong Kong with its much smaller households, and almost $10,000 a year higher than Switzerland, the number three. The US is the richest society in human history, as has been true since it’s consistent parts were British colonies.
Links: https://www.debt.org/faqs/americans-in-debt/poverty-united-s.... https://study.com/academy/lesson/urban-poverty-in-the-us-in-... https://www.bloomberg.com/opinion/articles/2019-11-01/econom...
No, a gold standard doesn't solve the debt problem.
Ok, now factor in that the mass entry of women into the workforce nearly doubles GDP per capita, plus the rising costs of education, health care, and housing. I think you'll start to see where the affordability issues come into play.
But could you please explain how 'mass entry of women into the workforce nearly doubles GDP per capita' is a problem?
Technology eased that burden somewhat.
Household work is hard work. Modern technology has made it much easier.
(And that's the bigger story here: the reduction of in-household workload. The consequence of women entering the workforce is a comparatively smaller effect.)
This has been true for something like the last hundred years out of all of human history. It's not something you'd want to try to architect a society around.
Also, it's not really about having the financial stability. People are terrible at estimating that; they are putting off starting a family until many, many years after they can afford to do it. There's a mass delusion of inability to afford a family -- but there isn't much inability.
Unfortunately I think the horse has already bolted there. Short of restricting contraceptives, the only thing we can do to increase fertility is give people a greater sense of stability.
>There's a mass delusion of inability to afford a family -- but there isn't much inability.
I honestly think you might be right there. A good friend of ours who had their first at the same time we did are on a single income, part-time wage and they are able to get by living frugally. He does miss out on certain experiences as a kid, though, and will have great difficulty trying to get ahead when he's a young adult as his parents won't own assets.
Others already mentioned state-specific minimum wage, but you are likely neglecting to consider:
1. Prison labor.
2. Unreported labor (in whatever statistic you're relying on).
3. Last but certainly not least: unemployment ("have managed to get work that" - what if you haven't managed to get work?)
Woah, horsey. For most HN readers including you and I, it looks like just a “lucky number”, but to the people it matters it is everything. Financial security is for most intents and purposes the first rung of being happy.
> There are a lot of people who don't have a family.
Social support per child can account for this. It’s a politically vulnerable policy, as it ‘seems intuitive’ for smart people that this would ‘incentivise child-rearing’. But upon leaving the blue sky anyone would realise that a normal person doesn’t calculate their life so coolly in quite that imagined fashion.
To pre-empt a counter-narrative about minimum wage - inflationary effects - it’s worth noting that modern countries both seek mild inflation and regularly enact policy which expect some inflationary outcomes.
Trickle-up benefits are known to be far more beneficial to all of society, which includes incumbents, than trickle-down policy. This also in time offsets the inflationary effect somewhat on the supply side.
Inflation is a monetary phenomenon. Central banks control that.
If you are actually looking for non-strawman arguments against minimum wage:
First, see https://web.archive.org/web/20220217044208/https://blog.jaib... (Basically, don't punish employers for interacting with poor people, nor reward other folks for successfully avoiding interaction with poor people. If you want to help poor people, give them money.)
Second, employers are paid with a whole basket of goods, and money is just one of component. Training, working conditions, flexibility etc are others. A minimum wage makes some of these baskets illegal, even though they might be mutually agreeable to all parties involved.
> [...] than trickle-down policy.
'Trickle-down' was only ever used as a strawman.
> People who hold onto money control money since the central bank is forced to make as much money available to be lent out as much as is being saved because savings = investments must hold and allowing savings to go down to the level of investments is frowned upon (negative interest means savings exceed investment).
Huh? Could you please explain?
First, not all saving happen as loans.
When someone harvests wood from her property and burns the wood in her fireplace, that's consumption. If she uses the wood to build a shed, that's investment. (No market involved in this example.)
Similarly, when I invest in a startup vs when I buy food, the amount of money needed for either activity is basically the same. One is saving/investment, the other is consumption.
When people save money in the bank, the bank typically turns around and loans that money out (or invests it in other ways). The money doesn't just pile up at the bank.
Now you are right that people often hold on to cash and that banks keep a certain amount of reserves around. Some amount because of regulatory requirements, some because it makes business sense. (You can clearly see the latter in countries that have no regulatory reserve requirements for banks.)
Also keep in mind that saving and investment are increasingly global phenomena: people from one part of the world can invest in other parts of the world. Eg Chinese people buying American stocks does lower the real cost of capital for American companies.
Inflation is a local phenomenon. Eg Japanese deflation and Zimbabwean hyperinflation cause neither deflation nor hyperinflation in Switzerland.
This is a rather glib comment that leads me to believe you've not experienced poverty.
(Compare also the earlier Canal Mania https://en.wikipedia.org/wiki/Canal_Mania )
But, yes, obviously 19th century Britain didn't have anything like the modern American car-commuter suburb.
You might want to do a cost-of-living-in-London adjustment?
It’s reaching the highest in 20 years. Save up for the inevitable crash.
The sidebar says
> You're now losing -1% of your money to inflation per year or 1.0% per month
That math doesn't seem to check out. I don't really know whether I can trust anything else there.
I think his numbers on that quote probably come from counting M3 money or something similar. Which isn’t that wild of an idea.
I was just questioning how they came from -1% per year to 1% per month. That's some weird math.
Also, Cratchit wasn't doing minimum wage job - AFAIR he was accountant or someone like that.