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Comment by PaulHoule | Hacker News Reader

So long as we have this policy

https://en.wikipedia.org/wiki/Earned_income_tax_credit

there are going to be headlines like "Walmart is subsidized". The EITC is one reason why the minimum wage wasn't raised for so long in the US.

The idea is that there are some workers (say teenagers working at the supermarket) who don't have to earn a "living wage" to support a family (if they did get a living wage then prices would go up and the living wage would be more and the cycle would repeat...) so rather than setting wages for them to be high enough to support a family we don't have, the government subsidizes people who are raising families on low incomes directly.

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The theory is clear, but after a few decades the results are also clear.

> say teenagers working at the supermarket

This flawed assumption is where the theory went wrong, IMHO. The EITC is designed around (say) 5 years of a young worker's life, but our labor market requires people in those roles through 5 decades of their lives. Low-wage employers have grown dependent on people of all ages to work for "teenager" wages through to retirement.

> The EITC

It's not just the EITC. Full-time low-wage employees don't really have any money, so they are subsidized by an array of federal and state programs. EBT/food stamps, Section 8/rental assistance, etc. Low-wage employees receive a lot of direct payments from taxpayers. (This is good!)

In any case, it's worth discussing whether it is appropriate for companies like Walmart (profit per employee: $13k) to be allowed to pay their staff at such a rate that the taxpayer then has to pick up the tab for their employee's food stamps.

Either case -- yes, it is totally accurate to say that employers are being subsidized by

This is an argument to not have any of those benefits (nor the income tax as well). Then a stronger semblance of markets can take root, especially w.r.t pay.

I'd be open to a UBI-type subsidy that is NOT means tested (everyone get it) to replace all the programs you've mentioned above, which are means tested.

> This is an argument to not have any of those benefits (nor the income tax as well). Then a stronger semblance of markets can take root, especially w.r.t pay.

This is an important argument! The counterargument is that we Americans tried it that way, and to summarize: it did not work out very well. By which I mean the outcome was broadly considered, across decades, not congruent with American values and preferences, which tilted toward electing representation to correct the situation. Which is not to say this wouldn't work elsewhere, just that America is not "elsewhere."

> I'd be open to a UBI-type subsidy that is NOT means tested (everyone get it) to replace all the programs you've mentioned above, which are means tested.

This would be an interesting experiment and IMHO is more intriguing that rehashing experiences that have already been repeatedly rebuffed by Americans.

> The counterargument is that we Americans tried it that way, and to summarize: it did not work out very well

Actually no, it did work really well. The first century in the US saw leaps and bounds of economic growth, and for the common person most of all.

Of course, generally things are better off today, after having benefited from all that early growth. Still, the pace of advancement has slowed, and most of that slowdown has come from people thinking they can redesign society.

If their salaries went up 10% then they would save some of that money. Prices would rise 3%. And then when their salaries went up 3% the prices would go up 1%. And then their salaries would go up 1$ forcing the prices to go up 0.3% and then you'd reach a limit....

Well that's what I think. Do you have any proof backing up your statement that I'm wrong and "the cycle would repeat" or are you just repeating talking points from someone else?

You might be right about the limit.

What I'll say though is that there is a real lack of thinking about "second order effects" of policy from people that are quick to subsidize things.

It is interesting right now to see Britain stuck in a place where it seems to have gotten stuck several times since 1900 in which (1) the economy is screwed up, (2) prices are rising, (3) workers in critical industries are on strike, (4) the effects approximate a general strike, (5) strikes screw up the economy more... And politicians are screaming "can't you just take one for the society as a whole" and "if we give you a raise this year prices will go up and you'll ask for a raise next year..."

In Britain it is worse than the US because they are so dependent on trade and have a non-dominant currency. It is not unusual at all for them to have violent swings in prices of fuel, food, and other imports, and when you consider the "wage-price" spiral inside the country you also have to consider the effect of Britons having more nominal money in their pocket to spend on imports, how that effects exchange rates, etc.

> if they did get a living wage then prices would go up and the living wage would be more and the cycle would repeat...

that's not how the world works

if they were paying them a "living wage" then they wouldn't hire low-skilled teenagers at all; if you raise the price of salmon roe to the same by weight as caviar, few people will buy salmon roe instead of caviar

and this is exactly what happens irl: "minimum" wage laws increase teenage unemployment, preventing them from getting experience, which no one (other than economists) factors into "wages"

"minimum" wage laws drive salaries down from low to zero (i.e. unemployment) for low-skilled workers, preventing them from getting more skilled

Walmart employer 1.7m people in the US and has a revenue of $437b in the US.

If those 1.7m employees were all on $10 an hour for 2000 hours a year, that's 34b.

If you doubled that wage to $20 an hour that would result in an extra $34b in costs at most. Revenue would have to go from $437b to $471b, a 7.8% increase.

This "living wage leads to inflation" story is right wing fearmongering. Prices don't just magically rise. They rise either because demand exceeds supply, or because monopolists realize they can capture from consumers. There aren't really shortages of the type of food/goods people at the bottom of the economic totem pole (who will benefit from a living wage) purchase. If prices rise due to a living wage, outside of a few corner cases it'll be the result of big business profiteering, which is the real problem that needs to be addressed.

> This "living wage leads to inflation" story is right wing fearmongering.

No, it's a misunderstanding of supply and demand. When you raise the price of something, doesn't matter if it's labor or oranges, demand goes down. "Minimum" wage laws result in unemployment for lower-skilled workers, preventing them from getting valuable experience. Everyone who works decides what their minimum is; but somehow "minimum" wage proponents don't trust low-wage earner to decide for themselves so they prefer them to be unemployed instead because they don't understand that this is the result of those policies.

I would be totally happy to put an exception in the minimum wage law for apprenticeships and training periods for challenging jobs. Just as long as McDonalds isn't run by "apprentice" fry cooks and register jockeys.

Low wage jobs with no career prospects are just preying on people for whom the alternative is homelessness.

even jobs with no career prospects provide experience leading to useful skills, at the bare minimum how to behave with coworkers

people have the option of taking those jobs or not so I'm not sure how this is "preying"

If there are very few non-predatory low wage jobs with good career prospects (which is one of the fundamental gripes of millennials/gen z along with housing costs) then your choices are:

1. Get lucky enough to land a good low paying job where advancement is likely 2. Take the shit job while you hope to find #1 (assuming you have the time and energy to keep job hunting while dealing with life/taking care of a kid/going to school part time/etc) 3. Get evicted for not paying rent and become homeless. You aren't even allowed the option of homesteading/living off the land, because it's all private property and some rich jerk who never uses it will eventually end up calling the sheriff on you. 4. Say fuck the system and become a criminal.

People are tired of spending their entire life on option #2, burning half their monthly paycheck on substandard, overcrowded living accommodations. These jobs are a trap, and companies that have roles of this sort should be forced to either build progression into them, or compensate workers better. If a business can't turn a profit without exploiting its workers it shouldn't be a business.

> These jobs are a trap

You always have the option of not taking the job and look for a higher-paying one.

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