Conversation with a friend about political economy: Two economists lament

In case you wonder what economists talk about when they get together…

Economist 1: I have a friend who is not speaking to me because I sent hir an article by Alan Krueger saying that a $15 min wage is probably too high (after zie made a big deal on social media about attending a “fight for 15” rally). And I have another friend who is avoiding me because zie voted for Trump and knows I think that’s despicable. I think I quit.

Economist 2: Don’t quit! Can you tell hir 15 is probably right for [expensive city]? You’re better off without the Trump supporter in your life. Keep fighting for evidence based policy, even if you only get to see people who truly understand once a year and at work…

Economist 1: I told hir I thought it was right for [other expensive city]. I was nice about it (I thought) and I sent it to hir over email – not publicly on Facebook. But zie’s ticked off anyway. And yes – I probably am better off without the Trump supporter but I’m so disappointed in hir and I’m sad about it.

Economist 2: Maybe if we lived in a different world with more social support and greater support of people getting education and also more automation…

Economist 1: Yes. Exactly. I don’t like arguing with people who are on the same side but… This friend was a strong Bernie supporter [#notallberniesupporters], which I guess explains a lot. Sigh.

Economist 2 [still imagining a theoretical world in which a $15 minimum wage is imposed across the US]: Probably what would happen though is we would have a highly functioning black market with little to no worker protections. *sigh* Reality just doesn’t care about ideals and opinions.

Economist 1: The side that *supposedly* cares about science and evidence won’t listen when the science doesn’t perfectly support their ideals. And everyone hates economists :(

Economist 2: We were briefly listened to under Obama… Everybody should love us– we have a hand for everyone! There are very few one handed economists!

Economist 1: Exactly!!! But instead we get crap from BOTH sides.

Economist 2: It really makes one not believe the median voter model. What bunk! (To think I so strongly believed in it prior to the Gore v. Bush election. How naïve I was.)

Economist 1: Maybe if we didn’t have gerrymandering and the electoral college…

Economist 2: Excellent point.

Have you lost (or gained) friends over politics recently?

25 Responses to “Conversation with a friend about political economy: Two economists lament”

  1. Omdg Says:

    If I refused to talk to trump supporters I would alienate 1/2 the people I currently work with…. so. I learned to keep my mouth shut about boneheaded statements about the economy a long time ago. Sometimes one has to choose between principle and pragmatism. 😞

    • nicoleandmaggie Says:

      That sucks. It’s hard to believe that supposedly educated people could have such little understanding about things that are in their best interests. They must have really high hopes for tax-cuts even though it’s likely their income will be negatively affected.

  2. becca Says:

    1) There is some data supporting $15. It would be better to change it to $15 than to leave it where it is, though I don’t doubt there could be a yet more optimal number… What literature should I read to get a feel for solid projections for a national optimal minimum wage? I did do some googling and found quite a bit of info on the minimum wage, but it’s not easy for a non-specialist to parse (I do *hope* that’s not me being susceptible to confirmation bias, but I think I’d like to know what “the most reasonable number” is). Other than Congressional Budget Office evaluations of ~$10/hour (which seemed like it would be net-good) and several papers on “this is what happened in this city when the wage went to $15” (which were nearly all net-good), I couldn’t find much on peer-reviewed studies/projections on $15 national minimum wage.

    2) Pragmatically, if you FIGHT for $15, you GET $12, at best. More likely you get $10 and no help for tipped wage. If you FIGHT for $10 and no help for tipped wage, you get Right to Work because your base doesn’t show up in the midterms.

    • nicoleandmaggie Says:

      $15 is great in many cities. But not for example, where I live, so a federal min wage of $15 would be bad. Also the big arguments for “well it used to be higher than $15 and things were great” ignore that that time period women were much less likely to work. Martha Bailey has some recent work that shows that, historically, increased minimum wages result in higher white male employment and lower minority and female employment as employers switch to white men if they can’t pay less and white men are more likely to work.

      There’s also some recent work by Jeff Clemens that shows that higher minimum wages do hurt people in recessions but not during booms.

      We don’t know what the “perfect” minimum wage would be. We do know that it varies geographically and that $15 is too high for low cost rural areas. My guess is that HRC’s initial platform of $12 was figuring she’d bargain down to $10, and she was willing to change to $15 for the same reason. The current minimum wage is too low, even for where I live.

      I don’t know that fighting for $15 results in $10 since it’s so much outside the bar of possible so many places.

      Also, I should note that there are well over 500 papers on the minimum wage at this point and we still don’t really know what its effect on employment is. Probably because the effects vary as Bailey and Clemens are showing in their respective papers.

      • Cloud Says:

        Ever since an episode of the Weeds podcast helped me understand what was going on with pre-existing conditions in the AHCA, I’ve been listening from time to time. There was a recent episode on universal basic income where they briefly talked about whether implementing UBI in the US would let us do away with the minimum wage, and that sort of blew my mind. But it was just an aside- they were really talking about a program being tried in Kenya. Their asides are often more interesting to me than the main topics, possibly because they assume a baseline level of policy knowledge that I don’t really have.

        I feel like given the increasing levels of automation it would be great if we could have a really deep conversation about the various purposes of work, the minimum level of support people deserve in our society whether or not they work, and the extent to which people’s preferences should matter when they don’t have a job (e.g., the articles about white working class men who won’t consider health care jobs)…. but I also feel like given the current political climate, there is no way that is going to happen at a broad enough level to make any difference. And whenever I try to think about these topics I feel like I’m thinking through the mental equivalent of molasses.

      • nicoleandmaggie Says:

        I mean, in a utopia, robots would do all the non-creative work, we’d have UBI and investment income for all the no-longer productive people, and creative people could do productive creative work as hobbies for the sheer enjoyment (and acclaim) of it. But that’s not going to happen.

        UBI is so much more efficient-in-an-accounting-sense than our current patchwork system. (That’s kind of the direction we were going with EITC.) But we have the red tape to avoid moral hazard. Personally I’m fine with less-productive people watching TV all day instead of working as cogs for minimum wage supplemented by the government, but the thought of that makes a lot of people upset. I’m also fine with people buying the occasional lobster with foodstamps, but again…that makes some people get upset.

      • Rosa Says:

        if we really cared about the moral hazard of people not working, we’d tax the hell out of inheritances.

      • nicoleandmaggie Says:

        I KNOW.

        It is so hard to be able to use logic because it hurts so much when people make these kinds of contradictions. But there’s always different rules for the rich in order to keep them in power.

      • Rosa Says:

        It’s having to maintain the polite fiction that others are truthful and disinterested that’s so wearing.

        Plus we can’t have a higher minimum just for the city because Republicans take the state legislature and make laws against cities having laws. Every state that has a city. It was like #3 priority for the Minnedota GOP after going after trans kids and preventing free pre-k

      • nicoleandmaggie Says:

        Ugh You are speaking to my very soul right now. It’s the same shadowy cabal making all those laws. :/

        My state has these same things. Trans kid persecution, no local laws, and screwing with schooling so only rich kids are educated. Though my state leg #1 priority is killing women.

  3. Jenny F. Scientist Says:

    I have dumped one close friend like she was on fire, on account of how she voted for Trump, and committed to seriously avoiding a cousin, two friends, and several acquaintances (and most of my in laws!) on the same grounds.

  4. chacha1 Says:

    I had to Google it, but apparently the federal minimum wage is $7.25. And hasn’t been changed since 2009. And 20 states (which I’m guessing are all solid red) have a minimum wage that is at or below the federal minimum wage. Meaning doubling the federal minimum is not a winner, politically. We *might* be able to get it up to $9.00. Even discussing $15/hr is going to piss people off.

    If we had universal single-payer healthcare, *and* if people earning minimum wage did not have to pay federal income tax, *and* if a 401(k) type tax-advantaged savings vehicle was available to every wage earner, *and* if vocational training was available at no cost, a $9.00 minimum wage might actually deliver a measure of financial security to most. In the sense of being able to afford housing, food, and transportation, which is a mighty low measure.

    A $15 minimum wage might well succeed in Los Angeles, but it certainly wouldn’t in rural California. And I mean “succeed” in the sense of “businesses stay in business despite increased labor costs.” In low-income areas – which is, geographically, most of the state – mandating a higher wage for your low-skill workers means you try to stay open with family labor, or a roster of part-time employees all of whom have to work two or more jobs, or you close your business and go work at Wal-Mart. We’re at $10.50/hr and I suspect that’s as high as we can go without killing more small businesses. There is a lot of empty state because little towns have completely shut down, and this is not unique to California.

    It’s also tough because you can’t talk about wages without talking about available employment, and the suitability of the available workers for that available employment. There are too many people on planet Earth for the total sum of available jobs, and VASTLY too many once businesses start automating. There is no point telling people to go to college when there are no jobs requiring a college education. It’s the same as telling people to train as plumbers when there are already 2 plumbers for every job.

    Right now agricultural businesses are scrambling because half of their available workers evaporated, but the laws that would make transient labor workable for the remaining workers do not exist. Most white Americans are not, clearly, willing to move four times a year in order to follow the ag work; and cities, states, and feds do not make it easy for people to do this even if they ARE willing. The wage is almost irrelevant.

    • nicoleandmaggie Says:

      There won’t be Walmart jobs though because Walmart will cut back and use more automation when labor costs increase.

      Available employment somewhat depends on the available workforce– there are more jobs for workers when the going wage is lower. There are specifically more jobs for unskilled workers when the going wage is low. College education is still useful in jobs that don’t require an education– college educated workers are more productive and earn higher wages in jobs that don’t require college degrees and when times are bad they push less-educated workers out of the labor market. College is a general degree, not specific job training like plumbing. There aren’t fewer jobs than people… an infinite number of jobs can be created given the right incentives. Whether or not they exist depends on the markets. Right now decreasing automation costs and the current cost of wages mean that automation is taking over, but the same is not true in say, India or Africa.

      If Ag wages were high enough, white people would move to take those jobs. (Ditto men and health care.) But ag wages are lower than minimum wages. And the minimum wage isn’t very high.

      • chacha1 Says:

        I am not an economist, but also I may have failed to articulate. :-) I believe that if all you have is low-skill jobs to offer, the wage has to be low because businesses that rely on unskilled labor typically have a very thin margin.

        My wage is high because my industry has an insanely fat margin, not because all my degrees & experience are actually worth anything. This level of employment is not very portable – there are only a few places one can get a job like this – and it is not replicable in the self-employment economy. An auto manufacturer can offer a fairly high wage to its skilled labor – an ever-shrinking class of employee – because it has a high-priced, always-in-demand product; but those jobs also are not portable and not something anyone can do at home in their garage. There is essentially only one market for those skills, just as there is only one market for mine.

        I cannot do this job in rural California: I have to be in the city. No choice. If I want to live in rural California, I have to accept that I will be doing something else and that my income will be cut at least in half.

        I don’t believe this is something that policy can realistically affect. The state can’t say to law firms, “thou shalt provide for home-based workers” and require them to set up high speed intranets, provide the home-based technology, and allow their paralegals and associates to live in, say, Visalia instead of Santa Monica and do this work, which requires high-level data security and solid technical infrastructure, from home. That is the only thing I personally can think of that would make my field portable, but I would never advocate for it, because I don’t think it makes sense for the employers *unless* the state is actually helping to pay for it. And then you are back to higher taxes. Could the state stop spending money on highway infrastructure, and use that money to set up remote-employment ways and means? No, because the number of jobs like mine, and therefore the number of people who would benefit, is simply too small.

        In order for people to be able to live decently on a low wage, there has to be a greater degree of social support than the US provides. Your worst-case-scenario result looks like parts of India, where people are literally digging in shit to find material to sell or recycle or, god forbid, eat. There is apparently an infinite number of jobs like that. I don’t believe there is an infinite number of jobs anyone would do absent abject desperation.

        If a society is going to offer a safety net, it has to tax economic production. If it is also going to offer major employment incentives, it has to tax everything even more. There are plenty of examples outside the US of the actual, real-world results of not providing a social safety net or mandating a living wage. There are also some discouraging examples of the real-world results of doing both.

        Back to main Q: no, I haven’t gained or lost any friends over politics. I have muted some people on FB, though, and I suspect I’ve been muted in return.

      • nicoleandmaggie Says:

        I can’t reply at length until leechblock comes off, but you’re talking about the short-term partial equilibrium, not the general equilibrium with your examples of jobs and job numbers.

        In terms of whether or not your degrees are useful, they are if you learned general thinking skills in them even if you don’t use the specific ones. We don’t really know why college degrees are useful and provide more career flexibility, we just know they are and they do (even controlling for selection into who gets them).

  5. Taylor Lee @ Yuppie Millennial Says:

    We have a ton of intra-left spats at our Dem party ward meetings regarding what does and doesn’t work regarding housing policy. If I have to hear the word “neoliberal” applied one more time to those who don’t think rent control will solve all our housing problems, I’m going to start flipping tables. Apparently the Bernie Bros at work (#notAllBernieSupporters) also think I’m a corporatist sellout.

    Oh, Massachusetts. Better than dealing with xenophobic close relatives (who chose not to vote) that I haven’t spoken to since Xmas I guess.

    • nicoleandmaggie Says:

      Omg, I was asked to sign so many rent control petitions the other year in Paradise [I always said, I’m not registered to vote here!]– rent control isn’t going to solve the we need more zoned apartment buildings problem! There’s going to be even LESS housing available.

      MA has several papers on the effect of rent control in Somerville/Cambridge/Boston/etc. specifically. Because that’s where MIT, Harvard, BU, and BC are and the cities have been generous with giving their data to graduate students. So we know that rent control results in flats turning into condos.

      • Taylor Lee @ Yuppie Millennial Says:

        Yeah, these are the same people who tend to slow down new high-density housing development because developers are greedy and evil and whatever. (The real reason is because they wanted more of the developed units to be designated as affordable. Which ended up backfiring since now there will be marginally more units but they will all now be in a segregated structure instead of integrated with the market-rate units.)

  6. Debbie M Says:

    Oh, thanks for all the economics analysis here and in the comments. Just want to say that I LOVE economists.

    But to answer your question, I don’t think I’ve lost (or gained) friends due to politics (but I’m socially a bit inept and might not even notice if someone were now ignoring me).

  7. Revanche @ A Gai Shan Life Says:

    I don’t think I’ve actually lost any friends over this administration, not anyone who was really a friend or mattered or I’d remember, and have had my faith strengthened by most friends. A few of those friends, though, have unfortunately found that their own family voted for him and that’s just really hard to see for them.

  8. Rosa Says:

    I have gotten into more ridiculous online fights this week, I swear. Currently going after a conservative friend of a friend on facebook over “people just want a handout” of SNAP benefits.

    Anyway, thinking “who are these people? How does my excellent friend even know them?” I realized 2 things: 1) if I had conservative friends I lost them a long, long time ago. 2) My family is not close so I was already not talking to the one known Trump voter (my dad) much. My brother stopped talking to him a week before the election and I was like, duh, you knew he was this way before when you were bugging me to talk to him more!

    Coworkers, acquaintances, parents of kids my kid knows, some of them are conservative Democrats. if there’s a Trump voter they were very stealthy.

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