Monday assorted links

by on August 3, 2015 at 12:04 pm in Uncategorized | Permalink

1 Jack PQ August 3, 2015 at 12:10 pm

(3.) A 70K minimum wage for one firm is abusing the term “minimum wage”, which should apply to all workers in a country, a state, or a city at least. This is simply an efficiency wage, not so different from Henry Ford’s experiment. That’s well and good, but it muddies the waters of the minimum wage conversation.

2 George August 3, 2015 at 12:28 pm

Agreed and wage typically refers to hourly not salary compensation. People who earn salaries are generally much better off than hourly workers because most of the people making hourly wages are easily replaceable unskilled workers.

3 Zack August 3, 2015 at 5:07 pm

Jack PQ,

Yes, yes, yes. I always find it irritating when stuff like this is labeled “minimum wage.” I believe the minimum salary for an NBA player is around 500k. Obviously this has no relevance to the debate over government mandated minimum wage laws.

4 collin August 3, 2015 at 12:29 pm

In terms of on-shoring production and jobs, our office has seen a handful position created to ‘replace India off-shoring positions’ of 2007. The cost of 30 people in India reporting versus 15 young people (with less US office rework) is small enough that the business wants to spend/invest our office minor league of young employees. Like yarn factories (where 100 Chinese workers are replaced by 20 US employees.) it is not large but this is one of the reasons why job growth has been consistent with slower growth GEDP.

5 Andre August 3, 2015 at 12:33 pm

As a software guy I’d be mad if the secretary was making as much as me, but I’m surprised that more young tech companies don’t try part of this. It always seemed strange to me that a CEO of such a small company would take a million dollar salary. Why not take 200k and get another half dozen sales guys or developers. You’d think it would pay off in the long run.

6 mulp August 3, 2015 at 12:44 pm

Its the free lunch economics that has been sold since Reagan was elected.

If you are a high paid worker, then you will not only keep your job but increase your wage and wealth by eliminating workers and slashing their pay because workers such wealth into black holes, and it is wealth that you have that increases the money consumers have to buy what you sell for ever higher prices and quantity.

Consumers are not workers and workers are not consumers.

Thus, everyone else can be paid nothing and that will make you ten times as wealthy by increasing your income from all the profits from selling to the increased supply of consumers with infinite money.

The guy buying your techie widget is not someone with a $70K per year job, but the peasant farmer earning $200 a year so he can get rich investing all his savings and that of all his family in the Chinese stock market on margin to get rich. He will double what he buys from you when the crash makes him go from millionaire to $45,000 in debt. Free lunch economics in action.

7 anon August 3, 2015 at 9:57 pm

“As a software guy I’d be mad if the secretary was making as much as me” < me too! I hate it when other people make money! I wish everyone except me was dirt poor.

8 mulp August 3, 2015 at 12:35 pm

Interesting that people quit because they were no longer high status workers based on wage. I bet they would happily earn less elsewhere as long as they earned 5 times as much as the majority of the other workers.

Reminds me of stories a Russian Jew friend told me after visits “home” to Moscow in the 90s. Friends struggled both before and after the 90s, but among the people who were doing better were communist party functionaries who had more income and more and better stuff but feeling worse off because some Jews had been quick to engage in trade and make a lot of money. While in the 80s, he could demand bribes from the Jew and make the Jew work hard to find what the commie wanted in exchange for signing the Jew’s paperwork, but afterward, he had to pay the Jew money to get what he wanted and the Jew was really good at getting stuff.

Those who think they have been insulted by other workers being able to buy more and drive GDP growth resulting in more “wealth” over all making the previously high wage worker better off resent their loss of status more than they welcome the benefit of higher GDP making them better off. Lower wealth and higher status based on wage are preferred by many as long as more people are much worse off than they are with lower wage.

9 Dan Weber August 3, 2015 at 6:48 pm

When people discuss income inequality, one group will typically say “it’s not the inequality that matters, it’s whether the poor’s absolute living level goes up.” The second group responds that relative income is what matters.

Now, when an experiment has been performed to actually lift up the bottom group, the second group is angry that, all of a sudden, people care about relative pay.

Role reversal is fascinating.

10 Dr. D August 3, 2015 at 9:23 pm

High enough salary is one dollar more than wife’s sister’s husband makes.

11 Tom Warner August 3, 2015 at 12:48 pm

#6 part 1 is a long, dreary, deliberately dishonest Putin apologia.

12 CD August 3, 2015 at 1:11 pm

You can’t be serious.

13 Brian Donohue August 3, 2015 at 3:30 pm

It was a bit long, but it was quite good actually. Hardly a Putin apologia.

14 Jan C August 4, 2015 at 6:58 am

Did you actually read it? He writes about vote-rigging, economic inefficiency, corruption, and Russia´s flawed strategy towards Ukraine.
Seeing who wrote it, I was actually quite surprised by how critical the article is.

15 Art Deco August 3, 2015 at 12:48 pm

” that capital “mechanically produces arbitrary, unsustainable inequalities” inevitably leading the world to misery, violence and wars and will continue to do so in this century.”

Occidental countries have suffered two global wars in the last century and a continental war implicating a general mobilization in at least one major participant ca. 1802 +/- 13 years. There was also the 30 years war. If one’s thinking is not trapped on the procrustian bed of Marxism, I’m not seeing how anyone these are attributable to ‘inequalities’ or ‘capital’.

16 rayward August 3, 2015 at 1:06 pm

7. I’ve already overinterpreted this story in a comment yesterday (with a caveat regarding TPP). But not because relatively low tech textile jobs are returning to the U.S. but as an indication that business may be reaching a tipping point that business will stop chasing lower costs in the far corners of the globe and will instead start investing in productive capital in order to improve efficiency. I understand that’s naive, that much lower labor costs can still be found in the far corners of the globe (except it seems in China), but one day business (and even a few economists) will realize that prosperity comes from investment in productive capital not by a race to the bottom.

17 Arjun August 3, 2015 at 2:58 pm

I, too, have already overinterpreted the China story, but not in terms of a “decreased labor costs vs. increased capital investment” dichotomy, but rather one where sections of the “core” countries end up turning into “peripheries” (defined in terms of where on the tech and profit ladder the commodities produced in these areas are–peripheral countries typically engage in mass production and resource extraction, core countries typically engage in the high-end R&D). No surprise that those US states where the governments are defined by a highly anti-labor standpoint are the ones where Chinese capital sees as most competitive with Chinese labor markets. It also helps that the US really likes to subsidize cotton production in order to appease rural voting blocs.

18 rayward August 3, 2015 at 3:45 pm

Your comments (above and below) complement mine yesterday, which I didn’t repeat here. My comment yesterday mentioned the apparent convergence of the cost curves here and in China with respect to textiles, with declining costs here and rising costs there. Rather than emphasize how globalization is flattening costs (especially for labor) across developed and developing countries, I chose to emphasize what I see as a potential positive, which is a refocus on investment to increase efficiency and productivity rather then simply chasing lower costs.

19 Arjun August 3, 2015 at 5:33 pm

That’s a good point about seeing all this as positive potential; but I’m still biased toward viewing this situation from the perspective of labor. How much is the transfer of capital from China into the US a good thing for your average Chinese worker; and given how this transfer is underpinned by the escalating labor militancy in China over the past 10 years, how much does this transfer echo the situation of Midwestern manufacturing hubs in the US during the ’70s, who started transferring capital from the Midwest to the South-West, and then abroad, in response to a high level of labor militancy? Given how places like Detroit, MI and Gary, ID are today, I’m not sure how optimistic we should be about leaving capital to its devices.

20 Todd Kreider August 3, 2015 at 1:09 pm

#5. Interesting article. As a bonus: how did sushi become popular in Japan? Apparently a fire at a ramen shop caused a large fire for blocks and so all ramen shops in that area of Tokyo were shut down for a while (a year?) which boosted sushi’s popularity. (I heard this on NPR a few years ago, so it must be true.)

21 Hoosier August 3, 2015 at 5:53 pm

Interesting but I call bs on the line that Americans were crazy about sushi. I’m sure there were sushi restaurants around, but how many people actually had tried sushi in the early 1900’s? Can it be more than 5% tops?

How many Japanese restaurants were in Detroit, for example, in 1910? Maybe it truly was a boom and I’m wrong, but from talking to my grandparents in Michigan people rarely ate out at that time and when they did I find it hard to believe that they went for sushi.

22 Todd Kreider August 3, 2015 at 5:56 pm

“but how many people actually had tried sushi in the early 1900’s? Can it be more than 5% tops?”

Good point. Not even close to 5%. My guess is maybe 0.5%. But even that seems like a stretch.

23 Agra Brum August 4, 2015 at 1:32 pm

Also, sushi has changed significantly over the years; the current form of sushi has been around for only 100 years or so. The more traditional sushi for 500 or so, but it is not as fresh and more vinegared.

24 Sunil August 3, 2015 at 1:30 pm

“… but please be careful not to overinterpret this story.” Amen! You can add this caveat to (almost) all the posts on this blog. Dismal sciences do not scale well, are not particularly portable, and have terrible predictable value.

25 Yancey Ward August 3, 2015 at 2:14 pm

#3 shouldn’t be surprising to anyone. The CEO thought he was going to change the shape of his company’s pay scale, but is instead learning that all he can do is shift it upwards. And, in the end, those who don’t justify the new 70K salary will be readjusted down to 0. It just won’t be discussed in The New York Times.

26 Tom West August 3, 2015 at 5:15 pm

The trouble is that there are a *lot* of positions where it’s supply, not demand that really determines the wage, and this is especially true in small technology firms that have found a profitable niche. A lot of jobs might cost a company $1M if no-one does them, but it’s possible to fill the job for $20K because there’s lots of people willing and able to do the work. Given that, exactly how do you “justify” a salary?

I do very nicely under the capitalist system, and I like to think I work hard. But if I’m a teensy bit realistic, I’m aware that my salary has far more to do with the unplanned accident of what skills other people happen *not* to have than clever planning on my part or even how much money I bring in to the company (if it could be magically subdivided like that).

27 Arjun August 3, 2015 at 3:01 pm

#7 Here are some points that come to mind on how I’d like to over-interpret the story:

1) The slow return of manufacturing to the United States probably has a lot to do with the general stagnation and regression of states in the South, whose far-right governments have dismantled what little social safety nets there might have been, and have been steadily increasing the power and privilege of capital over that of the rest of society.

2) The fact that cotton is subsidized in the US is mentioned as a key factor–does that mean that the US government is effectively subsidizing capital accumulation for Chinese companies? This raises some interesting questions about the power of rural farming constituencies and how their interests are convergent with that of global capital.

3) It is important to understand the “rising wages” and the “logistical costs” mentioned in the NYT piece that is driving capital out of China as being fundamentally linked with the escalating labor struggle in China that has developed over the past decade or so; Eli Friedman’s piece “China in Revolt” ( https://www.jacobinmag.com/2012/08/china-in-revolt/ ) in Jacobin Magazine does a great job illustrating this.

4) All this appears to be part of a larger, slow process of the “flattening” of global labor markets by global capital that is starting to upend common conceptual frameworks of core/periphery, North/South, etc. The NYT piece also mentions FDI in the US textile industry coming in from India and Brazil; its also worth noting that British steel workers were close to holding a strike a few weeks ago against Tata Steel, part of a massive Indian multinational conglomerate. ( http://www.bbc.com/news/uk-england-33204224 )

5) Increasing FDI from Asia into the US will likely spark racist backlash against Asians, and thus it will become increasingly important for racial solidarity and class struggle to be emphasized as the alternative, positive way to react toward what is seen as “foreign exploitation”

28 Keith August 3, 2015 at 4:53 pm

1) Don’t you mean the return of manufacturing is a reward for “giving up position for possession” as my basketball coach used to say? The South is getting manufacturing because everyone else got lazy and coddled.
3) See “lazy and coddled” above.
5) I read this a bunch of times, and I still don’t get it. Asian companies have operated plants in the south for decades. Where is all of this racist backlash you speak of? Why is racial and class solidarity a positive way to react? If this is positive, what is negative? Trench warfare?

29 Jeff R. August 3, 2015 at 6:08 pm

Remember how Toyota, Honda, and Nissan were all run out of the US auto market back in 1992, never to return?

30 Arjun August 3, 2015 at 8:47 pm

1/3) So in your mind, there needs to be hard limits on the living standards that workers should expect and get used to? I’m not sure how else to read your proposed narrative.

5) I think Chinese companies opening up factories *and* directly operating them is somewhat different than, say, Japanese factories. For one thing, there has been a lot of anti-Chinese sentiment given China’s rise in the global economy and as a political power (i.e. see some of the illustrious Donald Trump’s recent comments). I’m sure increased FDI from China will contribute.

I talk about “racial and class solidarity” as the positive reaction compared to racial tensions and conflict. Obviously, working together for the general betterment of society is more positive than fighting among ourselves.

31 Keith August 3, 2015 at 10:08 pm

1/3- Not limits. Once you get the jobs, you innovate to keep them. You have to get the jobs first though..
5- All speculative and won’t happen.

If you have racial solidarity (black with black, Asian with Asian etc.), how does that reduce tensions?

32 JWatts August 5, 2015 at 1:26 pm

“If you have racial solidarity (black with black, Asian with Asian etc.), how does that reduce tensions?”

It doesn’t. The statement ““racial and class solidarity” as the positive reaction” seems counter intuitive. Until I see some strong evidence to the contrary, I’ll assume it’s more thoughtless rhetoric than otherwise.

33 Student August 3, 2015 at 3:58 pm

#3 is absolutely fascinating. This is the modern telling of the Parable of the Workers in the Vineyard. It is fascinating because the reaction is exactly the same.

In fact, somehow put in a modern context, I finally understand what this parable means.

====

Worker set 1 were perfectly happy with their wages and suddenly became dissatisfied with that arrangement when others (worker set 2) were making the same (or close to the same). Worker set 1 suddenly felt slighted by an arrangement they were completely satisfied with at the outset simply because worker set 2 was compensated similarly.

This completely changed their feelings and in fact people quit over it.

====

Lets look at the parable of the workers in the vineyard workers:

For the kingdom of heaven is like a landowner who went out early in the morning to hire workers for his vineyard. 2 He agreed to pay them a denarius[a] for the day and sent them into his vineyard.

3 “About nine in the morning he went out and saw others standing in the marketplace doing nothing. 4 He told them, ‘You also go and work in my vineyard, and I will pay you whatever is right.’ 5 So they went.

“He went out again about noon and about three in the afternoon and did the same thing. 6 About five in the afternoon he went out and found still others standing around. He asked them, ‘Why have you been standing here all day long doing nothing?’

7 “‘Because no one has hired us,’ they answered. “He said to them, ‘You also go and work in my vineyard.’8 “When evening came, the owner of the vineyard said to his foreman, ‘Call the workers and pay them their wages, beginning with the last ones hired and going on to the first.’

‘I am not being unfair to you, friend. Didn’t you agree to work for a denarius? 14 Take your pay and go. I want to give the one who was hired last the same as I gave you. 15 Don’t I have the right to do what I want with my own money? Or are you envious because I am generous?’

16 “So the last will be first, and the first will be last.”

====

Let’s look at some quotes from the article:

“Now the people who were just clocking in and out were making the same as me,”

“He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,”

“Everyone may have equal rights, but not equal talent or motivation,”

======

You know it’s funny that people born talented, healthy, well cared for… they have no problem with the unfairness of an unearned endowment in time t=0.

However, when that unfairness gets flipped on its head, people suddenly become aware of it, even though they are still getting exactly the same amount as before… Its not even a symmetric flip. Their standard of living is unchanged.

====

The kingdom of heaven doesnt have to be after death, it could be here and now if people were a little more empathetic or could experience what its like to be born with little intelligence or paralytic or to crack head parents…

This parable is about empathy, love, and self-sacrifice.

Perhaps Dan is more Christian than he is leading on. Perhaps, I myself have a much longer way to go then I realize.

I would probably be whining about this too when in fact, the 2000 year old response is still so relevant.

====

‘I am not being unfair to you, friend. Didn’t you agree to work for a denarius? 14 Take your pay and go. I want to give the one who was hired last the same as I gave you. 15 Don’t I have the right to do what I want with my own money? Or are you envious because I am generous?’

34 Student August 3, 2015 at 4:01 pm

skipped some of the story… my bad.

8 “When evening came, the owner of the vineyard said to his foreman, ‘Call the workers and pay them their wages, beginning with the last ones hired and going on to the first.’

9 “The workers who were hired about five in the afternoon came and each received a denarius. 10 So when those came who were hired first, they expected to receive more. But each one of them also received a denarius. 11 When they received it, they began to grumble against the landowner. 12 ‘These who were hired last worked only one hour,’ they said, ‘and you have made them equal to us who have borne the burden of the work and the heat of the day.’

13 “But he answered one of them,

35 Brian Donohue August 3, 2015 at 4:34 pm

More good stuff from Jesus! Maybe this comment section needs a regular Jesus sock puppet.

36 AC August 3, 2015 at 11:44 pm

There is nothing new under the sun.

37 Floccina August 3, 2015 at 10:18 pm

+1 Jesus, greatest economist ever.

38 Al August 3, 2015 at 6:46 pm

#4 says: “Driving along the crumbling, unkempt freeways that crisscross Southern California, it’s easy to forget that many were world-class models of infrastructure design, celebrated by engineers and architecture critics alike, when they were built…”

Is that a comment on the nature of “world-class infrastructure design” or a comment on the current caustic, degrading nature of Southern California?

39 Agra Brum August 4, 2015 at 1:36 pm

I think he’s saying that the 110 freeway looks great, but the 405 is dull. I think he is way oversellling the other freeways – the 101, the 5, the 10…none of them are architecturally significant. Freeways in Phoenix have a far more significant ‘design’ feel – LA freeways are far more engineered than designed.

40 Chris August 3, 2015 at 7:37 pm

If you want to share the wealth, then a better strategy is likely developing a good profit sharing plan than paying everyone at least $70,000. It rewards the people who made your company a success, but may not have the bad effects the article shows of this policy. It won’t drive up costs and make your customers feel they’ll be overcharged. It shouldn’t lead to problems of non-performance or anger the higher skilled workers. It won’t doom the company if profits take a dive for whatever reason.

41 derek August 3, 2015 at 9:25 pm

Is Hernando de Soto’s comments on Piketty about status?

42 Dzhaughn August 4, 2015 at 4:41 am

TL;DR version of Perry Anderson 6.1:

Putin did the best he could after crooked Yeltsin et al. It was great for a while, and he was good to the West. But economic integration with the West brought tough circumstances around the crash, then oil price collapsed, and diplomatic mistake on Crimea (which was more innocent than your own annexations you hypocrites), and error in not foreseeing unwanted Donbas conflict occurring as a follow on. He has stumbled into Russian Nationalism. Russian nationalism has never really happened before, per se. Will it wash in face of a forecast economic decline? (Putin can’t back out of Crimea/Donbas now.) Don’t know!

Not overly impressive in reasoning or coherence. Not awful either.

43 carlospln August 4, 2015 at 6:56 am

2) “speculative” [snip]

I’ll say!

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