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I see that Elizabeth Warren seems to think the minimum wage should be tied to productivity growth and that, if it had been back in 1960 or so, the rate would be a much more live-on-able $22 per hour rather than the current $7.25. That’s of course a bad, job-killing idea on its face, but an even worse one when you think about it. My recollection from Econ 101 many moons ago is that increases in the minimum wage drive increases in hourly wage rates generally, since the market will maintain a gap between what high-skill workers such as plumbers and electricians receive and the statutory minimum paid to the non-skilled workers at the bottom. Ergo, tying the minimum wage to productivity gains would tie all wage rates to productivity gains. But if 100% of the benefit of productivity improvement goes to workers (all workers, remember), which seems to be what Sen. Warren has in mind, there’d be nothing left over to provide a return on the investment that generated the productivity improvement in the first place, and such investments would basically stop. That would not be a good thing. I’m remembering all this from my college days, which were awhile ago and not always dry if you catch my drift, so I may have mangled some details, but I doubt it. Input welcome. . . .


  1. David Foster

    The productivity numbers that Warren used to justify this appear to be those applying to PRIVATE-sector nonfarm organizations. Hence, they do not account for the increasing costs of unproductive government, which are paid by the private sector and obviously reduce the amount that can be paid in wages.

  2. Pat O'Brien

    This administration appears to be detatched completely from reality. They deplore the export of jobs but they advocate a rise in wage rates. It’s like King Canute ordering the tides to recede; he was was kidding, they are not.

  3. John Medlin

    The woman is plain goofy (which, of course, is why the dimbulbs of the People’s Republic of Taxachusetts elected her).

    • Tanny

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  4. jrt

    The Treasury/Fed monetizes productivity gains and population growth by increasing the money supply (adjusting for money velocity) to create ~2% inflation rate. In fact, they specifically redefine the basket of goods and services in high productivity environments (e.g. today’s PC is 1000 times better than 20 years ago) to achieve this. This directly effects the base interest rate for capital, but the “labor market” must adjust without the benefit of a US gov’t organization doing the heavy lifting.

    Look at the asymptotes… if a single machine could do all of the work in the country…should the benefit go to the machine owner? Designer? Buffett? When Google launches self driving cars and trucks what happens to jobs? This is not an abstract issue. Knowledge worker productivity is rising MUCH faster than in all recorded history globally because of exponential growth in computing and communications. Mechanical stuff NEVER went exponential. The old formulas are breaking down and we are struggling to understand what is happening.

    Google “Binary Economics” to see how one bright economist envisioned capital owned by labor (he petitioned congress to create the ESOP plan). Kelso’s theories were attacked by prevailing economists but they are operating in a mathematically flawed set of models caused by an error that they accidently propagated….and curiously…. the economics community will not admit it although the Royal Society has published a paper and one of the 3 Nobel Laureates that unknowingly propagated the mistake has admitted it to a physicist Ole Peters.

    Here’s a presentation from Gresham College that will explain…

    1) Why one of the most basic assumptions in modern economics and portfolio theory is wrong
    2) When and why it happened
    3) How it propagated to today
    4) Why wealth inequality is inherent in the mistake

  5. Samir

    I was able to get in by using back arrow for a couple of times. Now, no acsecs. Also while in FB, I was receiving a lot of error messages. It was also not allowing me to post. I know they have done some work with the Pet Pupz app but don’t know what other work might impact users.

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