The recent report from the Bureau of Labor Statistics that the American economy created 308,000 jobs in March was greeted by President Bush with a proclamation that "The tax relief we passed is working." Naturally, Democrats took issue with Bush's conclusion. But for the sake of argument, let's assume Bush is right, and the tax cuts led to the job growth. We at The Gadflyer thought we'd do some quick math to calculate just how much each of the jobs Bush has created cost the American government. Since Bush is already pretty deep in the hole when it comes to jobs - and it's going to take some pretty fantastic job growth to put him in the black - I decided to give him the benefit of the doubt and put the most optimistic spin possible on things, assuming that the economy will continue to create jobs at its March pace. So I've made some projections into the future in order to calculate the cost per job of Bush's tax cuts [...]
But to see how Bush has done so far, let's start by looking only at what the tax cuts will have cost through the end of 2004: $749.1 billion. And let's say the economy continues to create 300,000 jobs a month from here to the end of the year, something even the pollyannas in the Bush administration wouldn't predict. At the moment, Bush is still 1.84 million jobs in the hole, but 9 more months at 300,000 jobs per month would leave him at the end of the year with a net of 860,000 jobs created for his first term. That gives us the following:
$749.1 billion (cost of tax cuts, 2001-2004)
/860,000 jobs
= $871,046 per job
It'll only take someone a second to shout 'gross oversimplification!', and I wouldn't blame you if you did, but I ran across this at kos and couldn't help but share.
Posts: 4350 | Registered: Sep 2000
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Did they specify what sort of jobs were increasing? It doesn't really count in a way if it's only service jobs as service jobs pay so little and leave a person worrying about finances too much to spend a whole lot of money... *enlighten me*
Posts: 9942 | Registered: Mar 2003
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Synesthesia, I heard a report yesterday as I was going to sleep that talked about the latest job data for AZ. They're saying that we've got a positive job growth, but that it mas mainly in service sector jobs (which could mean anything from McD's to a yard worker here) and that those traditionally pay less than the other job types we've been losing here.
To touch on what John posted earlier, a majority of the jobs that were created in the early part of this year were government jobs, not free market. Unfortunately, I don't think the report specified what level of government. Another significant job growth sector was again the service industry.
It looks like the jobs that we're finally able to replace aren't the higher paying jobs but lower paying jobs (that people have to have multiple of to get by on).
Posts: 851 | Registered: Oct 2001
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Recently, an Iowa senator (Charles Grassley) said that people who make minimum wage don't need it increased because they make more than the poverty level. I think it's within $100 or so ... it's a very close number, anyway. My point is - he really believes that making just above poverty level is fine.
And (as I mentioned in another thread) having jobs go overseas is good for the economy ... right.
Posts: 2034 | Registered: Apr 2004
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I'd like to see the senator live at just above the poverty level for quite some time and then see what his views on them. Odds are that they'll change drastically and he'd be a proponent for finding ways of getting people above the poverty line (maybe not just through raising the minimum wage level).
While I'm being whistful tonight, I'd also like to see what companies (or even industries) that are supposed to be seeing the extra money coming into the country (if for no other reason than to try to confirm a thought of mine).
Posts: 851 | Registered: Oct 2001
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posted
"My point is - he really believes that making just above poverty level is fine."
Or, more likely, he doesn't believe that the role of the government is to help people lead fine lives.
Posts: 37449 | Registered: May 1999
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posted
I think it was something along the lines of "well, they make more than poverty level, so they are not poor." (Not an actual quote, but the gist of the matter.)
Grassley: $10,000 a Year is More Than Enough Friday, April 02 2004 @ 11:21 AM Des Moines – Senator Charles Grassley is so out of touch with day to day life in Iowa that he believes that $10,000 a year is a livable wage. During debate on the Senate floor over the minimum wage, Grassley did some simple arithmetic, calculating that a minimum wage worker, working 40 hours a week for 52 weeks, would earn a little over $10,000 a year. That’s a few dollars more than then federal poverty threshold of $9,310. Grassley concluded that there was no need to raise the minimum wage, because “A minimum wage worker is left with more money than the federal poverty guidelines.”
“Senator Grassley should be ashamed of himself,” declared Iowa Democratic Party Chair Gordon Fischer. “He either has zero understanding of what it is like to work for a living, or he simply has no compassion. Either way, it is outrageous to suggest that $10,000 a year is a livable wage for anyone. I suggest Senator Grassley cut his own $150,000 salary to 10 grand, and then try to afford housing, food, clothing, health care, day care, and transportation. Better yet, maybe he should find a new job entirely.”
Okay, it's more than $100 difference - nearly $700. And Grassley is clearly assuming that a minimum-wage worker is a single person supporting himself or herself, not a single mom or dad or even a married person supporting a whole family.
Gotta love those politicians. Posts: 2034 | Registered: Apr 2004
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"Or, more likely, he doesn't believe that the role of the government is to help people lead fine lives."
Or, even more likely, he doesn't believe that the role of government is to help people lead fine lives, unless they contributed to his campaign.
Posts: 4116 | Registered: Apr 2002
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posted
OK, some really silly assumptions and, need I say it? Gross oversimplifications are made in this thread:
Gross error number one:
quote: At the moment, Bush is still 1.84 million jobs in the hole,
That is simply ridiculous. Bush began his term while we were already well into a recession. Of course 9/11 helped to seal the deal. And of course the economy is much more like a lumbering elephant than an agile rabbit. Any measures taken to affect the economy will take time to show up.
Gross error number 2:
quote: $749.1 billion (cost of tax cuts, 2001-2004)
/860,000 jobs
= $871,046 per job
Any "jobs created" will result in added revenue to the government. If we assume that the average income generated per job is equal to the median US income of 42,409 (2002 level which is most recent I found) then those jobs generated 36,471,740,000 of income. If we assume a tax rate of 15% on that income then the new jobs created generated 5,470,761,000 of new tax revenue in one year.
The plain economic truth is that it makes sense to do things like the US is doing: cut taxes, devalue the dollar, cut interest rates and run deficits to stimulate the economy when times are rocky and then raise taxes, interest rates etc when things are smooth. What remains to be seen is if Bush (or his successor) will actually cut spending and pay off the deficit as things improve.
quote: Recently, an Iowa senator (Charles Grassley) said that people who make minimum wage don't need it increased because they make more than the poverty level
While the posted reasoning is flawed, it really DOESN'T make sense to raise the minimum wage. The beneficial effects are very short term and the long term effects are negative. Just consider: minimum wage is raised so John Poor Boy makes more per hour. For a few months the extra few bucks help out. However, since John isn't the only one who saw a wage increase, the price of running a restaurant, farm etc. Just rose sharply. To make up for the increased operating costs, everyone who uses minimum wage labor must increase prices. This means a general rise in the cost of living across the board. However, that increase in the cost of living isn't accompanied by a wage increase for anyone except the lowest income level and so most people see a decrease in their buying power and so they are worse off than before. Well what about John? Isn't he better off? The poor spend a greater proportion of their income (like all of it) so the cost increase will MOST effect John which means that depending on the size of the increase John is maybe just a bit better off, more likely ends up right where he started or maybe is even worse off. Everyone else is definitely worse off, so why do it?
Posts: 4548 | Registered: May 2001
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Would it be safe to say, then, Jacare, that you oppose ANY minimum wage, since the less we pay lower-end workers the cheaper things are for them to buy? At what point are they making so little money that all they things they want are free?
Posts: 37449 | Registered: May 1999
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Tom -- surely you know economics better than that? There's a production curve for anything.
The problem isn't a minimum wage, its a minimum wage above equilibrium market value for the job. If its below equilibrium market value, a minimum wage is preventing utter exploitation, like it should, and will have no particular economic ill effects, as its not actually interfering with any economic effects -- just externalities like exploitation.
However, when minimum wages rise above that equlibrium market value, they cause inefficiencies in the system. Suddenly companies are employing fewer employees than they normally would at the same price point and producing goods more inefficiently. This results in a price increase, because demand is higher, and in order to be willing/able to produce to match the demand level (recreating equilibrium), a higher price is needed.
However, the important thing to realize is that at that price the demand is, in fact, lower. So less is produced, at a higher price. Note the less is produced part -- its not just that prices are increasing, but that people will stop buying as much, often out of necessity to cut back. For the minimum wage workers, this is a good thing, as the price applies to everyone (and so to them, the price goes down). However, anyone even the slightest bit above minimum wage is screwed over, because they received no increase in wages, but see an increase in price. And that is the big problem with minimum wage laws -- most people who are low income still make more than minimum wage. Every time the minimum wage is increased, while that increases advantage for the small subset of people making minimum wage, it hurts everyone who makes more than minimum wage, which is particularly felt by those with low incomes that are above minimum wage -- increasing their poverty.
Posts: 15770 | Registered: Dec 2001
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"The problem isn't a minimum wage, its a minimum wage above equilibrium market value for the job."
Yes, I'm aware of that. That was, in fact, the point I was making.
In the same way that "tax cuts" are only a good thing if we're above the intersection on the Laffer Curve, "minimum wage" is only a bad thing if wages are markedly higher than the market can bear.
Posts: 37449 | Registered: May 1999
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What is the point of having a minimum wage if it's just what market value is? After all, market value is just whatever the market already pays for the job.
Posts: 2432 | Registered: Feb 2001
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I didn't say that the wages had to be significantly higher than what the market would OFFER. I said they had to be higher than what the market could BEAR. Posts: 37449 | Registered: May 1999
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The original post in this thread reminds me of a simple exercise we did in Econ 100 in college. We were looking at the steel industry and the government subsudies/tarrifs used to help our archaic steel industry survive in the USA. We calculated that we could shut down all US steel plants and buy Korean steel. This would save the economy so much money that we could pay every single person that worked in the steel industry over. $100,000 to stay home and not work. Of course, if we ever got in a war that threatened our steel shipments from Korea, we'd be screwed.
I personally think that the idea of cutting taxes to spur the economy is not very effective. I think the idea of doing *anything* to spur the economy is not very effective. It's a gargantua beast, and not much can be done except wait out the dips and try to not do anything that will cause more problems than is natural.
Posts: 16551 | Registered: Feb 2003
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Preventing exploitation of people who feel trapped in their job by their employer. Its not always effective, but its better than nothing. I answered that just above, if you'll notice. And I also pointed out why a minimum wage above the market value causes more harm than good to low income people.
Posts: 15770 | Registered: Dec 2001
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Xap -- no, the equilibrium market value is not exactly just whatever the market pays for a job. In times where wages are in motion, the equilibrium market value is often either under or above the current wage.
Also, its not what the market pays in every instance, its what the market pays across a particular job-type (a particular product, if you will). For particular employers, they may be (for instance) threatening some illegal immigrants with the INS to prevent from paying as much. A minimum wage law helps prevent things like that.
Posts: 15770 | Registered: Dec 2001
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And Tom, the market will "bear" any required wages. Its just any mandated change in wages will result in changes in prices and quantities produced, until equilibrium is restored. There's no point at which the market can or cannot bear it -- the only question is how much it moves, not whether. I suppose you could say the market cannot bear it if it makes production zero, but even that is just a natural intersection of the supply and demand curves.
Posts: 15770 | Registered: Dec 2001
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*nod* The point I'm trying to make, fugu, is that we really have no idea whether wages right now are high enough that an increase will create a net loss of purchasing power. I personally doubt that they are.
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That was, in fact, the point I was making.
