connecting a couple minimum wage points.

[JohnRoberts]

I'd hardly call MacDonalds a marginal business. Not profitable enough for who? A franchise owner? They are not hurting. I call BS.

McDonald’s Profit Drops 30% as U.S. Sales Slump
http://www.bloomberg.com/news/2014-10-21/mcdonald-s-profit-drops-30-as-u-s-sales-slump.html

I am not going to cry poor for McDonalds just saying they are losing share so not in a position to unilaterally distribute their declining profit.

Raising the minimum wage would "ideally" impact all fast food merchants similarly so Burger King couldn't sell their 10 piece chicken basket for $1. 49.  So everybody would raise prices a similar amount. Unfortunately the invisible hand of free markets does not always do what the government wants.

I am repeating myself and in my judgement these fast food chains are probably already looking at more automation to reduce their dependance on labor.  Mandating higher pay is attacking the symptom not the problem, and would likely lead to less actual jobs. 

I read long paragraphs of gloom and doom for the poor with less jobs. It is the corporations that benefit from a taxpayer subsidized low wage  workforce who will loose.  That's why there is strong organized opposition. It's not the workers who are saying it will be bad for themselves.

I agree it is wrong for head of households working for minimum wage and simultaneously on assistance to make ends meet. But to repeat myself, the problem is not that entry level menial jobs do not pay well, but that the economy is still limping along and there aren't more good paying real jobs.

Of course it is more complicated than this, but I do not blame big business for being the bad guy... While i concede I may have some bias, I have run my own business, and worked in management before.  My suspicion is that this is such a big issue for the current administration to win votes (spending other peoples money)  and perhaps finding some new union members for friends who are also losing market share..

Of course maybe I'm wrong.

JR

 

[Rocinante]

I have two jobs.  One is a small studio owner operator that does audio/video pre and post production as well as live recording and/or sound for venues and festivals, events, etc....  The other is as a GM at a very popular restaurant that has become a small somewhat local franchise with 12 different locations.  The one I run is the hub.  There are actually at the moment two GM's as one transitions to corporate world and helps out with the business and advertisement of the one we work in.  While I love audio, the restaurant gives me the opportunity to meet awesome people, offers a dependable salary, and allows me to troubleshoot critical decisions with the 73 employees and their abilities on the forefront of my mind.  The studio can sometimes keep me for weeks staring at screens by myself as I tweak and edit some douche bags car commercial.  The restaurant is also located in a disenfranchised demographic (and is very aware of that) and can be rough at night while being a family restaurant most hours.
Currently the minimum wage will be in effect in 4 months and the owners are loosing their minds trying to figure out how to compensate for the loss.
If they were incompetent they would certainly suffer but in reality they just won't be making the really high figures they had been enjoying for the last 4-5 years.  *On a side note since my hiring and rise I have added to an increase of 3.5% in sales which I am sure you understand is f***ing awesome and I have been duly rewarded -we just got the labor report numbers in-.
But make no mistake nobodies going to the poor house.
They just won't be making as much.  The main owner also is a part owner of a skyscraper.  Those things cost money.
As I am sure you are aware the scale is greatly weighted in favor of the corporate business with them making all the rules and leaving the leftovers for the small businesses to scrap over.
It will never change they are too powerful.
Doesn't mean I have to join them though and I still hold true to my anarcho-syndicalist beliefs and share all my profits with my partners in our audio business right down the middle no matter who does what that month.
In our world sh*t does not roll down hill.
There is no sh*t.
Servers and bartenders generally make a decent salary but it is just NOT a job one can continue to do forever.  They are barraged with lousy people saying lousy things all day or night long while the unpredictability of their daily income makes it hard for them to invest at times cause they aren't always sure if the "cow" is going to still be distributing milk the next day.  Everyday i have to take over for a server or tender for a few minutes to an undetermined amount of time while the person unwinds (has a smoke, calls their boyfriend, paces in the back parking lot muttering obscenities).  And it is generally the same in all restaurants (I have worked in wayyy to many from SF to NY where I am from.)
I have also physically removed patrons because of the inappropriate ways they have talked to one of my servers.  While rare it is a very enjoyable part of the job.
And so like i said the majority of people can not work as a server forever.  Eventually they will snap.  You do have that one lady whose been at it for 25 years but honestly she is kept around because its really hard to fire someone you know will not be able to get a job again for a while and so I compensate for it by redistributing another part of the restaurant.  In a sense its syndicalist but it takes a daily effort.
Food has gone up and so our prices have gone up (and in our edge of the ghetto location was noticed immediately) but hopefully it will compensate for when the rest of the countries food and prices rise (which is inevitable).

I am not arguing with what anyone has said in this thread.
I am only offering a perspective (albeit an uncommon one) that happens to be knee deep in the world of distribution to minimum wage employees while also being a self-employed business owner. 

 

[JohnRoberts]

Please keep us updated with how the minimum wage increase goes. I ASSume you are talking about a local minimum wage law. Hopefully that will better reflect what the local market can bear. 

Creating value like you did by increasing sales is why you don't get paid minimum wage.

I have been following (albeit not very closely) the recent increase to $15/hr by the Sea-Tac district around the airport, affecting mostly hotel and airport workers there.  Press reports are mixed, perhaps aligned with belief systems. Surely the higher wage must help those lucky enough to have jobs, but the money must come from somewhere.

The 215 room hotel there closed their full service dining room laying off 15 workers. The hotel is considering a 10% room rate increase.  Anecdotal reports from minimum wage workers mention that some have lost, 401ks, paid holidays and vacation, free food, free parking, etc. One waitress who's pay jumped from $7 to $15, reported dramatically less tip income that used to earn her over $15 hr. The high pay for entry level jobs has increased the quality of job seekers making it easy for a parking lot manager to replace marginal workers with over-qualified workers.

Pretty much what I predicted elsewhere the Sea-Tac McDonalds is experimenting with a self-order kiosk,  and iphone payment systems to eliminate counter workers. A California company is developing a robot that can make 360 burgers an hour. Of course somebody will still need to service the machines.

These anecdotes are from a conservative viewpoint and those of other persuasions view Sea-Tac as a good use of government force. Opinions vary.

http://www.thenewamerican.com/economy/sectors/item/19075-real-world-proof-that-15-minimum-wage-hurts-those-it-s-claimed-would-help 

The majority of google hits were for more favorable articles. like http://www.washingtonpost.com/opinions/dana-milbank-no-calamity-yet-as-seatac-wash-adjusts-to-15-minimum-wage/2014/09/05/d12ba922-3503-11e4-9e92-0899b306bbea_story.html While even the favorable article mentioned extra surcharges or price increases.

This is one to watch and learn from, we rarely get such real world experiments in economic research.  While Sea-Tac is not exactly middle America.

JR

 

[mattiasNYC]

I haven't read the whole thread, but to me it strikes me as the discussion misses the elephant in the room because of its narrow range.

Capitalist business interests will always strive towards lowest cost / highest revenue to in crease profits. Maintaining a low wage while housing costs etc rise is a de facto lowering of the wage (English isn't my native language, but I'm sure you understand what I'm talking about). Forcing a higher minimum wage is just expediting the transition to using robots and cutting service. It would have happened sooner or later anyway if it increases profits. Like some people already pointed out, we're talking to a large degree about decreased profits, not net loss. Mc Donalds losing 50% is still making a cool billion in profit (if I remember the article correctly). 

Since we're in the audio industry / hobby it's interesting to note that some studios closed down not because they weren't profitable, but because the owners, who clearly didn't give much of a crap about studio work itself, could make bigger profits using the assets differently (i.e. running a real estate business rather than owning real estate and running a studio business on the real estate) (I wonder what the Steinway factory will be like in 10 years).

This is in my opinion a futile discussion because it is about much bigger and more fundamental issues pertaining to just what kind of political and economic system one chooses to have.  Needless to say (or perhaps it is needed) I am not in the camp that believes there is an infinity number of new types of jobs to be invented. Rather, I think that we'll just see more work being done by machines and with an increasing supply side of labour these problems will only get bigger. A larger percentage of the population will make less money and it won't work in the long run.

Talking about minimum wage to me seems like discussing the size of the band aid to put on one's elbow while one's bleeding out through the chopped off hand.

 

[JohnRoberts]

This is in my opinion a futile discussion because it is about much bigger and more fundamental issues pertaining to just what kind of political and economic system one chooses to have.  Needless to say (or perhaps it is needed) I am not in the camp that believes there is an infinity number of new types of jobs to be invented. Rather, I think that we'll just see more work being done by machines and with an increasing supply side of labour these problems will only get bigger. A larger percentage of the population will make less money and it won't work in the long run.

Talking about minimum wage to me seems like discussing the size of the band aid to put on one's elbow while one's bleeding out through the chopped off hand.

Thank you, I am closer to your POV than you probably think.

Raising minimum wage is a classic"we're from the government and here to help you" strategy.  While most productive workers rise above minimum wage very early in their careers. I last worked for minimum wage back in the '60s. (Ignoring my time in the army when I was paid less than minimum wage, even for back then.)

The only way to feed and pay the world's increasing population more is to create more wealth.  Governments can not create wealth, they can only spend other people's wealth, wasting a major fraction in the process.  For all it's flaws only capitalism with it's incentives for ownership to profit from that activity creates new wealth and more jobs as a side effect.

Unfettered capitalism can lead to abuses so we always need some amount of regulation, but we must be careful to avoid crony-capitalism where big business ends up partners with regulators from big government, at the expense of everybody else.

I see us moving in the wrong direction recently. Capitalism helped us grow to where we are for a couple hundred years but in this current century is failing to keep delivering the golden eggs. The golden goose has a sore neck from being throttled by increased regulation, taxes, and new employee costs (like ACA), and keeps looking behind for what is coming next..

We need tax reform to clean up the negative incentives that drive companies off shore to escape higher than world average tax rates here.

We need government to be a little less buddy-buddy with big business (crony capitalism), and allow small business to prosper. With the modern internet, computer technology, and automation, we should be in the golden age for small business but big business still has too much power (IMO).

Finally I would like to see an amendment that makes congresspeople follow all the laws they pass for us to live by. That is just an obscene abuse of power for them to excuse themselves from legislation and rules they make us follow.

JR

 

[mattiasNYC]

Thank you, I am closer to your POV than you probably think.

Quite the opposite actually.

The only way to feed and pay the world's increasing population more is to create more wealth.  Governments can not create wealth, they can only spend other people's wealth, wasting a major fraction in the process.  For all it's flaws only capitalism with it's incentives for ownership to profit from that activity creates new wealth and more jobs as a side effect.

The first sentence I agree with, but it begs the question "what is 'wealth'?"

The two sentences that follow I completely 100% disagree with, with the caveat that we perhaps view the definition of "wealth" differently and that if we we'd sort that out possibly come to the same conclusion, though I doubt it.

 

[living sounds]

For the last 35 years or so we have mostly seen a massive maximum wage increase, as well as as a resurgence of income derrived from capital. If we let this go on we will soon be back to 19th century levels, which means massive inequality, low growth, very low social mobility and higher returns on capital than on labour (all of them bad things).

Widespread prosperity in the second half of the 20th century has been a result of the wars, which destroyed large properties, levelelled the playing field and created demand catching up.

Wealthy people and corporations can, among other things, use scale effects in their favour, which means they can make more out of the same amount of capital than those with lesser means. And the bigger they get the more they can influence policy in their (narrow and relatively short-sighted) favour.

Since we obviously don't want wars or other catastrophic events to get the balance back the only thing to do is to use policy to remedy the situation, and that in its most obvious form means taxing higher incomes and properties to a much higher degree, so over time the playing field is levelled again.

Since this is, as everyone knows, is a really hard thing to do, the second best thing is to mandate higher earnings for those lower at the income pyramid. Since we want businesses to be smaller ( less direct political influence, more dynamic, more innovation, less corruption etc.) and bigger businesses have advantages over them anyway (see above) the solution would be to make a progressive minimum wage.

This could mean excempting small businesses, and/or differentiating by size - the bigger and more prosperous a business is, the higher its minimum wages must be. Unintended consequences - outsourcing, automatisation, etc. must be taken into account and penalized/regulated accordingly.

 

[JohnRoberts]

Thank you, I am closer to your POV than you probably think.

Quite the opposite actually.

My bad I will try to not opine on what other people think.

The only way to feed and pay the world's increasing population more is to create more wealth.  Governments can not create wealth, they can only spend other people's wealth, wasting a major fraction in the process.  For all it's flaws only capitalism with it's incentives for ownership to profit from that activity creates new wealth and more jobs as a side effect.

The first sentence I agree with, but it begs the question "what is 'wealth'?"

Wealth is defined several ways but generally things people value and are willing to exchange money for. Money can be a reservoir of wealth, but just printing money does not create wealth. Likewise mandating wealth transfers (like minimum wage laws) does not create wealth.

A business, that buys some electronic parts, then assembles them  into a product that performs a desirable function, that people are willing to pay a lot more for than the labor and parts cost, has just created new wealth from thin air. Not to mention employing workers to manufacture the raw parts or assemble the finished goods. 

The two sentences that follow I completely 100% disagree with, with the caveat that we perhaps view the definition of "wealth" differently and that if we we'd sort that out possibly come to the same conclusion, though I doubt it.

Government can create a constructive environment for wealth creation but historically has fared poorly trying manage private sectors of economies themselves.  Cuba and Venezuela are common examples of such failure trying to operate businesses.

Morales in Bolivia just passed a child labor law, but their idea of child labor is that 10 year olds are old enough to work.  I like working, but think 10 YO is a bit young to enter the work force. 

Again my apologies...

JR

 

[JohnRoberts]

For the last 35 years or so we have mostly seen a massive maximum wage increase, as well as as a resurgence of income derrived from capital.

Not sure I follow. Income from capital in the form of interest income or dividends on bonds is at historically low levels, just ask the typical retiree who has seen such income flows from bonds and the like hurt by central bank manipulations of interest rates.

If we let this go on we will soon be back to 19th century levels, which means massive inequality, low growth, very low social mobility and higher returns on capital than on labour (all of them bad things).

So you propose reducing the return from capital somehow...  Sounds like the classic income redistribution argument that ends up with a smaller pie, and disincentive to work harder and create more new wealth.

Widespread prosperity in the second half of the 20th century has been a result of the wars, which destroyed large properties, levelelled the playing field and created demand catching up.

Again I do not follow that logic. Wars consume vast amounts of blood and treasure. Wars are only a lesser evil than than the evils that wars address.  We would be much better off if we didn't lose all those soldiers and spend huge amounts of money to keep bad actors in check.

The wealth created in recent decades has been from developing countries dragging themselves out of poverty.

Wealthy people and corporations can, among other things, use scale effects in their favour, which means they can make more out of the same amount of capital than those with lesser means. And the bigger they get the more they can influence policy in their (narrow and relatively short-sighted) favour.

I have already ranted against crony capitalism, but would love to hear how to take advantage of scale effects to grow my retirement funds.  I still have to pick stocks by myself and don't always pick winners. Gold is still down 38% since I bought it over a year ago.  By the way I worked hard for my capital and invested it wisely over the decades.

Since we obviously don't want wars or other catastrophic events to get the balance back the only thing to do is to use policy to remedy the situation, and that in its most obvious form means taxing higher incomes and properties to a much higher degree, so over time the playing field is levelled again.

As i've observed before, do the poor in Cuba or Venezuela feel better because everybody is poor? Maybe they do? I wouldn't. When all worker create the same amount of value they can deserve the same payday.  Flipping burgers at Macdonalds does not create the same value, as a nurse or other professional.

Since this is, as everyone knows, is a really hard thing to do, the second best thing is to mandate higher earnings for those lower at the income pyramid. Since we want businesses to be smaller ( less direct political influence, more dynamic, more innovation, less corruption etc.) and bigger businesses have advantages over them anyway (see above) the solution would be to make a progressive minimum wage.

This could mean excempting small businesses, and/or differentiating by size - the bigger and more prosperous a business is, the higher its minimum wages must be. Unintended consequences - outsourcing, automatisation, etc. must be taken into account and penalized/regulated accordingly.

Every time government tries to mandate an outcome they meet the reality of unintended consequences.

IMO government needs to get out of the way of business.  If they want to do something useful improve education (not by making student loans too easy) but by steering/helping  under-employed to gain merchantable skills. We have skilled jobs that go unfilled with too many still on unemployment.

The student lending is classic case of government hurting by trying to help... Just like they hurt home buyers helping them get mortgages for over priced homes (inflated by too easy mortgages), a similar economic effect has distorted college costs. Too easy lending has inflated college costs, while if anything discounting the value of a college degree as curriculum is dumbed down for the new expanded student population. The government equate getting a degree with success, if it was that simple they should just issue degrees to everybody. It't the education that adds value (I think, I'm a drop-out myself).

Of course maybe I'm wrong.

JR

PS: thanks guys I missed all the arguments and different world views.

 

[mattiasNYC]

My bad I will try to not opine on what other people think.

No worries, I didn't find what you said offensive or anything. Besides I have very think skin.

Wealth is defined several ways but generally

Ok. I mostly agree with that definition I think.

Government can create a constructive environment for wealth creation but historically has fared poorly trying manage private sectors of economies themselves.  Cuba and Venezuela are common examples of such failure trying to operate businesses.

Well, first of all that's a very very different proposition compared to the one you made before. Before you were making two absolute statements;  (1) "Governments can not create wealth" and (2) "only capitalism with it's incentives for ownership to profit from that activity creates new wealth".

So fair enough, it's not that either of the above two points are actually correct - because they're too absolute to be -, it's about what is 'better', right?

Look to Scandinavia after WWII. Governments there created a vast amount of wealth and became an example on how to grow as a nation. And that brings me to your latest reply  where you talk about Cuba and Venezuela. While they've certainly been common examples them being common examples surely doesn't make them inherently good examples. It is actually a bit 'careless' to suggest that Cuba is a good example of a government's failure to perform when said government has been subjected to an embargo for decades. If it can't trade freely with those it deems appropriate how are we to judge it? And as a matter of fact the same has been true for other nations in this hemisphere.

Morales in Bolivia just passed a child labor law, but their idea of child labor is that 10 year olds are old enough to work.  I like working, but think 10 YO is a bit young to enter the work force. 

I don't see what this has to do with anything. There isn't one monolithic alternative to Capitalism. But since you brought it up it begs the comparison with US child labour laws. Is it significantly worse really? From what I can tell it doesn't seem that way.

 

[mattiasNYC]

If we let this go on we will soon be back to 19th century levels, which means massive inequality, low growth, very low social mobility and higher returns on capital than on labour (all of them bad things).

So you propose reducing the return from capital somehow...  Sounds like the classic income redistribution argument that ends up with a smaller pie, and disincentive to work harder and create more new wealth.

I think what he is saying - and please forgive me if I read that wrong - is that the incentive to actually do labour that creates actual wealth is being paid for said labour. Taking X dollars and buying stock isn't labour that creates wealth. We both discussed what the word "wealth" means and it isn't money, it's what money gets you. So getting more money does not equal wealth, because if it dis - as you point out - we could just "print" more of it.

The ultimate incentive in Capitalism is to make money do the work rather than you doing it. That can mean a great deal of things but the two most apparent ones are 1) paying others to do labour (create wealth) and then pocket the difference between the total cost and the sales price (i.e. profiting from the labour of others, by definition), and 2) by investing in capital markets where you don't care about wealth the way we just described it but purely about profit itself. So you can play a derivatives market and bet on stocks going up or down etc, but you're not creating anything tangible of value.

If we were to take an extreme example that is counter to the type of Capitalism we see in the US today, an example where we'd have no Capitalism and no financial markets, the incentive to work for a businessman now working in financial markets would simply be to "make a living". Same as for anyone else. Same as it's ever been for our species. Why would he work harder? Well, I suppose if he wanted more stuff he could work harder. Why would he work less? He wouldn't. Why would anyone work less in today's society? Because they can. Because it's better to have your money work for you than you working yourself.

People that own property that generates a profit can allow themselves to not work at all and still make money. If "disincentive to work" is a problem then being very wealthy is clearly a problem.

 

[JohnRoberts]

Government can create a constructive environment for wealth creation but historically has fared poorly trying manage private sectors of economies themselves.  Cuba and Venezuela are common examples of such failure trying to operate businesses.

Well, first of all that's a very very different proposition compared to the one you made before. Before you were making two absolute statements;  (1) "Governments can not create wealth" and (2) "only capitalism with it's incentives for ownership to profit from that activity creates new wealth".

I do not see any contradiction but I have discussed some of these points so many times that I often speak in short hand.  Government can not create wealth by itself. While it can facilitate wealth creation with supportive infrastructure like property rights and rule of law.

A more recent example is China who suffered deep poverty for years under collective politics with strict government management of the means of industry.  After seeing the success of Singapore and Hong Kong from allowing the ownership/profit incentive to create wealth, China has relaxed their iron grip over industry (somewhat), while they still have a lot of work to do. Their regulatory infrastructure has not kept up with the rapid growth of private enterprises so we see some of the dark side of purely profit driven business with unsafe foods, unsafe products.  etc. But they will catch up with that over time. They are also struggling with the public expectations in hong Kong for true democracy, but at least the demonstrators there are not being cleared out by tanks. Like Tiananmen square. 

So fair enough, it's not that either of the above two points are actually correct - because they're too absolute to be -, it's about what is 'better', right?

Look to Scandinavia after WWII. Governments there created a vast amount of wealth and became an example on how to grow as a nation.
{/quote]
Scandinavia covers several countries but the dominant model I am familiar with (like Norway) is extracting oil wealth from the north sea, and using that to fund entitlements. Nationalized oil resources sounds vaguely similar to Venezuela, but after they seized the oil resources from western companies they have not kept the technology current or well maintained. The Scandinavian oil industries are better managed.  IIRC they also have a sovereign wealth fund where they used capital raised from selling oil to make profitable investments.  I guess it's ok fro them to make profits from investing capital.  I guess you could argue that they have created wealth, it still looks like redistribution of national resource wealth but they are surely doing a better job at it in Scandinavia than Venezuela.  Cuba unfortunately does not have a wealth of natural resources to draw upon.

And that brings me to your latest reply  where you talk about Cuba and Venezuela. While they've certainly been common examples them being common examples surely doesn't make them inherently good examples. It is actually a bit 'careless' to suggest that Cuba is a good example of a government's failure to perform when said government has been subjected to an embargo for decades. If it can't trade freely with those it deems appropriate how are we to judge it? And as a matter of fact the same has been true for other nations in this hemisphere.

I've know some Cubans whose parents had their businesses seized by Castro.  He deserves the bad governance label as well does the Chavez clone Maduro.

OK please offer an example of socialism that actually creates wealth, besides some oil rich nation that is just redistributing their natural resource wealth. 

Morales in Bolivia just passed a child labor law, but their idea of child labor is that 10 year olds are old enough to work.  I like working, but think 10 YO is a bit young to enter the work force. 

Just coincidence... Morales is way left of center in his politics.

I don't see what this has to do with anything. There isn't one monolithic alternative to Capitalism. But since you brought it up it begs the comparison with US child labour laws. Is it significantly worse really? From what I can tell it doesn't seem that way.

Capitalism sucks but it as better than everything else.

JR

 

[mattiasNYC]

I'll give you a more comprehensive answer in a bit, but briefly:

If oil revenue by a state isn't wealth creation then nothing is. The oil doesn't extract itself, it doesn't put itself in barrels, it doesn't transport itself, it doesn't transform itself to gasoline or other derivative products. It's wealth creation.

In addition to that there are a huge amount of other products that rely on exactly the same thing. If we are to exclude any and all products that are derived from natural resources then we'd exclude a whole lot from our discussion.

Sweden is a better example than Norway then if you think oil is a too limited an example.

 

[JohnRoberts]

I think what he is saying - and please forgive me if I read that wrong - is that the incentive to actually do labour that creates actual wealth is being paid for said labour. Taking X dollars and buying stock isn't labour that creates wealth. We both discussed what the word "wealth" means and it isn't money, it's what money gets you. So getting more money does not equal wealth, because if it dis - as you point out - we could just "print" more of it.

The economic term for simple interest or dividend income generated from lending capital is called "unearned income" and this income receives different tax treatment than regular income (like being paid for being an employee.) This unearned income is treated differently for tax purposes Then there are capital gains. Suppose I want to start a business and don't have the cash or  credit to borrow as much money as I need, so I can promise a share of my business' future profits in trade for working capital now.  While this is not labor, you will definitely work up a sweat sweat since that capital you put into a business is at risk so you may get more back or you may get nothing back at all.

The ultimate incentive in Capitalism is to make money do the work rather than you doing it. That can mean a great deal of things but the two most apparent ones are 1) paying others to do labour (create wealth) and then pocket the difference between the total cost and the sales price (i.e. profiting from the labour of others, by definition), and 2) by investing in capital markets where you don't care about wealth the way we just described it but purely about profit itself. So you can play a derivatives market and bet on stocks going up or down etc, but you're not creating anything tangible of value.

I see capitalism as more creating wealth by inventing some new product or providing some service better than others. The guys who invented the Uber cab service are not making money with money but making money with their brain power to come up with a new idea.

If we were to take an extreme example that is counter to the type of Capitalism we see in the US today, an example where we'd have no Capitalism and no financial markets, the incentive to work for a businessman now working in financial markets would simply be to "make a living". Same as for anyone else. Same as it's ever been for our species. Why would he work harder? Well, I suppose if he wanted more stuff he could work harder. Why would he work less? He wouldn't. Why would anyone work less in today's society? Because they can. Because it's better to have your money work for you than you working yourself.

I have a lot of problems with wall street and some financial engineering that does not really create anything. The high speed traders who game the markets with fast computers to win some narrow benefit, that multiplied by thousands of transactions adds up to real money.

People that own property that generates a profit can allow themselves to not work at all and still make money. If "disincentive to work" is a problem then being very wealthy is clearly a problem.

Investing is kind of like work, It's not like the '80s when you could earn 6%+ on CDs, In fact CD peaked at 15% in 1981. Today they pay more like 1% and I think I read in europe that some banks were charging customers for holding cash due to negative inter-bank interest rates.

Another important question is where did the money come from for them to buy that income producing property. If they already paid income tax on that money before investing it, paying more tax on the gain is double taxation (like I pay on my stock market gains).

We seem to have gotten a little off track about minimum wage...

JR

 

[JohnRoberts]

I'll give you a more comprehensive answer in a bit, but briefly:

If oil revenue by a state isn't wealth creation then nothing is. The oil doesn't extract itself, it doesn't put itself in barrels, it doesn't transport itself, it doesn't transform itself to gasoline or other derivative products. It's wealth creation.

Yes there is wealth creation by a state owned oil company. They take low value oil deep beneath the earth and make it more valuable by bringing it up, cracking it into gasoline, etc.  That difference is wealth creation.

There are some state owned oil companies that are competitive with private industry, some that are not. Mexico has recently decided to open up oil drilling in Mexico to private industry to generate more revenue than the state owned company could.

In addition to that there are a huge amount of other products that rely on exactly the same thing. If we are to exclude any and all products that are derived from natural resources then we'd exclude a whole lot from our discussion.

Sweden is a better example than Norway then if you think oil is a too limited an example.

I guess I need to study up on Sweden.

I am kind of consumed by domestic politics for the next few days.

JR

 

[living sounds]

Actually, Uber is a neat example of what is wrong with today's capitalism. This wall-street funded gem sells people on the idea of sharing their own property with others to save money, in order to make money for the guys extracting money, who won't have to share anything. And on its way it destroys public infrastructure that makes sure everybody, be he sick, or old, or live in the middle of nowhere, can get a car to drive him whereever whenever he needs it.

If Uber were to destroy the taxi infrastructure it would make live cheaper for some people at the price of some comfort, and  let a lot of people stand outside in the rain. And again, it would make very few people much richer.

The trick in this new economy of sharing is to create an illusion for a sufficient amount of people to imagine the alignment of their interests with the plutocrat class.

 

[living sounds]

Not sure I follow. Income from capital in the form of interest income or dividends on bonds is at historically low levels, just ask the typical retiree who has seen such income flows from bonds and the like hurt by central bank manipulations of interest rates.

Instead of me arguing the point, I'd rather recommend this book, which has all the numbers in it:

http://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century

Again I do not follow that logic. Wars consume vast amounts of blood and treasure. Wars are only a lesser evil than than the evils that wars address.  We would be much better off if we didn't lose all those soldiers and spend huge amounts of money to keep bad actors in check.

The wealth created in recent decades has been from developing countries dragging themselves out of poverty.

Of course, you won't find me arguing pro war. It just had this unparalleld effect of creating, for a short time, the opportunity to get this much more equal society with for example the huge middle class in the US. 

I have already ranted against crony capitalism, but would love to hear how to take advantage of scale effects to grow my retirement funds.  I still have to pick stocks by myself and don't always pick winners. Gold is still down 38% since I bought it over a year ago.  By the way I worked hard for my capital and invested it wisely over the decades.

That's the thing, you can't. You need much more money to make much more money. If you have the kind of money for example Harvard University can invest, you can pay the best brokers out there to find the best investment opportunities for you, pay them very well, and still get a better percentage. Concentration of wealth is a sure way to get higher concentration of wealth, scale effects are everywhere, and simple math shows that over time - given a lack of regulation and taxation - that's what happens.

As i've observed before, do the poor in Cuba or Venezuela feel better because everybody is poor? Maybe they do? I wouldn't. When all worker create the same amount of value they can deserve the same payday.  Flipping burgers at Macdonalds does not create the same value, as a nurse or other professional.

Again, nobody serious is arguing this straw man proposition. Nurses don't earn too much, they work hard for a modest living. And they should be payed better than the burger flipper. It's the guys at the top of the income/wealth distribution pyramid who make and have the big bucks now (this was different in 1980) that are the problem. Everybody wasn't poor in 1960 in the US, were they? But it's much harder to raise taxes for the rich (due to their disproportional influence on politics and media) than to raise the minimum wage.

 

[JohnRoberts]

Actually, Uber is a neat example of what is wrong with today's capitalism. This wall-street funded gem sells people on the idea of sharing their own property with others to save money, in order to make money for the guys extracting money, who won't have to share anything. And on its way it destroys public infrastructure that makes sure everybody, be he sick, or old, or live in the middle of nowhere, can get a car to drive him whereever whenever he needs it.

Now that is a truly interesting take. Uber is a wall street creation to erode public infrastructure, that if I understand you, helps old sick people in the middle of nowhere  get a ride when they need it... 

By definition if they live in the middle of nowhere (like where I live) there is no public transportation infrastructure.  Where I live there is the interstate and a rail-road track but the train doesn't stop here or carry passengers, just freight. Out here in the real middle of nowhere there aren't even taxi cabs.  I might call one from 25 miles away but can't imagine what that would cost.

There are lots of places in the US far more sparse than where I live, but we are not remotely like Europe for population density.

Uber strikes me a cross between the third world where everyone with a car thinks they are a taxi, and some college kids wanting to be the next facebook.  I suspect wall street is happy to take a slice for bringing them public.

If Uber were to destroy the taxi infrastructure it would make live cheaper for some people at the price of some comfort, and  let a lot of people stand outside in the rain. And again, it would make very few people much richer.

The trick in this new economy of sharing is to create an illusion for a sufficient amount of people to imagine the alignment of their interests with the plutocrat class.

OK I had to google that, for others as ignorant as I am (was) plutocrat  means a government run by the wealthy. It seems these days working in and around government is how many people get wealthy, being lobbyists here, while the rise of industry in China has made many government officials there billionaires. .

I believe some of our founders were wealthy men, certainly not destitute. I don't hold that against them. I do object to people making wealth today by using their government influence over spending.

JR

PS: Creative destruction is a key element..  New ways that are better, cheaper, faster, whatever replaces the old ways. The people invested in the old ways do not appreciate being replaced. Note: I have no idea or opinion if Uber will overcome the established taxi cab old guard.  They are pushing back in many countries.

 

[living sounds]

By definition if they live in the middle of nowhere (like where I live) there is no public transportation infrastructure.  Where I live there is the interstate and a rail-road track but the train doesn't stop here or carry passengers, just freight. Out here in the real middle of nowhere there aren't even taxi cabs.  I might call one from 25 miles away but can't imagine what that would cost.

There are lots of places in the US far more sparse than where I live, but we are not remotely like Europe for population density.

Well, I was referring to the consequences this would have in a country like Germany, where taxi cabs are highly regulated, monitored, are required by law to transport every applicant and provide local public transport infrastructure. It's reliable and accessible to everyone, even to people who don't live in city centers, don't own cell phones, at whatever time etc.  And it provides jobs that don't subject workers to self-exploitation because there are standards.

And there is no 20% extraction of earnings to wall street. Which makes Uber extremely profitable, all they have to do is run the app and collect the money. Compared to the taxi craft it is again a net bottom-to-top redistribution. 

And it does this also at the expense of people's quality of life. Good luck to the 75 year old coming from the supermarket to find someone to drive her home safely with all the shopping bags she cannot carry all the way home.

If Uber took all the profitable routes, the remaining jobs would be highly unprofitable, the taxi system couldn't work. It's progress for some, leaving others out in the desert.

The same goes for AirBnB and other similar offerings. Their raison d'etre is extraction, not advancement.

 

[dmp]

Getting back to the minimum wage topic - ideally there would be a healthy balance of power between business leadership and workers, analogous to a healthy balance between consumers and business sales. If this balance of power is out of whack, worker's can be paid less and less (many things contribute to this, primarily unemployment, i.e. why pay someone $10/hr if a bunch of people are  jobless and willing to work for $8/hr).
It seems, looking at history, that capitalist systems without government regulation (aimed to maintain a healthy balance), morph into systems with business leadership overpowering worker's interests  - wages drop - poor working conditions - etc.
Let's face it, the best and the brightest are on the business leadership side, and they  figure out how to maximize their profits at the expense of worker's.

It seems economists KNOW the answer - but for some reason greed obscures common sense. Without a healthy balance of power between worker's and business leadership, the path leads to political instability.