On Walmart, And Who Bears Responsibility For the Poor
Note: Originally posted in Discussion, edited to take comments there into account.
Yes, politics, boo hiss. In my defense, the topic of this post cuts across usual tribal affiliations (I write it as a liberal criticizing other liberals), and has a couple strong tie-ins with main LessWrong topics:
- It's a tidy example of a failure to apply consequentialist / effective altruist-type reasoning. And while it's probably true that the people I'm critiquing aren't consequentialists by any means, it's a case where failing to look at the consequences leads people to say some particularly silly things.
- I think there's a good chance this is a political issue that will become a lot more important as more and more jobs are replaced by automation. (If the previous sentence sounds obviously stupid to you, the best I can do without writing an entire post on that is vaguely gesturing at gwern on neo-luddism, though I don't agree with all of it.)
The issue is this: recently, I've seen a meme going around to the effect that companies like Walmart that have a large number of employees on government benefits are the "real welfare queens" or somesuch, and with the implied message that all companies have a moral obligation to pay their employees enough that they don't need government benefits. (I say mention Walmart because it's the most frequently mentioned villain in this meme, but others, like McDonalds, get mentioned.)
My initial awareness of this meme came from it being all over my Facebook feed, but when I went to Google to track down examples, I found it coming out of the mouths of some fairly prominent congresscritters. For example Alan Grayson:
In state after state, the largest group of Medicaid recipients is Walmart employees. I'm sure that the same thing is true of food stamp recipients. Each Walmart "associate" costs the taxpayers an average of more than $1,000 in public assistance.
Or Bernie Sanders:
The Walmart family... here's an amazing story. The Walmart family is the wealthiest family in this country, worth about $100 billion. owning more wealth than the bottom 40 percent of the American people, and yet here's the incredible fact.
Because their wages and benefits are so low, they are the major welfare recipients in America, because many, many of their workers depend on Medicaid, depend on food stamps, depend on government subsidies for housing. So, if the minimum wage went up for Walmart, would be a real cut in their profits, but it would be a real savings by the way for taxpayers, who would not having to subsidize Walmart employees because of their low wages.
Now here's why this is weird: consider Grayson's claim that each Walmart employee costs the taxpayers on average $1,000. In what sense is that true? If Walmart fired those employees, it wouldn't save the taxpayers money: if anything, it would increase the strain on public services. Conversely, it's unlikely that cutting benefits would force Walmart to pay higher wages: if anything, it would make people more desperate and willing to work for low wages. (Cf. this this excellent critique of the anti-Walmart meme).
Or consider Sanders' claim that it would be better to raise the minimum wage and spend less on government benefits. He emphasizes that Walmart could take a hit in profits to pay its employees more. It's unclear to what degree that's true (see again previous link), and unclear if there's a practical way for the government to force Walmart to do that, but ignore those issues, it's worth pointing out that you could also just raise taxes on rich people generally to increase benefits for low-wage workers. The idea seems to be that morally, Walmart employees should be primarily Walmart's moral responsibility, and not so much the moral responsibility of the (the more well-off segment of) the population in general.
But the idea that employing someone gives you a general responsibility for their welfare (beyond, say, not tricking them into working for less pay or under worse conditions than you initially promised) is also very odd. It suggests that if you want to be virtuous, you should avoid hiring people, so as to keep your hands clean and avoid the moral contagion that comes with employing low wage workers. Yet such a policy doesn't actually help the people who might want jobs from you. This is not to deny that, plausibly, wealthy onwers of Walmart stock have a moral responsibility to the poor. What's implausible is that non-Walmart stock owners have significantly less responsibility to the poor.
This meme also worries me because I lean towards thinking that the minimum wage isn't a terrible policy but we'd be better off replacing it with guaranteed basic income (or an otherwise more lavish welfare state). And guaranteed basic income could be a really important policy to have as more and more jobs are replaced by automation (again see gwern if that seems crazy to you). I worry that this anti-Walmart meme could lead to an odd left-wing resistance to GBI/more lavish welfare state, since the policy would be branded as a subsidy to Walmart.
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Comments (510)
Chris, I agree with your observation that people don't think very consequentialist here. However, there is also something to be said for a solid application of common sense.
Yes, the obvious economic argument is that Walmart is under no obligation to hire employees, and any employee is free to leave whenever, so they should be allowed to treat them any way they want. The underlying assumptions here are that the (job) market is efficient so that no single company can influence it, people can get new jobs instantly, people can rationally decide whether to switch jobs on the fly, etc. etc. Of course these assumptions are not correct. For example, if a company becomes successful by beating all competition, say by driving costs lower than anyone else can, and then one day the company fires all employees and packs up and leaves there is going to be a very real hit to the economy. There certainly is not going to be an identical company performing the same service there the next day. In the case of Walmart, they are one of the largest companies in the world. It would be extremely unrealistic to assume that if they don't pay their employees enough, everyone could just go and leave and it would be the same as if Walmart had never existed. The larger a company you are, the better a bargaining position you have, and the more capable you are of driving down wages to make a higher profit.
The point I'm trying to get across here is this: The reason many people object to Walmart's policies is because their moral intuitions tell them that there is something wrong when a company doesn't pay its employees enough for them to feed themselves. Yes, a lot of it boils down to "Companies Boo, people Jay!". No, it isn't very consequentialist. But you should probably not ignore that moral intuition, because a good helping of common sense is usually better than an overly simplistic economic argument based on unrealistic assumptions. At least in my experience.
If possible, I would like to hear the reason for the downvoting of the above post. Specifically, whether the reason is:
1) It discusses politics (in response to an article about politics?)
2) The reasoning is fallacious
3) It was written by me
4) People don't like silly examples
5) It sounds vaguely leftish
6) The point I made is so obvious that it's redundant
7) people prefer to have their politics debates one-sided
LWers are mostly socialists. If you're getting downvoted here while saying "leftish" things, what you're saying probably has some actual problems.
I've no idea who you are and I've just downvoted you because your post is a tedious wall-of-text.
8) It's too long, says very little and doesn't have a summary preceding it. 9) Almost all of your writing is either political or meta, which suggests you don't belong here and will only add noise. 10) You've clearly failed to learn from previous criticism.
Sorry to make my first post on LW a political one, but I've been hearing too much about this discussion everywhere to stay out of it, here. I'll try to keep it short.
ChrisHallquist: I worry that this anti-Walmart meme could lead to an odd left-wing resistance to GBI/more lavish welfare state, since the policy would be branded as a subsidy to Walmart.
Quite honestly, I think this is a confused concern, or at least a misplaced one.
I'm a philosopher by education (again, my apologies), but an urban economist/macroeconomist by trade and hobby. I don't think I'm saying anything new or surprising in mentioning that, as industrial economic growth decline, and economic growth shifts to less labor-intensive service industries, there begins a decline the growth rate of the employment-population ratio. Assuming the typical level of population growth rate decline associate with this economic transition (i.e. Western Europe/North America fertility levels, not East Asian/European fertility levels), you end up with a large ratio of low-wage/high-wage laborers. Because people respond intuitively to the two population segments with more visibly-dispersed levels of income, by claiming that this is unjust, you start to get a popular movement for social welfare. The confusion/frivolousness should be becoming somewhat apparent.
The income dispersion which is a product of the development of the economic system which created it cannot be solved by that same system; this is what leads to calls for things like living wages and other types of income redistribution--or even just labor welfare generally--through government intervention. However, these interventions in a market built around the production of capital only serve to reduce its efficiency by introducing new inflexibilities in the market, e.g., if I'm looking to start up a restaurant, I can only do so provided I have enough money to satisfy OSHA regulations. If I don't have enough money to do so, I can't begin to produce capital through food service, which not only deprives me of profit, but deprives local workers of (theoretically) sharing in that profit. When economic growth slows and population growth doesn't, it's bad for everyone.
I'm pretty strongly socialist, but I'm willing to admit social welfare and capitalism simply don't go together...though maybe that's less surprising than it seems to me.
I suppose this just hits on the fact that I agree with what a few other people here have said: I don't think that people who are genuine libertarian capitalists can actually have conversations about socioeconomics with non-libertarian socialists. We have different consequences we're trying to reach, and knowing that, we can move on and not worry about convincing each other. Frankly, it leads me to respect libertarians totally, even if I absolutely disagree with them.
But American liberals, and most European social democrats, are inconsistent. Whether or not they know it, they believe that human welfare (whatever their preferred sources of utility are) is Good, but they refuse to use a system that produces it because they believe that system--socialism--is Bad, though in their defense, it's mostly because they misunderstand what socialism actually is (not that I'll lay claim to an absolute understanding). Because the morality they use is deontological in nature, you end up with people creating rules AND goals (the latter because humans are planning things), separately and simultaneously(ish), instead of deciding on one starting point and letting what comes naturally happen without interference.
Feel free to introduce yourself in the welcome thread and take the census/survey, if you haven't already.
I was going to say “Sure, fewer regulations means more, cheaper restaurants and more jobs for cooks and waiters, but also more cases of food poisoning -- and if you wonder why in a free market I couldn't just decide to avoid the kinds of restauraunt likely to give me food poisoning even if they're cheaper, I invite you to read Section 4 in this FAQ”, but reading on I gues you'd actually agree.
Funny. I think minimum wage is a terrible policy precisely because we'd be better off replacing it with guaranteed basic income. I think welfare is a terrible idea, for the same reason.
They all have the same intentions, but guaranteed basic income is the one the meshes the best with the invisible hand. Even if you have no idea if you should be helping the poor, minimum wage is the wrong way to help the poor, so clearly you shouldn't have minimum wage.
It is of course possible to have both. Set a minimum income guarantee for everyone (so that even those who are not working, don't starve), allow the minimum income to be retained by those in work (so avoiding a high effective tax rate on low incomes), and add a minimum wage as well (so discouraging low-productivity work, and incentivizing training for higher productivity work).
By the way, the major political value of describing Walmart as a "welfare queen" is that welfare recipients are stigmatised, and this line of rhetoric redirects the stigma (and tends to dilute it). It is unfair to Walmart, but perhaps no less fair than calling anyone a welfare queen.
You can have both, but minimum wage is still a bad idea. You're better off just having a higher minimum income guarantee.
Why a bad idea, though? I guess you are disputing this point:
Here's a simple model. Assume that full-time employees cannot live on less than $8 an hour (they starve, can't pay rent etc.) Also assume that an employer can offer untrained staff two sorts of job:
Job 1 has very low productivity, total value of $6 per hour, but a pay-rate of $3 per hour. $3 a hour is too low to live on, but employees will accept it where that supplements a minimum guaranteed income.
Job 2 has higher productivity, total value of $14 per hour, but staff must be trained to do it, and because they now have transferable skills, the employer must offer $10 an hour to retain them. The training costs average at $2 per hour over the typical duration of the employment.
The employer offers staff Job 1 because that gives a higher profit ($3 per hour, rather than $2 per hour). Staff take it because $3 is better than nothing. But there is more economic value created if employers offer Job 2 instead. A minimum wage requires them to do that. You can argue the details, but that's the general principle.
There is clearly a counter-argument that the minimum wage is a market intervention and can cause inefficiencies (it may result in some folks who just can't be trained losing their $3 per hour jobs). But the counter to that counter-argument is that the minimum income guarantee is already a market intervention which is encouraging employers to offer Job 1 (as it allows employees to accept it). So a corrective intervention is needed.
My knee-jerk assumption is that Job 1 would actually not be accepted by almost any employees. This is based on the guess that without the threat of having no money, people generally would not agree to give up their time for low wages, since the worst case of being unemployed and receiving no supplemental income does not involve harsh deterrents like starving or being homeless.
Getting someone to do any job at all under that system will probably require either a pretty significant expected quality of life increase per hour worked (which is to say, way better than $3 per hour) or some intrinsic motivation to do the job other than money (e.g. they enjoy it, think it's morally good to do, etc.)
It's more likely that a well-implemented basic income would simply eliminate a lot of the (legal) labor supply for low-wage jobs. I both see this as a feature and see no need for a minimum wage under this system.
That's an inefficiency, but it seems to me that a far more central one is embedded in the assumptions of your toy model: how many unskilled jobs ($3) funge against skilled or semi-skilled ones ($10). In practice, it seems to me that the kind of jobs an employer can offer are often narrowly constrained by business requirements.
A factory owner, for example, might be able to retrain unskilled line workers (fitting Subwidget A to Subwidget B) to do semi-skilled work (operating a widget-fitting machine) for higher total productivity; that's consistent with your model's assumptions. But if you run, say, a hardware store, someone's got to stack shelves, mop the floors, and run the registers, all of which take roughly the same level of training, and there's only so many places you can squeeze out more per-body productivity by investing more. Anyone you have to fire because of minimum-wage laws there represents an economic loss: they aren't getting paid, and you aren't running as efficient a business as you could be.
OK, a fair criticism of the "toy" model, which was simplified to make the point. There are always multiple choices of productivity and wage level, and big moves (more than doubling employee productivity, while simultaneously quadrupling the cost of labour) usually can't happen quickly.
Back in the real world, I did a quick look at the economic evidence, and was surprised. The latest evidence base is that the minimum wage has surprisingly little effect on anything. It seems to have no discernible effect on employment levels - see here - but it has no clear net impact on training levels either - see here.
One problem is that minimum wages tend to be varied only marginally, so it is hard to see a big effect. However, the UK provides a more dramatic experiment, where minimum wages were abolished in the 1990s, then re-introduced a few years later. Some UK assessment here on employment and on training. Again, not a big impact in either case, though training levels apparently did increase among groups affected by the minimum wage. This suggests the toy model is not totally daft.
Interesting reading, although I'm always leery of relying on a single meta-analysis of a politically charged subject. For the sake of argument, though, let's take it as given that increasing the minimum wage has no or only a small effect on employment rates. Where's the money coming from, then, and what would we expect that to do to the economy?
First option: It's a free lunch; the money would otherwise go to line the pockets of (spherical, behatted, cigar-chomping) capitalists. This is implausible to me on priors, but we can put bounds on how far we can stretch it: most businesses run on margins of 15 to 20%. I'm having a slightly harder time finding figures on personnel costs, but Google informs me that 38% is a decent payroll target; factor in benefits and such and let's call it 50% for all personnel-related expenses. This suggests that minimum wage laws could increase average wages by 10 or 20% without cutting too much into business owners' cigar budgets, although we should really be thinking on the margins here.
Second option: It's being passed on to consumers in the form of higher prices. On average people are making more but also paying more; this means inflation. There are institutions trying to control inflation, though, so the costs probably end up being taken out in lower interest rates or in subtler ways. Note that higher costs of consumer goods work a lot like a mildly regressive tax; lower-income people buy more in consumer goods as a share of income.
Third option: The balance of labor changes. Jobs that can't economically be done at the lower wage points move to places that have less stringent laws, and trainable or higher-skilled jobs move in to fill the employment gaps. I don't think I'm economist enough to analyze this fully, but it looks like we'd expect wages for those higher-skilled jobs to go down in the affected jurisdiction as a consequence of supply-and-demand issues, probably after a time lag. In any case someone's still doing crappy jobs for crappy wages; they just don't show up in the statistics. Frictional costs also arise; outsourcing isn't cheap.
Fourth option: Something's masking the effect. Either the changes are slow enough that they don't show up in the available statistics, or something I haven't thought of is going on.
My first reference above was more of a "meta-meta-analysis" since it surveys the results of several meta-analyses! At a high level, it is going to be quite difficult to argue that there really is a big impact on employment, but somehow all the analyses and meta-analyses have missed it. As I said, I found it surprising, but this is the full evidence base.
This is the main question addressed by the Schmitt paper. To quote the exec summary.
"The report reviews evidence on eleven possible adjustments to minimum-wage increases that may help to explain why the measured employment effects are so consistently small. The strongest evidence suggests that the most important channels of adjustment are: reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners ("wage compression"); and small price increases."
One of the other hypotheses considered was a reduction in profits (which is what the toy model would suggest: the low-wage "Job 1" maximizes profits rather than productivity, and moving to "Job 2" increases productivity but lowers profits). However, Schmitt found not many studies and not much evidence of this, except in the UK following introduction of the minimum wage from nothing. Again, I found that very surprising: if anyone is losing out by paying the minimum wage, you would expect it to be the Walmarts of the world. But not so, apparently.
Personally I would expect large corporations and the very rich to be capable of defending their position against any reasonably predictable shift in the economic environment, since they have resources and motivation to lay out more comprehensive contingency plans than anyone else. That extra productivity from "Job 2" doesn't just vanish into the aether. Higher minimum wage means the poorest people have more money, then they turn around and spend that money at Walmart.
The ones who lose out from a higher minimum wage would be the middle managers, who are then less free to treat bottom-tier workers as interchangeable, disposable, safe targets for petty abuse. With higher wages, those workers will have more of the financial security that makes them willing to risk standing up for themselves, and specialized skills that make them more expensive to replace. That's what wage compression, reductions in turnover, and improvements in organizational efficiency look like from the trenches.
Managers are more likely to abuse minimum wage workers the higher the minimum wage. At a higher minimum wage workers will value their jobs more and so will tolerate more abuse before quitting, and managers will value having the worker less because employing the worker is more costly.
Someone downvoted your reply, Nornagest, which I really can't understand: I upvoted it myself.
The parent is now at -2; one more down and it will disappear from view, and we will get a heavy tax for continuing.
What is happening here? Are we just not allowed to have discussions on this forum about the possible economic gains and costs of minimum wage or minimum income policy?
Someone's probably downvoting everything in the thread, most likely on grounds of being too political for the forum. My other comments here have taken the same hit.
Obviously I don't agree with that policy as it's applied locally, but I can't really blame them either. This exchange has been relatively sane, but the discussion under other comments has had points of low quality, and I'm not totally convinced that we're better off with the thread as a whole.
I haven't scrolled through all the existing comments to see if someone else has already raised this point, but while, in general, I would agree that it's usually better for people to have poorly compensated employment that leaves them in need of some public support than to have no employment whatsoever and be even more heavily reliant on public support, I think this is not necessarily the most useful context in which to view institutions like Walmart.
In general, Walmart doesn't create jobs where, otherwise, no jobs would have existed. Instead, it usually displaces jobs that would otherwise be created by smaller stores or chains which it can undercut by being able to more effectively employ economies of scale. While those economies of scale can deliver genuine benefit to consumers, in offering its employees such low pay and benefits that they need public assistance, Walmart creates an illusory benefit to consumers over smaller stores, by lowering prices and thus making themselves a more appealing shopping destination, but making the public shoulder the hidden cost of the employees' low level of compensation.
wait, in that case isn't Walmart mostly a subsidy to disadvantaged people? The vast majority of taxes are paid by the wealthy, but the vast majority of Walmart customers are the poor. This means that they get the benefit of cheaper products while paying little to none of the costs.
Well, the majority of taxes aren't paid by the lower class, but I wouldn't say the majority of taxes are paid by the wealthy; for those who have enough money, there are sufficient tax loopholes for them to pay less taxes by proportion of their income (Warren Buffet has for some time now been paying a lower proportion of his income in tax than his secretary). So Walmart would mostly be subsidized by the middle and upper-middle classes.
While Walmart's customer's certainly skew lower class, as to whether the "vast majority" are lower class, I couldn't say.
The top 1 percent pay 36 percent of taxes while only being 19 percent of total income. The loophole thing, despite egregious examples like buffet, is wildly exaggerated.
Ialdabaoth already raised this point, but to put some numbers to it, while the the top 1 percent pays 36 of income taxes, people in that percentile make less than 40% of their income through salary and wages; most of the remainder comes from investments, which are not covered under the income tax and are taxed at a lower rate.
Be careful that the same definition of "income" is being used in both cases; I believe that the definition Warren Buffet was using included capital gains (which is specifically not taxed as 'income', which is what your first link counts). Capital gains are still taxed at 15%, so if the top 1% gain most of their 19% share through capital gains (or if the share is higher than 19% when capital gains are included), then it's likely they ARE paying less.
http://www.mercurynews.com/business/ci_24065108/wealth-gap-widens-richest-1-percent-earn-biggest according to this capital gains bumps it up to 22.5 percent.
Which is still well below the top income tax bracket of 39.6%.
Given the income tax rates, capital gains tax rates, and the average proportion from both sources composing the income of the top 1%, the average rate of tax on people in that bracket, barring any use of additional tax limiting strategies, should be somewhat under 28%, the rate paid at the $87,851 - $183,250 income tax bracket. The very wealthy, whose income is more dominated by investment revenue, would tend towards a lower rate.
If we categorize the wealthy by total wealth rather than yearly revenue though, then the top 1% pays a much lower proportion of their total wealth in tax.
So while Walmart displacing jobs that leave employees in need of public assistance can be seen as a subsidy on the lower classes, it's not one where the wealthy are paying out either a majority or a disproportionate amount relative to their wealth.
I get the impression that the real problem with health care specifically is that we are keeping sicker people alive longer with more effective (and expensive) treatments, and this increased cost is not being reimbursed by valuable work done by those sick people. In simplistic economic terms it is not cost-effective to keep a certain class of people alive or healthy. Is that analysis evil? I think so; automation will almost certainly put 99% of unmodified humans into that class at some point in the future. The practical effect is perhaps what we are seeing; Walmart and McDonalds can't afford to pay enough money to keep their minimum wage workers as healthy as a Silicon Valley tech worker or a NY banker, and the difference in achievable healthcare outcomes between a low income worker and a high income worker has increased significantly in the last 50 years. Remember when cancer and heart disease and even diabetes used to kill people (rich or poor) quickly and cheaply?
Guaranteed basic income or minimum wage aren't sufficient on their own to solve the problem. Total production efficiency (or at the very least medical/health care efficiency) has to increase at a rate equal to or above the rate that medical treatments and medical technology advance. When automation unemploys people from McDonalds and Walmart they will still get sick. at roughly the same rate, and with the same diseases. The total cost of providing healthcare will not go down, barring increases in efficiency, and the cost of welfare would increase. Given those assumptions it seems like the best action is to allow McDonalds and Walmart to continue to employ people at existing, sustainable wages and leave them on welfare, and implement as much of basic income or increases in minimum wage that the rest of the economy can bear to prepare for widespread automation, and focus heavily on automating medical care to improve its efficiency.
Evil? It depends on your moral code. However, I would certainly note that allowing the economy to kill people should be considered strongly contradictory with normal LessWrongian social goals like abolish effective scarcity and make everyone immortal.
People are dying for economical reasons all the time.
In most cases, when a person dies, there was an option to save them. Killed by a disease? With enough money, best doctors and medicine could be bought to save them. If that is not realistic, with some money they could be at least cryopreserved and given some chance of living again. Killed by a murderer? With enough money, there could have been a policeman standing on that street to prevent the crime. Killed by a random falling object? With enough money, something could be there to prevent the object from falling on someone's head. Killed by an obesity caused by unhealthy life style? I am sure that with enough money, something could be done to prevent this, too.
Thus speaking about not allowing the economy to kill people is merely an applause light. People die for economical reasons today, and they will also die tomorrow. The only choice we have is to move more money to some area, by taking the money from another area, so we can save some people from dying by cause X at the expense of more people dying by cause Y; and we can hope that by doing some we have increased the total value (total quality-adjusted life years, or whatever is your favorite metric).
In a perfect world, an answer to "is it worth spending $ 1 000 000 to save this person's life?" would always be yes, because in the imaginary perfect world you can always get the $ 1 000 000 without taking it from somewhere else. In real life we have choices more like "is it worth spending $ 1 000 000 to save this person's life? or should we instead let the person die and use the money to save lives of other ten people?". (And if you wish, you can make it more complicated by assuming that the first person is a Nobel price winner in medicine and invented a cure that saved millions of lives, but these days he is too old to invent anything more; and the other group contains one great poet, but also one murderer, et cetera.)
If this comment was made with the implicit intent and understanding of money as an abstraction of the resources we have available, I don't see why it hasn't been upvoted through the stratosphere yet.
It really, really hurts me when I see that the best options being offered by even the brightest minds and best visionaries in a given group all revolve around better redistribution of these million dollars, and not one of them asks "What if we could create a world where we don't have to take that million dollars from somewhere else?". Because I'm pretty sure that if someone cast Greater Wish and made everyone in a large rich country (e.g. USA) work together on this, it would happen.
I have the opposite perception. For the near and medium term, resources are finite and that means we have to make allocation trade-offs. When we're talking about safety and health resources, those decisions are going to have consequences for who lives and who doesn't.
I can imagine a society without resource shortages. But I can't imagine building it even with universal agreement and cooperation. You don't get a technological singularity just by wanting it.
Ah, I may have been overly abstract or generalized.
I agree with your assessment of the situation. What I would like to see is novel approaches at making it so that resource shortages that can be eliminated are eliminated. Cliché example: We are mere years away, barring opposition from invested parties and given continued funding and enthusiasm, from a fully automated transport and logistics infrastructure. AKA self-driven cars & trucks. (please leave argumentation of those two premises for another discussion - a Greater Wish or the circumstances I discussed in the grandparent would make those premises true for the purposes of this discussion)
Current wisdom is that these things should be left alone and "let the free market sort these things out" - which means, essentially, that we are to let shortages keep happening, because the margins of the free market will keep producing availability issues and shortages even on things where we can match supply to demand with positive net value after taking into account resources diverted from elsewhere (raw materials and human work time are the only relevant ones here once you trim the fat and all humans are fed, I believe).
So to come back to the virtual example of the million dollars, what I'd like to see is less people asking "How do we decide who to heal, cure and provide treatment for?" and more people asking "How do we dramatically increase the abstract availability and supply of medical resources and is there some way to do this without draining human resources from other industries?"
To craft a silly image, imagine an automated cold & flu treatment machine that looks like an ATM, is placed strategically to cover as many people as possible, does some basic automated symptom assessments to make sure it's cold & flu, and provides a printout and some dosage of medication.
Once the setup is done, all that's left is raw materials and human work to maintain the system, the human work is of a non-expert kind so not currently in any kind of shortage, and not planned to be given advances in automation, and the raw materials would be in the same ballpark as that already being consumed. An overall net gain, and the supply becomes directly tied to demand and only capped by raw materials, which in this example I'm led to believe are far more ample than what is needed to meet demand. An ideal scenario, disregarding the ridiculous feasibility issues with this scheme.
All this to say: There's too much Utopia/Reality dualistic thinking, where there are either No Resource Shortages or Limited Resources Which Require Free Markets, and nothing in between. Sure, eventually when you trim enough fat everything comes down to a few key raw resources, which could be abstracted into "money" if you tried really really hard, but those are, in most practical cases I've thought of, not the bottleneck.
What do you mean with "best doctor" in this case. Do you mean more than just a doctor who know which clinical trial says which drug is best for a particular condition?
There no straightforward way to throw money at the problem of obesity to solve it. Gastric bypass surgery might work to reduce the weight but it has it's own disadvantages and I wouldn't call it buying health.
I don't think that there are many cases where you can simply buy a life in a country with a health system like Germany for $1 000 000.
You're leaving out the possibility of needing to shuffle through a number of doctors to get a competent diagnosis. It's a fairly frequent problem in the US. I don't know how common it is in Germany.
Typo: I think you mean disadvantages.
Do you have a source that describes how US millionaires go through 10 doctors to get a correct diagnosis? I think most of the time in Germany what stopping people from going to more doctors isn't financial but the fact that they trust a doctor.
Fixed.
Is that because Germany has more competent doctors, or because Germans trust their doctors even when they shouldn't?
How does a non expert judge the competence of an expert?
Well, seeing if the doctor's recommendations help the problem is one way.
Like this? (I'd guess Germany would be somewhere between France and Sweden.)
I don't have a source for how many non-millionaires in the US have to go through a number of doctors to get a correct diagnosis-- I just know a fair number of people (some online-only) who've done it. They probably have average or better incomes, though it would be worth checking. It isn't a cheap process, at least in terms of time, and I'm guessing that poor people are less likely to have the self-assurance to do it.
Your assumption is that the difference in Germany is in the degree of trust in doctors rather than better diagnosis?
That is not true because of one simple observation: eventually everyone dies.
Millionaires and billionaires die, too, even with the best of doctors and security guards.
Does that have anything to do with Walmart or health care for workers?
That's a problem. The international statistics suggest it's not the problem -- health care expenditures don't correlate particularly well with longevity at the high end.
Cultural tendencies towards proactive vs. reactive care might be responsible for part of this, but I'm unaware of any high-quality research on the issue. On the other hand, I haven't been following it closely.
Instead of complaining, could this system be hacked to help the poor people? If you created a company for hiring currently unemployed unskilled people and providing them as good working conditions as possible, could you get the same subsidies Walmart does? Then those people would prefer working for you.
I imagine something similar to Mondragón Corporación Cooperativa, but focused on low-income people.
I'm not sure if I understand what you're suggesting. As I understand it, the argument isn't that Walmart is literally getting subsidies. It's just that Walmart employees are getting welfare, so Walmart doesn't have to pay to support them, reducing Walmart's costs hypothetically compared to an equivalent company which paid their workers a better wage.
So if you created a company which provided as good of working conditions as possible, your employees wouldn't need welfare, so you wouldn't be benefiting from the "subsidies". Also, your costs would go up, so you'd be more likely to go out of business than Walmart.
No need to hack anything, anyone who wants to can step in and create such a company.
I predict rapid learning about reasons why these people are unskilled and unemployed :-/
Not sure if it's my idea that is wrong, or just my way of presenting it. So here is a longer version:
We observe that some people are employed by a company that effectively pays them less than most people consider an acceptable wage. Some say it's less than living wage, but that's probably an exaggeration. Let's just say that the wage is considered so low that this fact offends many people, and for the purpose of this comment let's just call it "unacceptable" without providing an exact definition of what precisely that means. (The basic intuition is that we object against a specific amount of money being paid to a person living in a specific location, regardless of which specific company would pay the money, if the work is equivalent.)
Some people conclude that the company is "evil". Which I would translate as a moral obligation to stop doing such things, and either pay the employees an acceptable wage, or fire them. Other people conclude that the company is doing morally okay, because some people simply don't create enough value that would translate to an acceptable wage without a state subsidy. There doesn't seem to be an easy way to make both of these people agree on one specific answer; not merely about whether Walmart should but even about whether it could pay those people acceptable wages.
Instead of just expressing my allegiance to one of these tribes, I propose solving the problem experimentally.
If it is possible to employ the same people and give them higher wages than Walmart does, then do it. Actually, Walmart succeeds to do it while creating profit and big salaries for its management -- so if you would run the company without the explicit goal of creating a profit and big salaries for the management, you could use that extra money to improve the situation of your employees compared with the employees of Walmart. If you succeed to execute this project well, it could lead to Walmart going out of market, which (if you consider Walmart evil) would be a good thing to do. (I am not trying to solve all the society's problems here, neither from socialist nor libertarian viewpoint, just to improve one specific situation.)
On the other hand, if it is not possible to employ those people without using the same methods Walmart does (if your project predictably fails), then your only possible conclusions about Walmart's behaviour is either that it is okay, or that Walmart should fire those employees; because they don't have other choices.
I would prefer to see this resolved experimentally, instead of writing clever arguments on the internet. I can imagine both results, for example depending on which subset of the current Walmart's employees one would employ. I consider one of the results more likely, but I would prefer to have experimental data instead of a smart and mostly uninformed opinion.
That's a rather interesting criterion.
By the way of comparison, let me point out that not baptizing your children also offends many people (because from their point of view you have just pushed your child into the pits of hell). Or, for another example, polyamory offends many people, too. So?
Um, and who's going to do it? And how would that work-- you'll set up a company which functions much like Wal-Mart? That will be pretty expensive and I am not sure you can do this -- arguably Wal-Mart competitors have tried and failed.
If you want to just employ these people doing whatever, well, there is the whole market economy out there which offers choices of employment. If someone is willing to pay these people more (in money and benefits) they would switch jobs, wouldn't they? Yes, of course there are frictions but at Wal-Mart scale the effect should be pretty obvious.
Confusingly, "living wage" in US parlance doesn't mean "the minimum you can live on", but rather the minimum needed to meet some set of quality-of-life criteria for the region after factoring in dependents. Exact definitions differ, but it usually hashes out to quite a bit higher than subsistence wages: when California was debating one a while back, I believe the number being tossed around was $13/hour in late-1990s dollars.
I don't know exactly what Walmart pays its employees but it probably doesn't qualify.
Your idea sounds great in its short and long forms, and I think Lumifer's agreeing with you and telling you his prediction about how it will go, so you can falsify it.
Whatever your moral position is, government benefits to low-income workers are a subsidy to their employers.
If the government awarded benefits only to the unemployed, many low-income workers would find preferable to quit their jobs if their employers didn't increase their wage. Since employers need employees, employers would find preferable to increase their employees' wages enough that they don't need government benefits.
The net effect would be a redistribution of wealth from employers (especially those who use lots of low wage labour, like Walmart) to the government (and hence to taxpayers).
On the other hand, increasing government benefits to low-income workers would redistribute wealth in the opposite direction: from the government to Walmart-like employers.
Note that neither policy significantly affects the welfare of low-income workers, since their effective purchasing power remains approximately the same.
Therefore, if you think it is morally preferable to redistribute wealth from Walmart to the taxpayers, support unemployed-only benefits (and/or minimum wages), if you think it is morally preferable to redistribute wealth from the taxpayers to Walmart instead, support guaranteed basic income and/or other low-income workers benefits.
They would also hire fewer employees while doing so.
Why?
Basic supply and demand, if something costs more you buy less of it. Unless their demand for labor is completely inelastic which is rarely the case.
That's an interesting point against Basic Income Guarantees. Thank you for making me consider it.
This isn't true, literally. Why do you think it's true figuratively? If you have in mind the counterfactual situation in which benefits to low-income workers were removed, well, I think the economic consequences of that are complicated -- much more complicated than a simple subsidy.
None of this makes it a subsidy.
That's incorrect. Basic income is provided to everyone, even to those who choose not to work. Perhaps you were thinking of the Earned Income Tax Credit, which is provided only to low-income workers.
Therefore it allows employers to pay lower wages.
Even so, payments to those who aren't working can't reasonably be classified as 'redistribution of wealth from the taxpayers to Walmart'
I'm not sure that the drop will be as much, though - if everyone has a basic income, some people who are now driven to work despite hardship would not be so driven and could finally quit. Those who do work will not need to compete with them for jobs. ALSO, those on basic income would be able to buy things they presently cannot, which would increase the demand for labor further.
Right, in fact I was referring to payments to those who are working. A guaranteed basic income would not discriminate between the two, thus, in the proportion it was given to workers, it would be a subsidy to their employers.
Unemployment benefits would be sufficient to obtain these effects without transferring wealth from the taxpayers to the employers.
No. To illustrate, look at the starting point of the aforementioned subsidy to employers: the Earned Income Tax Credit. You can only make use of the EITC once you are employed, so all else being equal, the EITC contributes to the idea: "If you don't work, you starve." I may then feel pressured to work at McDonald's or Walmart. By contrast, Basic Income exists external to the market, serving as a base amount for everyone to live on. Since I don't have to worry about starving anymore, I now have more leverage in choosing if/where I want to work. Any amount I earn on top of the base amount is of my own volition for luxury items not needed for my survival. If I later want more money and my employer resists, I can use the basic income as a strike fund.
Three things. First, you seem to be forgetting my earlier point regarding staying power. Even if you rally society today to support your targeted "unemployment benefits" (I put it in quotes because I know you mean it in a welfare context that is wider than merely unemployment compensation), your welfare solution is still at risk of being stigmatized in the future and then cut by politicians. Basic income for everyone avoids this risk, and will have much greater staying power.
Second, you seem to be under the impression welfare is handed out like free candy. In reality, welfare can be a pain in the butt, whether it's the intrusive paperwork, stressful delays, or the threat of fines and probation. Basic income bypasses this mess.
Third, you keep suggesting "taxpayers" and "corporations" are two separate things, even though corporations pay taxes too. Yes, corporations are quite adept at avoiding taxes, which is why tax reform also needs to be a part of this discussion.
...only if the workers don't mind lower wages (such as in a Silicon Valley startup). See, among many other benefits, basic income can serve as a permanent strike fund for those who are still employed. These employed strikers would not receive anything from your solution of "unemployed-only." Furthermore, your targeted solution can be demonized as "lazy-only" and cut by politicians. Look at stigmatized food stamps today. Such drastic cuts are very unlikely with a non-stigmatizing basic income provided to everyone.
On a related note, GiveWell appears to be removing Against Malaria Foundation as their top charity, making GiveDirectly their new top charity. Donating to GiveDirectly may help legitimize the idea of an unconditional basic income. I don't think basic income is as important as mass cryonics, but I still defend it in my upcoming "cryonics and basic income for everyone" website. Here's hoping I finish the website someday.
It does seem possible that welfare changes workers' wage preferences and allows Walmart to attract laborers for less money though, doesn't it?
This seems implausible. If anything, I would expect taking away governent benefits to make people more desperate and more willing to work for low wages.
I have noticed a contrarian position on the whole minimum wage thing. One that advocates buying from sweatshops, because they say "at least those people working in the sweatshops aren't homeless".
Possible solution to the whole minimum wage thing: model the thing as a math problem where you minimize the cost to taxpayers? Like, if (current minimum wage * current number of jobs) - (hypothetical minimum wage * resulting number of jobs) < 0, then the taxpayers would want to switch to the hypothetical minimum wage.
And to keep experimentation in that from being too harmful to people who have jobs, a possible solution: a limited number of sweatshops, where there is no minimum wage. The limited number is important, so that it doesn't become a viable option for companies like Walmart to start their own sweatshops and flood the market with jobs, contaminating the experimental results.
Actually a sort of "sweatshop fallback net" might be a good idea.
I don't understand why you are worried that the anti-wal-mart meme would cause anyone, let alone a leftist, to oppose GBI ... a GBI reduces the incentive to work for low wages. If it's true that welfare is benefiting Wal-Mart and other low-paying companies, then the reason is that in the current system you lose your benefits if you don't get a job. This is just the natural consequence of our method of imbedding an incentive to work within the welfare system.
I suppose someone who didn't like GBI and thought work-dependent welfare was an acceptable alternative might be driven to oppose welfare in addition to GBI upon learning about this side effect.
I've seen the more general claim that companies which can't afford to pay a living wage shouldn't exist. This would include not just companies like Walmart, but also small new companies and businesses with relatively poor owners.
Many of those businesses provide useful services, and I've wondered whether there's a public good argument to be made for subsidizing them rather than eliminating them.
I would have to contest that in this case, the absence of evidence is the evidence of absence. On general principle, lacking special cases with adorable old grandmothers and shiny MIT graduates, what is added to the public good by subsidizing businesses that are literally not efficient enough to keep their own employees alive? How can we claim such a business is adding net value to society?
Note that I'm trying to distinguish between a subsidy and an investment. When a shiny MIT graduate needs money for his start-up, there could easily be a public good of investing in him, but in that case the public deserves shares of stock as compensation -- and will be able to realize gain from those shares as capital gains or dividends when the time comes. With Wal-Mart, the public doesn't even receive a capital stake in the business. It just pays for private actors to get rich on jobs that are, judging by their wage levels, far less efficient and productive than the ones people used to have.
It may be that no one is efficient enough to supply ,low cost low quality goods and services to people who can't (typo corrected) afford better and pay a living wage at the same time. At that point, you can shut down the business and hope that services and goods of better quality will be supplied by the government (when?), technology will improve so that workers in those businesses will be more productive so that it's possible to pay them more, leave the unattractive business in place as it is, or subsidize the business.
I'm not saying subsidizing the business is a great choice (keeping the system even relatively honest might be impossible), but I think it should be considered rather than just saying the business shouldn't exist.
If we condition our reasoning on the proposition that nobody can efficiently provide goods to poor people cheaply, then yes, I would at least claim the Proper Move (which is not necessarily easy from our status quo position) is to have certain things provided as a public service.
On the second hand, if we're already talking about instituting such a thing as a Basic Income Guarantee, then it makes good sense to do so and then remove subsidies for "sub-living efficiency" businesses. After all, with a correctly configured Basic Income, possibly plus even a small income from real business (which will be easier to come by due to the demand/money-velocity boost), even those at the lower end of the income scale should have the purchasing power to start buying, at the very least, frugal goods instead of cheap goods.
I am unaware of any such businesses. Perhaps you want to dial down your rhetoric a little bit? It looks silly.
It's not rhetoric. If a company says they cannot pay a living wage without the subsidy, then that is what such a statement means.
It is rhetoric because "living wage" in the US is far beyond what's needed to keep people alive. People who don't get paid a "living wage" do not drop dead in the streets from malnutrition and exhaustion.
Can we drop the pointless definitional agreement and just find a study specifying what wage-level is necessary to keep people from dropping very preventably dead or being arrested for vagrancy?
I am not particularly interested in a study. At one point in my life I was poor. Very very poor. I have quite a good idea of how much money do you need to survive in a US city. Hint: it's far below what is usually called "a living wage".
What constitutes a "living wage" has literally nothing to do with how much money it takes to meet your survival needs; it is an amount of money which is supposed to support your family at a "normal standard of living" in your area. The actual cost to survive is naturally quite a bit lower than that, and can be calculated with things like the 'Food Energy Intake' or 'Cost of Basic Needs' methods of establishing poverty lines.
Adding to this confusion is the fact that the Federal Poverty Line seems to be what most people use as their yardstick, despite it being an abstraction over the entire US with no allowance for regional cost-of-living differences and appears to be a relative measure of poverty based on mean income rather than an absolute measure based on the cost of survival needs.
[Edit] Surprisingly, the Federal Poverty Line does actually seem to be an absolute measure, although I still can't find exactly what goods are supposed to go into calculating it and there is still no allowance for regional price differences.
Let's assume something truly basic: a living wage covers housing, food and health insurance. That is, a worker paid a living wage will not starve, will not die of treatable disease for financial reasons, and will not be removed from work via arrest for vagrancy (because they have a place to stay).
Quibbling over definitions won't get us anywhere. Let's talk about the real issue, and if it means we have to taboo "living wage", so be it.
Do you consider it unethical to pay less than it takes to pay less than it takes to live alone, but enough to hold down an appartment with a couple of roommates? Is every treatable disease, no matter the cost of treatment, included in that, or are insurance companies allowed to draw a line inconsderation of how common or expensive a treatment is? Is that insurance pool required to subsidize riskier but likely better off (ie, older) people? Is that food required to be convenient, tasty, and nutritious, or can the wage assume the employee does their own shopping and cooking with less costly food?
What if one potential employee has a different idea of what it takes to live than others?
I have no problem tabooing "living wage" in our discussion, but it is important to remember that the word has an actual definition in policy terms; if we talk about paying Walmart / Sam's Club employees a living wage that actually means one very specific thing in terms of how much money they are going to get, and it's not a particularly intuitive amount at that.
But that's a debate for the talking heads; if I understand you correctly, we just want to know if someone working at Walmart would starve without public assistance.
Let's assume for the moment that the Federal Poverty Line is the number we're trying to avoid here; above that you're still in a shitty position but you are not actually starving (technically you're probably not starving below it either, but I can't find good Cost of Basic Needs data for the first world). An average Walmart employee makes about $17,600 a year plus minimal benefits for 35 hours of work a week, which is piddling but also enough to support yourself and one other person by federal standards ($15,510 a year). With another 15 hours a week of work in a second job at the federal minimum wage (remember, most states have a higher minimum) a Walmart employee can support a family of four ($23,550 a year). This is also assuming only one person in the family of four is working, which is a bit of a spherical chicken these days.
So without any public assistance at all a single person with Walmart as their primary job can definitely support themselves and another person at a level above the Federal Poverty Line, and can support a family of four at that level with an additional part time minimum wage job. It would be an uncomfortable paycheck-to-paycheck kind of existence, but all of their basic survival needs would be met out of their own income.
Now don't misunderstand me; I'm not saying that Walmart is morally in the right here, or that their employees shouldn't have a more comfortable and secure way of life. On the contrary, I think it's disgraceful the way real wages have fallen in the last half-century and how many good blue-collar jobs have been destroyed by our ludicrous trade policies. But the question of whether Walmart employees would be starving without EBT is an empirical claim and one which is easily disproved.
Which is to advocate permanent unemployment for people who can't deliver value greater than a living wage.
I think you'd tend toward perverse incentives immediately if you tried to subsidize only the below living wage jobs.
Which is exactly what we're currently doing, and exactly what the left-wingers are complaining about in this situation. Rather than the State spending its money on, for instance, useful jobs programs that can directly employ people for living wages in productive infrastructure work (would that totally eliminate unemployment? No. Is it an obvious first move? Yes.), tightening the labor market, stimulating demand, and helping to pay down private debts, the State instead spends its money subsidizing poverty-jobs.
And as the Right always says, you get more of what you subsidize. In this case: sub-living wages.
I'm glad that there are some left wingers now "demanding" a rollback in the perverse programs left wingers put in place in the first place.
But as I've asked before, are there any particularly prominent liberals doing this in the US? I'm not aware of any. Prominent liberals anywhere else?
In the US, I'm aware of prominent libertarians, and even republicans who have been advocating this for a long time.
A basic-income scheme is part of the platform of the Green Party in the US. I don't know exactly what they want done with the rest of the welfare system, though.
http://www.gp.org/greenpages/content/volume8/issue3/oped5.php
My first google US hit. Promising. Not only basic income, but coupled with reducing corporate welfare. And the numbers don't seem crazy - $600-$800. I consider probably the majority of the arguments used appealing to libertarians. I didn't expect much common ground at all.
Not.
This is pie-in-the-sky promises with no hard numbers or, actually, much of any economic analysis. Instead there's a lot of handwaving about cutting government spending and corporate welfare, introducing flat tax (!), etc.
It's one page on a web site. How much detail did you expect? They do refer to their party platform. Did you read that to look for details?
They say:
Certainly a footnote would have been useful here. Maybe there is one in their party platform. But you can eyeball government spending and do some basic math yourself. $800 isn't crazy talk, if you're actually replacing other health and welfare programs.
I liked the basic principles they expressed - reduce government subsidies and tax carve outs. It surprised me to see the Greens come out in favor of that. I didn't have high expectations in the first place.
You should fix the title. It doesn't parse in my head, and has a spelling error.
How about?
Thanks. I caught the gramatical error on my own but somehow completely missed the spelling error. I am a terrible proofreader.
Well done. This is one of those things I'd never thought of, but is obviously correct now that you point it out.
I don't think this needs expansion. Brevity is a virtue, and this does a good job of explaining the core idea quickly and accessibly. If you run it through a spellcheck and spend fifteen minutes making the prose flow more smoothly, I'd consider it ready for Main.
This post is almost the epitome of what I don't want to see on LessWrong, Discussion or not.
EDIT: This post was moved to Main after I made this comment. This makes me like it even less.
Argument?
Note: I didn't mind it in Discussion at all and thought it was interesting. I am of the opinion that comments + discussion should not be heavily self-censored. However, I second the opinion that it shouldn't be in Main. I'm also a relatively new user (first handle was mid 2012) so you can take my opinions on what belongs in Main with that in mind.
I think the rule of thumb is, that a post should possess at least one of the following qualities:
1) About epistemic rationality (ontology, epistemics, ethics, AI, bias reduction, scientific method, semantics, etc)
2) About instrumental rationality (self improvement, happiness, willpower, organization, social behavior, etc)
3) Furthering the Reader's Interests (Effective Altruism, textbook recommendations, etc)
4) Meta, announcements, and notifications about things of interest to LW or closely affiliated with LW.
--
I think politics can fall into any of these. News (News! not opinions!) about some political activity or press release relating to the Singularity institute or other prominant figures on LW would fall into 4. An analysis about whether or not voting is rational would fall into 3. Descriptions of how political groups behave would fall into 2. The psychology of politically induced biases, how to do science for economic policy, etc... would fall into 1.
So your post is interesting (for me, because I follow politics), not particularly mind-killing, etc...but it's not meeting the criteria for making me more rational or furthering my interests. It's not simply that it's about politics, boo on talking about politics, etc.
I can't actually do anything about the Wal-Mart meme. Knowing about it doesn't further my instrumental goals, nor does it improve my epistemic skill, nor can it really effect my behavior or thinking in any way. I might get hedons from reading and Learning about a Cool Thing, but that's moving away from the stated purpose of Lesswrong.
Edit: Looking over other posts in main, I can see that there are quite a few other which did not meet my stated criteria (including some by prominent posters like Eliezer and katydee). So I suppose my stated criteria don't actually describe things as they actually are or how they are intended to be, but how i think they aught to be.
Actually, grammar, boo hiss. Just check your post title again.
Thanks.
(If anyone is confused, there was an extra word in my post title that I noticed and fixed before reading these comments.)
I don't see why a vague argument against one of many political memes deserves a post in Main.
Useful illustration of the kind of mistakes thinking in terms of consequences can help you avoid.
EDIT: To elaborate - I think LessWrong could really benefit from accessible posts applying LessWrong-type ideas to topics that people who aren't already hardcore nerds about typical LessWrong topics might have heard about and care about.
I see. I guess I am having trouble following your conclusions from your premises.
Walmart is in a low-margin business and it employs unskilled labor, so naturally they put as much squeeze on the wages as they can get away with. I don't see anything immoral about it, it's just business. Corporations are well known to behave like psychopaths.
There is a 100 year-old solution to this issue, it is called organized labor. While unions are out of place in many other industries, Walmart is a perfect target for unionizing, since individual workers have zero leverage against the company, while a union can fight for reasonable wages and benefits. Same applies to Amazon warehouses, by the way. So, an alternative to increase in mandatory minimum wage (which ought to be increased, by the way, in the US it is currently lower in inflation-adjusted dollars than it was 30 years ago) and to a guaranteed basic income (which shifts the burden of paying the Walmart employees from the shareholders and the customers to everyone and adds some unnecessary overhead) is to enact policies making it easier to unionize unskilled labor.
This isn't corporate welfare to Walmart or it's employees, it's corporate welfare to our regulatory protected medical industries and guilds.
The vast majority of the supposed "welfare" spending for health care is paid in rent seeking and tribute to the regulatory state and the vested interests they entitle.
Good article. I think an important part of the idea behind the anti-Walmartism is the idea that Walmart is not only offering low paying jobs to people, but in doing so eliminating higher paying jobs that those people could otherwise take in the stores which a re driven out of business. They can do so because their business model is efficient, and people like their lower prices. But the anti-walmart crowd would argue that the low prices hide a negative externality for society at large, which reduces equity, and is a net utility loss.
I thought this was generally a good post, but I suggest linking to some serious research rather than a Krugman blog. In his article he links to a survey article, and there are many other good ones. These contain the same information, but lack the unnecessary partisan attacks - "Republican leaders clearly feel disdain for low-wage workers."
Eh - Krugman is nice and concise, and popularizers like him are where I actually get my impressions of the empirical evidence of minimum wage laws. Also as far as I can tell he's right about Republican leaders.
And completely mind-killed about politics. (I'm giving him the benefit of the doubt there.)
Also, notice his post crisis behavior. First he makes concrete predictions about what will happen with and without stimulus (things will be somewhat bad with stimulus and even worse without stimulus) meanwhile his opponents predict the stimulus will make things worse. Then the stimulus happens and things are even worse then his without stimulus prediction, his conclusion: "we didn't stimulate enough".
There is strong agreement among economists that the stumulus worked.
That is not at all relevant to Eugine's point, which is a conjunction between predictions ahead of time and beliefs after the fact. If he holds now that the stimulus worked, he must hold that has previous predictions were badly wrong. Does he admit that? Moreover, he must reduce his belief in the efficacy of stimulus, even if his assessment of the state of the economy shifts more. Is he explicit that he has stronger beliefs about the efficacy of stimulus than about the future of the economy? And these economists that today have strong agreement, what did they predict ahead of time?
(I'm assuming that Eugine is correctly describing Krugman. But you didn't object to that.)
It's absolutely relevant. By Eugine's account, Krugman's opponents were predicting the stimulus would make things worse. Most economists now agree that Krugman's opponents were wrong and the stimulus helped.
Beyond that, I'm a little unclear on what Eugine is saying: "Krugman said things would be worse without stimulus" is ambiguous between "Krugman said things would be worse without stimulus than with stimulus" and "Krugman said things would be worse without stimulus than they were at the time he was speaking." Link to what Krugman statement exactly Eugine has in mind would be helpful. In any case, this is at least semi-relevant.
No, Eugine is perfectly clear. The only way to interpret his "things are even worse then his without stimulus prediction" is that Krugman made absolute predictions.
The simplest hypothesis is that economists are impervious to evidence and are just backdating their predictions. Yes, inference can be complicated by mechanisms; that link is relevant, quite unlike your previous link.
I think Krugman is sufficiently mind-killed on politics that it would be a mistake to get your impression of the literature from him, unless you also read the work of semi-professional Krugman watchers. In the latter case I withdraw the objection, but at that point it'd probably be easier to read the literature yourself.
In terms of actually existing politics, which do you think people in general would dislike least: subsidizing would-be freeloaders with taxpayer money, or using that same taxpayer money to hire people (or subsidize hiring people) to do largely unproductive jobs that the market wouldn't pay them a living wage to do? There seems to be a general feeling that it's wrong to let people (figuratively) starve, but also that it's bad to give people things they don't deserve.
If the answer is "I think people in general would rather make people work for their money, even if the work itself isn't actually worth what we're paying" then we might as well let Wal-Mart do the hiring rather than have the government do it directly.
(Aside: The textbook example of unproductive make-work is digging ditches and filling them in again. A slightly less obviously ridiculous way to employ low-skilled workers is as "taxi drivers" for people who would rather spend their daily commute doing something other than driving but wouldn't go to the expense of hiring a driver themselves. After all, driving is a skill that most adults actually do have...)
I would actually say it's definitely better, if you're stuck subsidizing someone's survival, to subsidize them as a "freeloader", aka: someone with actual leisure.
If you're thinking that this is an incentive against the work-ethic, yes, it is. I believe our culture currently overemphasizes work-ethic, and this is all part of my sneaky evil plan to convince people to value work less.
Your analysis of the short-term effects is correct, but the long term effects depend on whether "low wage workers" are permanently so. Sometimes people condemn Walmart jobs as "dead-end" and that is getting at the right point.
I've heard the claim that Costo and Sam's Club (ie, Walmart) are very similar, but Costco is famous for paying its employees twice as much. But this doesn't come out of profits - Costco spends the same amount on labor, employing half as many people, twice as productive. If Walmart could make its employees twice as productive, that would be great for society, though in the short term it would lay off half of them.
If the productivity of people is unchangeable, then Walmart is doing society a valuable service by providing a niche to people capable of no more. But if Costco employees are more productive because Costco trains them, then Costco is doing a valuable service by improving their productivity. In the first case, we want Walmart to win because only a few companies like Walmart can make use of the least productive workers. But in the second case, we want Costco to win because it is making use of the same people, but making better use. But we observe that they are evenly matched, so there's no reason to expect either of them to win, let alone the right one. Eventually in the second scenario Walmart loses, not because Costco wins, but only when the Costco model expands into new industries, producing more training, bidding up the salaries Walmart pays.
In the particular example, I believe that Costco is not increasing productivity, but merely identifying more productive workers, and that Walmart is able to employ people that few other companies can. In general, I think the economy is generally trending away from investing in low-end worker productivity, which is terrible. In theory, raising the minimum wage should put pressure against this, but pressure to create new companies that work differently is less certain than pressure shifting the balance of power between existing companies.
(Also, there's a third scenario where Walmart provides the training, but the productive workers graduate to Costco. I certainly think Walmart is providing filtering, letting productive people build up a resume to show to Costco; I'm less certain of whether it improves the workers.)
Part of Sanders' argument relies on the belief that there is a possible free lunch, here : they believe WalMart could raise wages significantly without causing the company to explode, either not harming people in ways that count to the progressive movement (decreased profit to corporations) or by arguments of comparison to CostCo, Trader Joe's, or other stores that have different structures. I'm pretty sure the math doesn't work out that way, and the realistic event chain is likely to be drastically different, but it's a very common belief. From that perspective, it's more the concept that WalMart's low wages are a bad equilibrium point established by existing laws, and because it is less costly to the state for WalMart to directly pay more at a different equilibrium, the state should force them to change their actions.
If it helps, almost all of the people opposing WalMart on this tactic have called for increase welfare states of the type compatible with what you've suggested. It's likely to complicate getting interest from the right-wing in the United States, but since the right consider work requirements one of its biggest successes there are some much more pressing issues with trying to get them to accept a basic income guarantee.
((On the flip side, I think there are some issues with BIG or BIG-like systems that make them poor solutions to gwern's concerns, but these probably exist outside the scope of this thread.))
Good points. The second link is excellent, may incorporate into a revised version of the post.
But in addition to the points it makes, there's what seems to be a questionable moral assumption here: even if Walmart could pay employees more by taking a hit in profits, why should they bear that burden alone, as opposed to spreading the cost of improving those people's lives over the wealthy as a whole through taxes? That's where the anti-Walmart crowd seems to assume something like, "hiring someone creates a (fairly) strong moral obligation to look after their welfare, above and beyond things like not cheating them."
That doesn't match my idea of what a free lunch is. I believe a better descriptive term would be the deep pockets theory.
It isnt even a question of deep pockets. Require walmart to pay each employee twice as much, and they will probably fire half of them, train the remainder better, and have customers bag their own groceries. Same total labor cost. This is generally considered better on the grounds that the people fired by walmart in this situation are not really worse of - any other employment they come by is as least as good because their current employment situation verily doth sucket hose - and the people still working there would then have actual jobs.
I see no reason to believe this would happen. May I recommend a post on the subject?
Oh really? Do you think Wal-Mart employees agree with you on that point? You're basically saying that there is no reason for anyone to work at Wal-Mart. This is... empirically wrong.
What counts as one?
You just have to make an argument that would appeal to a conservative, which I think Paine's would. Amusingly enough, Bill O'Reilly basically bought Paine's argument with respect to the guaranteed payments from Alaska's oil fund, saying "It's our oil". Paine's argument was "It's our land." It's really not a great leap.
Conservatives reject liberal arguments because they're not based in anything Conservatives recognize as justice. Your need for food does not justify your stealing my dinner. They may wish to give to charity to help the poor, but they reject having their money taken by force by the government to help the poor. It's the difference between giving a gift and being robbed.