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February 25, 2016

Comments

aragon

Coronation Street is not a Government, and therefore allegory is inappropriate for macro-economic policy.

Where the state does control the creation of money (a magic money tree), rather than a zero-sum game we can put under used resources to work, and automation (technology) allows less work and more product. True increases in productivity.

If you wish to return to subsistence farming we can all spend all our short brutal lives producing food. Full employment!

Not an attractive option to me. The issue is the distribution of the product of society, not productivity which can be achieved through technological progress.

Deviation From The Mean

The problem with all the productivity examples given is that they all face the "However, this would leave the Rovers’ customers with less to spend elsewhere.".

For example if the Rovers attracts more customers, then the other pubs will get less customers. The thing balances itself out.

Surely the main way to raise productivity in the Rovers is to sack the bar staff and employ a robot in their place. Now this may not happen in pubs but it happening elsewhere. And when robots, machines or computers replace people this may or may not impact employment in the short, medium or long term.

I understand why you used the Rovers analogy, this article was but a subliminal message of unrequited love dressed up as smart arsed economics.

"automation (technology) allows less work and more product"

But in reality results in increased hours and more inequality. But you are correct to say that automation isn't the problem, capitalism is!

gastro george

Isn't the IFS expecting a move to more "self-employment" as an evasion of the NLW?

Calgacus

Whichever it is, the NLW will impose costs upon someone. It is not a magic money tree.

No. This is just not true, as Aragon points out, and it doesn't even need new money from the government. Of course it is almost always wildly wrong if the government does actively spend to ensure full employment, through a JG or an approximation of that. Minimum wage laws may be redistributive. But they can increase as well as decrease employment, & several economists noted the former would have been a likely result at the depths of the Great Recession in the USA. Capitalists get what they spend. Workers spend what they get.

Ralph Musgrave

Nida Broughton’s initial point above is utterly naïve. Reason is that as productivity rises, so does the minimum wage or living wage. What we nowadays regard as the minimum socially acceptable wage would have been regarded as a grossly extravagant lifestyle in the Middle Ages.

Rhys

"This will not happen because the NLW shifts income from employers to workers, thus redistributing income from people who have a low propensity to spend to those who have a higher one." - so surely people on agrregate will be spending a higher percentage of their income? being a boost albeit in the short run to aggregate demand or am I looking at this wrong?

Deviation From The Mean

Actually fascist Ralph makes a good point.

Also, we should remember that when New Labour brought in the minimum wage legislation a number of right wingers and their academic lackeys were telling us that it would have a terrible impact on employment. It DIDN'T.

They were scaremongering and lying then, I have no reason to believe they are not doing the same now.

Asher Dresner

I'm intrigued by your point about tax credits.

Surely if a rise in NMW is offset by a fall in tax credits, demand stays the same. Why are you sure it would fall?

Not only that, we know that not everyone who is entitled to a tax credit claims it, whereas the NMW will be enforced. So surely it is more likely that the rise in NMW will increase the spending power of those with a relatively high MPC, and so perhaps raise productivity via your third channel.

RJ

"This will not happen because the NLW shifts income from employers to workers, thus redistributing income from people who have a low propensity to spend to those who have a higher one."

This seems clearly incorrect, since the lower one's income, the lower one's propensity to save -- just because higher-income people "spend a lot," it's still a smaller fraction of their income than an average lower-income person.

chris

@ Deviation: one reason why the NMW didn't have much effect upon employment (though it did have some) is that it was deliberately set at a low rate by the LPC. This isn't the case for the NLW.
@ Asher, Rhys. I fear I might have garbled my point here. Assuming no employment effect, the NLW transfers £1 from bosses to workers. Its advocates say this would raise demand, because workers save less than bosses. I doubt this, partly because bosses of the low-paid are themselves often small businesspeople on modest incomes with a high propensity to spend rather than megafirms with big cash balances. Also, the transfer is a negative sum one, as tax credits are withdrawn. Yes, some NLW recipients don't get these credits. But some do, and their withdrawal means a cut in aggregate demand.
I agree that a NLW, if introduced with sensible macro policies, needn't cost jobs. But this isn't what we're going to get.

Bob

"I agree that a NLW, if introduced with sensible macro policies, needn't cost jobs. But this isn't what we're going to get."

That's precisely the point. Which is why they fight so hard against 'sensible macro policies' and try to control the framing. See Kalecki:

http://mrzine.monthlyreview.org/2010/kalecki220510.html

Mikep

Not sure if your fourth way of raising productivity is correct. It raises value-added at current prices, but not at constant prices.I don't think either double deflated or single deflated value added would change if drink prices were raised (in the absence of any quality change in the drink).

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