6 ms·

Doesn't that argument apply to any government spending? If my enterprise relies on roads existing, and I cannot pay the full costs of maintaining the roads, say

by ikeboy 11y ago

Doesn't that argument apply to any government spending? If my enterprise relies on roads existing, and I cannot pay the full costs of maintaining the roads, say. (Ah, but roads benefit others, and we should only calculate your share! But welfare benefits others as well, it's a collective funding, so the same applies.)

rskar 11y ago
Interesting what you've given us to consider, in regards to "charity benefiting its owner", to suggest these two things as comparable: (1) insufficient wages (per Adam Smith) as set by private enterprise (2) private enterprise usage of services/infrastructure as provided by government above and beyond their share of taxes Walmart was in the news recently enough (http://www.msnbc.com/martin-bashir/mcdonalds-employee-resource-advice http://www.msnbc.com/martin-bashir/mcdonalds-employee-resour... and http://www.bloombergview.com/articles/2013-11-13/how-mcdonald-s-and-wal-mart-became-welfare-queens http://www.bloombergview.com/articles/2013-11-13/how-mcdonal...) about their low wages and their advice to employees to avail themselves of government assistance programs (a.k.a. "handouts" - that's not a mean word, is it? http://dailysignal.com/2011/03/18/welfare-reform-self-reliance-not-government-handouts/ http://dailysignal.com/2011/03/18/welfare-reform-self-relian...). So, between Walmart (or MacDonald's, etc.) and such employees, who is the beneficiary of charity here (at least in the Adam Smith sense)?
- ikeboy 11y ago
  My point was the reverse, actually. We're fine with companies benefiting off roads, because they pay taxes. Roads are a public good funded with public funds. I think we should be just as fine with companies benefiting from the public good of welfare. If we don't think it's a public good, we shouldn't fund it. Now, if they were directly contributing to an increase in public funding, then we might wish to discourage that. But if they wouldn't hire the worker, they would necessarily be paid less or not at all (else they would quit; abstracting away from inefficiencies which may make this inaccurate). So Walmart's decision to offer a wage that's the best the worker will get, yet is not livable by itself, still benefits the government, because otherwise the entire cost falls on the government. Mandating a minimum wage, and letting those workers become unemployed, just makes things worse. Of course, this assumes that increasing the minimum wage leads to a decrease in jobs, which is itself controversial.
  - rskar 11y ago
    > Mandating a minimum wage, and letting those workers become unemployed, just makes things worse. I'm not sure what you mean by "My point was the reverse" - "public good" is not charity I guess? I'm trying to wrap my head around how a less-than-living wage is a necessity for certain kinds of industry to function profitably, and that, furthermore, indirect government subsidies to them via handouts are essential enablers. Is it that consumers perpetually undervalue the products of retailers and restaurants? Or is it that without the subsidies many retailers and restaurants would face much "pent-up demand" (as economists may call it)? Frankly, for money to have any meaning to it, this situation must somehow have a cash-flow that at minimum breaks even. I.e., if these industries are gainful, that gain should somehow be reflected in the tax revenue back to government, the compensations to executives, the dividends to shareholders, etc. Which means if this is a good deal for the government, does it at least breakeven on the handouts it has made? Not sure if that is happening - there's certainly plenty of think-tank whitepapers available that declare social programs as unsustainable (e.g. http://budget.house.gov/uploadedfiles/rectortestimony04172012.pdf http://budget.house.gov/uploadedfiles/rectortestimony0417201...). But here are some fun factoids: From http://www.marketwatch.com http://www.marketwatch.com, I get for McDonald's a net income about $5 billion on revenue over $25 billion; for Walmart it's a net of $15 billion on revenue over $480 billion. marketwatch.com also shows revenue per employee of $60,507 for McDonald's, and $209,622 for Walmart. So there's money to be made in cheap food and cheap goods. So, let's see, a $5/hr increase for a 35 hr workweek and 50 workweeks in a year comes to a $8,750 hit to the revenue per employee amount. So maybe a 14% increase in the price of fast-food burgers and 4% increase in white socks? So in light of growing government deficits, growing corporate profits (well, we'll see about 2016 - http://www.bea.gov/newsreleases/national/gdp/2016/gdp4q15_3rd.htm http://www.bea.gov/newsreleases/national/gdp/2016/gdp4q15_3r...), and reasonable (whitepaper-ishly anyway) suggestions on the unsustainability of the "public goods" collectively known as the "Welfare State", in this discussion on whether wages need to have some sort of mandatory minimum - well, what are we to make of this? Too many economically useless people?
    - ikeboy 11y ago
      You'd need to increase profits, not revenue. If profit margins are around 3%, you'd need to more than double revenue per employee for Walmart. And of course, doubling prices makes less sales, so doesn't double revenue, it might even reduce revenue. Re reverse: you said "above taxes paid" for roads, which I didn't mean to imply. Regarding your "break even" idea: suppose the most someone's labor is worth is $22500 a year. Suppose the minimum required to live is $30000. The government has decided that nobody should starve, and so any outcomes where this person starves are not to be considered. There are two options: allow them to work for $22500 or less, whatever the market will pay, and pay $7500 from welfare, or forbid them from working, and pay them $30000. I don't see how the second is preferable to the first. So if you believe that raising minimum wage hurts jobs (an empirical question that has economists on both sides), then you shouldn't support. The other model you could have is: Value of labor is $30000, but there's so much labor available that the market will only pay $22500. Then, mandating a minimum wage does raise the amount paid, although it can still have negative effects elsewhere. Probably both models are correct for different jobs, and the question is which one is more often correct. I'm also neglecting inflation, part time, disincentives to work, and so on. As I understand it deficits have been shrinking. Where are you getting the growing stat from?
- brightball 11y ago
  The thing is that it's easier for a large business to do that than a small one...which is the type that can't afford to pay people so much more.
dredmorbius 11y ago
Read Smith: <quote> Of the Expense of Public Works and Public Institutions The third and last duty of the sovereign or commonwealth is that of erecting and maintaining those public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain. The performance of this duty requires, too, very different degrees of expense in the different periods of society. After the public institutions and public works necessary for the defence of the society, and for the administration of justice, both of which have already been mentioned, the other works and institutions of this kind are chiefly those for facilitating the commerce of the society, and those for promoting the instruction of the people. The institutions for instruction are of two kinds: those for the education of youth, and those for the instruction of people of all ages. The consideration of the manner in which the expense of those different sorts of public, works and institutions may be most properly defrayed will divide this third part of the present chapter into three different articles. ... That the erection and maintenance of the public works which facilitate the commerce of any country, such as good roads, bridges, navigable canals, harbours, etc., must require very different degrees of expense in the different periods of society is evident without any proof. </quote> Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book V, Of the Revenue of the Sovereign or Commonwealth. Chapter 1: Of the Expences of the Sovereign or Commonwealth https://en.m.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/Chapter_1 https://en.m.wikisource.org/wiki/The_Wealth_of_Nations/Book_... I'm kind of a big fan of people reading Smith, actually reading and reading him, not simply seeing someone else's interpretation (my own included). It's a bit of a big deal. https://www.reddit.com/r/dredmorbius/comments/4cyroa/adam_smiths_lost_legacy_or_why_you_should_read/ https://www.reddit.com/r/dredmorbius/comments/4cyroa/adam_sm...
- ikeboy 11y ago
  I unfortunately don't currently have the time to read many primary sources. What is the difference between roads and welfare, in your understanding?

by ikeboy 11y ago

rskar 11y ago

Interesting what you've given us to consider, in regards to "charity benefiting its owner", to suggest these two things as comparable: (1) insufficient wages (per Adam Smith) as set by private enterprise (2) private enterprise usage of services/infrastructure as provided by government above and beyond their share of taxes Walmart was in the news recently enough (http://www.msnbc.com/martin-bashir/mcdonalds-employee-resource-advice http://www.msnbc.com/martin-bashir/mcdonalds-employee-resour... and http://www.bloombergview.com/articles/2013-11-13/how-mcdonald-s-and-wal-mart-became-welfare-queens http://www.bloombergview.com/articles/2013-11-13/how-mcdonal...) about their low wages and their advice to employees to avail themselves of government assistance programs (a.k.a. "handouts" - that's not a mean word, is it? http://dailysignal.com/2011/03/18/welfare-reform-self-reliance-not-government-handouts/ http://dailysignal.com/2011/03/18/welfare-reform-self-relian...). So, between Walmart (or MacDonald's, etc.) and such employees, who is the beneficiary of charity here (at least in the Adam Smith sense)?

ikeboy 11y ago
My point was the reverse, actually. We're fine with companies benefiting off roads, because they pay taxes. Roads are a public good funded with public funds. I think we should be just as fine with companies benefiting from the public good of welfare. If we don't think it's a public good, we shouldn't fund it. Now, if they were directly contributing to an increase in public funding, then we might wish to discourage that. But if they wouldn't hire the worker, they would necessarily be paid less or not at all (else they would quit; abstracting away from inefficiencies which may make this inaccurate). So Walmart's decision to offer a wage that's the best the worker will get, yet is not livable by itself, still benefits the government, because otherwise the entire cost falls on the government. Mandating a minimum wage, and letting those workers become unemployed, just makes things worse. Of course, this assumes that increasing the minimum wage leads to a decrease in jobs, which is itself controversial.
- rskar 11y ago
  > Mandating a minimum wage, and letting those workers become unemployed, just makes things worse. I'm not sure what you mean by "My point was the reverse" - "public good" is not charity I guess? I'm trying to wrap my head around how a less-than-living wage is a necessity for certain kinds of industry to function profitably, and that, furthermore, indirect government subsidies to them via handouts are essential enablers. Is it that consumers perpetually undervalue the products of retailers and restaurants? Or is it that without the subsidies many retailers and restaurants would face much "pent-up demand" (as economists may call it)? Frankly, for money to have any meaning to it, this situation must somehow have a cash-flow that at minimum breaks even. I.e., if these industries are gainful, that gain should somehow be reflected in the tax revenue back to government, the compensations to executives, the dividends to shareholders, etc. Which means if this is a good deal for the government, does it at least breakeven on the handouts it has made? Not sure if that is happening - there's certainly plenty of think-tank whitepapers available that declare social programs as unsustainable (e.g. http://budget.house.gov/uploadedfiles/rectortestimony04172012.pdf http://budget.house.gov/uploadedfiles/rectortestimony0417201...). But here are some fun factoids: From http://www.marketwatch.com http://www.marketwatch.com, I get for McDonald's a net income about $5 billion on revenue over $25 billion; for Walmart it's a net of $15 billion on revenue over $480 billion. marketwatch.com also shows revenue per employee of $60,507 for McDonald's, and $209,622 for Walmart. So there's money to be made in cheap food and cheap goods. So, let's see, a $5/hr increase for a 35 hr workweek and 50 workweeks in a year comes to a $8,750 hit to the revenue per employee amount. So maybe a 14% increase in the price of fast-food burgers and 4% increase in white socks? So in light of growing government deficits, growing corporate profits (well, we'll see about 2016 - http://www.bea.gov/newsreleases/national/gdp/2016/gdp4q15_3rd.htm http://www.bea.gov/newsreleases/national/gdp/2016/gdp4q15_3r...), and reasonable (whitepaper-ishly anyway) suggestions on the unsustainability of the "public goods" collectively known as the "Welfare State", in this discussion on whether wages need to have some sort of mandatory minimum - well, what are we to make of this? Too many economically useless people?
  - ikeboy 11y ago
    You'd need to increase profits, not revenue. If profit margins are around 3%, you'd need to more than double revenue per employee for Walmart. And of course, doubling prices makes less sales, so doesn't double revenue, it might even reduce revenue. Re reverse: you said "above taxes paid" for roads, which I didn't mean to imply. Regarding your "break even" idea: suppose the most someone's labor is worth is $22500 a year. Suppose the minimum required to live is $30000. The government has decided that nobody should starve, and so any outcomes where this person starves are not to be considered. There are two options: allow them to work for $22500 or less, whatever the market will pay, and pay $7500 from welfare, or forbid them from working, and pay them $30000. I don't see how the second is preferable to the first. So if you believe that raising minimum wage hurts jobs (an empirical question that has economists on both sides), then you shouldn't support. The other model you could have is: Value of labor is $30000, but there's so much labor available that the market will only pay $22500. Then, mandating a minimum wage does raise the amount paid, although it can still have negative effects elsewhere. Probably both models are correct for different jobs, and the question is which one is more often correct. I'm also neglecting inflation, part time, disincentives to work, and so on. As I understand it deficits have been shrinking. Where are you getting the growing stat from?
brightball 11y ago
The thing is that it's easier for a large business to do that than a small one...which is the type that can't afford to pay people so much more.

dredmorbius 11y ago

Read Smith: <quote> Of the Expense of Public Works and Public Institutions The third and last duty of the sovereign or commonwealth is that of erecting and maintaining those public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain. The performance of this duty requires, too, very different degrees of expense in the different periods of society. After the public institutions and public works necessary for the defence of the society, and for the administration of justice, both of which have already been mentioned, the other works and institutions of this kind are chiefly those for facilitating the commerce of the society, and those for promoting the instruction of the people. The institutions for instruction are of two kinds: those for the education of youth, and those for the instruction of people of all ages. The consideration of the manner in which the expense of those different sorts of public, works and institutions may be most properly defrayed will divide this third part of the present chapter into three different articles. ... That the erection and maintenance of the public works which facilitate the commerce of any country, such as good roads, bridges, navigable canals, harbours, etc., must require very different degrees of expense in the different periods of society is evident without any proof. </quote> Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Book V, Of the Revenue of the Sovereign or Commonwealth. Chapter 1: Of the Expences of the Sovereign or Commonwealth https://en.m.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/Chapter_1 https://en.m.wikisource.org/wiki/The_Wealth_of_Nations/Book_... I'm kind of a big fan of people reading Smith, actually reading and reading him, not simply seeing someone else's interpretation (my own included). It's a bit of a big deal. https://www.reddit.com/r/dredmorbius/comments/4cyroa/adam_smiths_lost_legacy_or_why_you_should_read/ https://www.reddit.com/r/dredmorbius/comments/4cyroa/adam_sm...

ikeboy 11y ago
I unfortunately don't currently have the time to read many primary sources. What is the difference between roads and welfare, in your understanding?