4 ms·

The Milton Friedman model gave you a tax deduction twice as much as the BI check. So, if you're getting $500 a month in BI, but you decide to work a little, up

by jfoutz 10y ago

The Milton Friedman model gave you a tax deduction twice as much as the BI check. So, if you're getting $500 a month in BI, but you decide to work a little, up to $1000 dollars in taxes is deductible. The idea is, you always make more money by working. So maybe you sell a painting for $500, 20% taxes would be $100. At the end of the month, you wind up with $450 from BI and $500 from the painting (because you can deduct all the taxes at a 2 for 1 rate). So maybe you're a fancy doctor that makes $10000 a month. to keep things simple taxes would still be 20%, $2000. You get to deduct $1000, from those taxes, because you didn't take any BI benefits. One of the things i think is great about it, it provides a soft launch for anything you might want to do. (I think you know this, but some people sort of miss the "it's better to work" part of BI)

balls187 10y ago
> So maybe you're a fancy doctor that makes $10000 a month. An annual salary of $120,000 is $10,000 a month. No need to be a fancy doctor to pull that salary.
prostoalex 10y ago
> provides a soft launch for anything you might want to do Similar argument gets thrown a lot when advocating a minimum wage raise, for instance, and on surface it seems clear - a person with $11 in his pocket has more buying power than someone with $10. The question is why hasn't that previous wage increase cause a long-term boom in economic activity? The answer is that eventually it gets priced in. Whether into the cost of housing, cost of food, cost of daycare, cost of healthcare, newer car or a cable package that now has Showtime. The retail industry is quick to anticipate any cash influx and appropriate not only immediate cash, but future cashflows as well, which explains so many "tax refund day" sales at mattress stores and car dealerships come April.
- sheepmullet 10y ago
  > The answer is that eventually it gets priced in It gets priced in because work (especially min wage work) is heavily location dependent.
  - prostoalex 10y ago
    Do you foresee large movements of population to cheaper geographies (Detroit, Mississippi, Alabama) given freedom from employment? Why are we not experiencing it with the population segments currently receiving a fixed monthly income (social security, disability, annuities)?
    - morgante 10y ago
      > Why are we not experiencing it with the population segments currently receiving a fixed monthly income (social security, disability, annuities)? We are. Moving to a cheaper locale is an extremely common part of retirement.
- jfoutz 10y ago
  Because $1 * 77 million workers * 2000 hours is only $160 billion dollars? The department of labor said "Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front." I don't think anybody claimed there would be a boom. BI on the other hand, might. With minimum wage you're still spending all day working. it's tough to be enthusiastic about much of anything beyond a book or a video game (or it was for me). I would guess A few people would do nothing. Most people would try a bunch of different stuff and kind of suck at it. A few people would have moderate success. And finally the occasional superstar. Pretty much the same expected outcomes as venture capital, but way way more breakevens. edit Oh, you're making the argument that because the cost of labor increases everything gets more expensive. That's true, but it's in proportion to the labor cost of the thing. Tomatoes are labor intensive, so they cost more. Pasta is mostly automated, so it doesn't go up as much. Relative pricing changes, making books and computers cheaper in terms of tomatoes.
  - empath75 10y ago
    Raising minimum wage raises salaries all the way up the chain, as retail staff now make as much as assistant managers, then assistant managers get a raise and make almost as much as managers and so on.
    - jfoutz 10y ago
      well, if the bottom rung gets 10%, the next one up gets 5%, then 2.5% and so on till you hit the top, where you probably get 20-50%. which sounds horrible but is a tiny fraction in an organization with tens of thousands of people. But again, that only affects prices to a degree that labor is a component. 10% across the board at Ford is .1% increase in the price of a car.
  - gozur88 10y ago
    Tomatoes are actually a good case study for wage increases. The last time we had a serious effort to curb illegal immigration we got the usual "crops rotting in the fields" rhetoric from growers, but somehow they lost the political argument. Wages went up due to the resultant labor scarcity. So growers introduced Roma tomatoes, which are not labor intensive because they can be machine harvested. https://www.youtube.com/watch?v=R3EpFTyN26E https://www.youtube.com/watch?v=R3EpFTyN26E
- lukeschlather 10y ago
  > The answer is that eventually it gets priced in. There's really not a lot of data supporting this statement. For the most part, minimum wage has remained pretty static between $5-15 in inflation-adjusted dollars. We do have a significant counterexample which disproves your thesis from the early 20th century - minimum wage was set at 25 cents (previously there was no minimum wage) and increased 5 cents per year until it reached 40 cents. So that's at least an 80% increase, and all of this during a big economic recovery. Obviously the WWII boom was also a factor, but the nation went from abject poverty to boom times in a scant 20 years, and I don't think you can say that the minimum wage was eroded. To the contrary, it set the standard of living that has prevailed to this day. Frankly, a market crash precipitated by a minimum wage hike has never happened, and I don't think it would happen. The worst case scenario you posit is modest inflation. That sounds like a pretty tame worst-case scenario, and well worth the risk if we can do what FDR did again, and raise the minimum standard of living for the next century.
  - prostoalex 10y ago
    I'd have to ask you more about the details, i.e. which decades you're referring to, and how much of the recovery was simply cyclical (with Black Friday being the rock bottom), but two observations about using that time period as an example: 1) People had limited or no access to credit facilities, and therefore had little ability to accrue large household debts. One of the phenomena that bothered the economists ever since the dip in oil prices is why isn't US retail sector booming as expected - cheaper gas historically led to more shopping. I am on mobile to google this properly, but eventually they found out that a shopping boom has happened, except slowly and over a previous decade, and most people were using their newfound savings simply to deleverage their credit card debt. 2) The economy was much more localized back then. Local butcher paying the local milkman paying the local seamstress paying the local travel agent paying the local florist paying the local asphalt paver paying the local butcher. The money got recycled. Today the recycling path is more of consumer -> big-box store -> Asian manufacturer.
    - WalterBright 10y ago
      > consumer -> big-box store -> Asian manufacturer -> American real estate -> consumer
- crdoconnor 10y ago
  >The question is why hasn't that previous wage increase cause a long-term boom in economic activity? It has. The money multiplier of raising the minimum wage is higher than almost any other place you could put the money. Increasing debt levels also spurs economic activity but that can only go on so long. The story of the last 30 years is that debt levels were used to spur economic activity while wages were suppressed. Once debt levels reached a peak, it all ended. In 2008. >The answer is that eventually it gets priced in. It usually leads to a decline in profitability. Dividend income comes down. Share prices come down. Prices do not usually go up: http://www.nber.org/papers/w13996 http://www.nber.org/papers/w13996 The businesses that area threatened by an increase in the minimum wage always put up a big political fight. They simply wouldn't bother if they could just pass the cost on to the consumer.

by jfoutz 10y ago

balls187 10y ago

> So maybe you're a fancy doctor that makes $10000 a month. An annual salary of $120,000 is $10,000 a month. No need to be a fancy doctor to pull that salary.

prostoalex 10y ago

> provides a soft launch for anything you might want to do Similar argument gets thrown a lot when advocating a minimum wage raise, for instance, and on surface it seems clear - a person with $11 in his pocket has more buying power than someone with $10. The question is why hasn't that previous wage increase cause a long-term boom in economic activity? The answer is that eventually it gets priced in. Whether into the cost of housing, cost of food, cost of daycare, cost of healthcare, newer car or a cable package that now has Showtime. The retail industry is quick to anticipate any cash influx and appropriate not only immediate cash, but future cashflows as well, which explains so many "tax refund day" sales at mattress stores and car dealerships come April.

sheepmullet 10y ago
> The answer is that eventually it gets priced in It gets priced in because work (especially min wage work) is heavily location dependent.
- prostoalex 10y ago
  Do you foresee large movements of population to cheaper geographies (Detroit, Mississippi, Alabama) given freedom from employment? Why are we not experiencing it with the population segments currently receiving a fixed monthly income (social security, disability, annuities)?
  - morgante 10y ago
    > Why are we not experiencing it with the population segments currently receiving a fixed monthly income (social security, disability, annuities)? We are. Moving to a cheaper locale is an extremely common part of retirement.
jfoutz 10y ago
Because $1 * 77 million workers * 2000 hours is only $160 billion dollars? The department of labor said "Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front." I don't think anybody claimed there would be a boom. BI on the other hand, might. With minimum wage you're still spending all day working. it's tough to be enthusiastic about much of anything beyond a book or a video game (or it was for me). I would guess A few people would do nothing. Most people would try a bunch of different stuff and kind of suck at it. A few people would have moderate success. And finally the occasional superstar. Pretty much the same expected outcomes as venture capital, but way way more breakevens. edit Oh, you're making the argument that because the cost of labor increases everything gets more expensive. That's true, but it's in proportion to the labor cost of the thing. Tomatoes are labor intensive, so they cost more. Pasta is mostly automated, so it doesn't go up as much. Relative pricing changes, making books and computers cheaper in terms of tomatoes.
- empath75 10y ago
  Raising minimum wage raises salaries all the way up the chain, as retail staff now make as much as assistant managers, then assistant managers get a raise and make almost as much as managers and so on.
  - jfoutz 10y ago
    well, if the bottom rung gets 10%, the next one up gets 5%, then 2.5% and so on till you hit the top, where you probably get 20-50%. which sounds horrible but is a tiny fraction in an organization with tens of thousands of people. But again, that only affects prices to a degree that labor is a component. 10% across the board at Ford is .1% increase in the price of a car.
- gozur88 10y ago
  Tomatoes are actually a good case study for wage increases. The last time we had a serious effort to curb illegal immigration we got the usual "crops rotting in the fields" rhetoric from growers, but somehow they lost the political argument. Wages went up due to the resultant labor scarcity. So growers introduced Roma tomatoes, which are not labor intensive because they can be machine harvested. https://www.youtube.com/watch?v=R3EpFTyN26E https://www.youtube.com/watch?v=R3EpFTyN26E
lukeschlather 10y ago
> The answer is that eventually it gets priced in. There's really not a lot of data supporting this statement. For the most part, minimum wage has remained pretty static between $5-15 in inflation-adjusted dollars. We do have a significant counterexample which disproves your thesis from the early 20th century - minimum wage was set at 25 cents (previously there was no minimum wage) and increased 5 cents per year until it reached 40 cents. So that's at least an 80% increase, and all of this during a big economic recovery. Obviously the WWII boom was also a factor, but the nation went from abject poverty to boom times in a scant 20 years, and I don't think you can say that the minimum wage was eroded. To the contrary, it set the standard of living that has prevailed to this day. Frankly, a market crash precipitated by a minimum wage hike has never happened, and I don't think it would happen. The worst case scenario you posit is modest inflation. That sounds like a pretty tame worst-case scenario, and well worth the risk if we can do what FDR did again, and raise the minimum standard of living for the next century.
- prostoalex 10y ago
  I'd have to ask you more about the details, i.e. which decades you're referring to, and how much of the recovery was simply cyclical (with Black Friday being the rock bottom), but two observations about using that time period as an example: 1) People had limited or no access to credit facilities, and therefore had little ability to accrue large household debts. One of the phenomena that bothered the economists ever since the dip in oil prices is why isn't US retail sector booming as expected - cheaper gas historically led to more shopping. I am on mobile to google this properly, but eventually they found out that a shopping boom has happened, except slowly and over a previous decade, and most people were using their newfound savings simply to deleverage their credit card debt. 2) The economy was much more localized back then. Local butcher paying the local milkman paying the local seamstress paying the local travel agent paying the local florist paying the local asphalt paver paying the local butcher. The money got recycled. Today the recycling path is more of consumer -> big-box store -> Asian manufacturer.
  - WalterBright 10y ago
    > consumer -> big-box store -> Asian manufacturer -> American real estate -> consumer
crdoconnor 10y ago
>The question is why hasn't that previous wage increase cause a long-term boom in economic activity? It has. The money multiplier of raising the minimum wage is higher than almost any other place you could put the money. Increasing debt levels also spurs economic activity but that can only go on so long. The story of the last 30 years is that debt levels were used to spur economic activity while wages were suppressed. Once debt levels reached a peak, it all ended. In 2008. >The answer is that eventually it gets priced in. It usually leads to a decline in profitability. Dividend income comes down. Share prices come down. Prices do not usually go up: http://www.nber.org/papers/w13996 http://www.nber.org/papers/w13996 The businesses that area threatened by an increase in the minimum wage always put up a big political fight. They simply wouldn't bother if they could just pass the cost on to the consumer.