3 ms·

You can't cut from 0%, unless you're talking about expanding earned income tax credits or something.

moorhosj 9y ago
Even so, the problem outlined isn't after-tax earnings, it is wages. Lower tax rates don't solve that fundamental economic issue. In the past twelve months, the unemployment rate has fallen, from 4.8% to 4.1%. Meanwhile, the laborforce participation rate has also fallen, from 62.9% to 62.7%. This is not easily explained by traditional labor economics. It seems like there is a broken link somewhere in the chain. Why haven't we seen wages rise with the falling unemployment rate? Why aren't discouraged workers moving back into a labor market with 4.1% unemployment? data source: https://www.bls.gov/news.release/empsit.a.htm https://www.bls.gov/news.release/empsit.a.htm
- bomb199 9y ago
  I'm not sure how these are a mystery. Wages aren't going up because there is nothing forcing them to go up. The upper class just takes their rents and insists paying more wages would tank the economy. Participation is going down because there's little reason to seek employment if you know the employer is just attempting to shaft you. You produce $40/hr, but they'll pay you $8/hr. You can't negotiate, they'll just find someone who is desperate.
  - moorhosj 9y ago
    I largely agree with you, it was more of a question for those who believe labor economics should act like traditional market economics. You have pointed out the key difference as there isn't perfect information in labor economics like there is in market economics.
- lazerpants 9y ago
  I think the decline in the labor rate isn't as much of a mystery as some people think. Baby boomers are definitely retiring. For the last 10 years we've had two demographic bubbles (baby boomers and millenials) in the job market at the same time, and now that is shifting. Obviously there is more at play when you look at certain demographics in certain regions, but a lot of this can be explained by the number of older people who are choosing to retire or being forced to retire by medical issues. I believe HN misses this issue sometimes because on average tech workers are pretty young. However, anecdotally, in my last office (in the same organization) we had a team of 10. 5 of my coworkers there were over 60 years old... Those people are going to retire soon and hopefully live good long lives outside of the labor pool.
  - moorhosj 9y ago
    Even more proof that wages should be rising as the labor market thins out and the economy grows.
digitaltrees 9y ago
Looking at the federal income tax rate is only a small part of the picture. There are a lot of other taxes everyone pays, payroll taxes / fica, sales taxes, etc.; most of which are highly regressive. You could cut those for lower income brackets. When you include these tax categories you will also note that there was a shift to these regressive taxes at the same time the highest income tax rates were cut. And to further reinforce this feedback loop there was also a move to reclassify income to long term capital gains profit which is taxed even lower than the highest income tax. All of these policy shifts combined to create greater wealth inequality, and wage stagnation.

Even so, the problem outlined isn't after-tax earnings, it is wages. Lower tax rates don't solve that fundamental economic issue. In the past twelve months, the unemployment rate has fallen, from 4.8% to 4.1%. Meanwhile, the laborforce participation rate has also fallen, from 62.9% to 62.7%. This is not easily explained by traditional labor economics. It seems like there is a broken link somewhere in the chain. Why haven't we seen wages rise with the falling unemployment rate? Why aren't discouraged workers moving back into a labor market with 4.1% unemployment? data source: https://www.bls.gov/news.release/empsit.a.htm https://www.bls.gov/news.release/empsit.a.htm

bomb199 9y ago
I'm not sure how these are a mystery. Wages aren't going up because there is nothing forcing them to go up. The upper class just takes their rents and insists paying more wages would tank the economy. Participation is going down because there's little reason to seek employment if you know the employer is just attempting to shaft you. You produce $40/hr, but they'll pay you $8/hr. You can't negotiate, they'll just find someone who is desperate.
- moorhosj 9y ago
  I largely agree with you, it was more of a question for those who believe labor economics should act like traditional market economics. You have pointed out the key difference as there isn't perfect information in labor economics like there is in market economics.
lazerpants 9y ago
I think the decline in the labor rate isn't as much of a mystery as some people think. Baby boomers are definitely retiring. For the last 10 years we've had two demographic bubbles (baby boomers and millenials) in the job market at the same time, and now that is shifting. Obviously there is more at play when you look at certain demographics in certain regions, but a lot of this can be explained by the number of older people who are choosing to retire or being forced to retire by medical issues. I believe HN misses this issue sometimes because on average tech workers are pretty young. However, anecdotally, in my last office (in the same organization) we had a team of 10. 5 of my coworkers there were over 60 years old... Those people are going to retire soon and hopefully live good long lives outside of the labor pool.
- moorhosj 9y ago
  Even more proof that wages should be rising as the labor market thins out and the economy grows.

digitaltrees 9y ago

Looking at the federal income tax rate is only a small part of the picture. There are a lot of other taxes everyone pays, payroll taxes / fica, sales taxes, etc.; most of which are highly regressive. You could cut those for lower income brackets. When you include these tax categories you will also note that there was a shift to these regressive taxes at the same time the highest income tax rates were cut. And to further reinforce this feedback loop there was also a move to reclassify income to long term capital gains profit which is taxed even lower than the highest income tax. All of these policy shifts combined to create greater wealth inequality, and wage stagnation.