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The Fed is against raising the minimum wage because it will make inflation increase above the allowed 2% per year. Which kind of makes sense because paying work

The Fed is against raising the minimum wage because it will make inflation increase above the allowed 2% per year. Which kind of makes sense because paying workers more will make things more expensive especially service businesses. But, they should still raise the minimum since most service businesses are heading for automation and the bump will help workers have a better job transition.

deleted 7y ago
[deleted]
AnthonyMouse 7y ago
Wouldn't it just make the automation viable more quickly?
- theturtletalks 7y ago
  I feel like companies are already racing for it. Just look at how fast outsourcing has taken place across SMBs and public companies.
  - AnthonyMouse 7y ago
    They do it when the cost of automation is less than the cost of labor. In some areas that has already happened, sure. But what's the result when you cause it to happen more?
- CryptoPunk 7y ago
  It could boost per worker automation, but there will be fewer workers, and less economic output to reinvest into capital (which is essentially automation), so there will be less automation in general. So higher automation per worker but lower automation per capita.
  - AnthonyMouse 7y ago
    Capital isn't "essentially automation" in general. It includes a lot of other things like land and art and government bonds. If you have a job which can be automated at a cost equivalent to a $10/hour wage, it doesn't get automated when the wage is $9 and does when it's $11. The money doesn't inherently come at the cost of some other automation, it may (and if the other automation is profitable, more likely does) come from selling some bonds or other assets you own, or by borrowing it from a bank which just creates the new money from nothing as banks do. You're also ignoring a number of other effects like the higher demand for automation allowing fixed costs to be spread over more units and lowering the purchase price of the automation equipment. A lot of these things are actually good -- if people sell real estate to buy automation equipment then housing prices come down. If four people get replaced by four machines and one person to look after them, the person who knows how to look after the machines may get paid more than any of them would have before the automation. But the other three are still out of a job, and are then in a wasteful competitive signaling game with all the other newly unemployed to overpay for degrees and credentials because none of them are allowed to compete by accepting lower compensation anymore.
    - CryptoPunk 7y ago
      I'm referring to 'capital' in the economic sense, not financial sense. Here's the Wikipedia definition: >>In economics, capital consists of an asset that can enhance one's power to perform economically useful work. For example, in a fundamental sense a stone or an arrow is capital for a caveman who can use it as a hunting instrument, while roads are capital for inhabitants of a city. and >>Capital is distinct from land (or non-renewable resources) in that capital can be increased by human labor. At any given moment in time, total physical capital may be referred to as the capital stock (which is not to be confused with the capital stock of a business entity). Increases in capital essentially mean increases in automation. >>If you have a job which can be automated at a cost equivalent to a $10/hour wage, it doesn't get automated when the wage is $9 and does when it's $11. The money doesn't inherently come at the cost of some other automation, it may (and if the other automation is profitable, more likely does) come from selling some bonds or other assets you own, or by borrowing it from a bank which just creates the new money from nothing as banks do. Not inherently, but generally. There's generally an opportunity cost. If the business has to pay $11 instead of $10, that extra $1 represents more resources being expended on accomplishing that task, which leaves less resources for other things. Yes there are always situations where some extra cost leads to a business or a combination of businesses unlocking productivity that was otherwise dormant, but there will be cases of the opposite, of an extra cost exacerbating wastage, beyond the value of the extra cost. You can't assume that an extra cost will lead to more efficiency gains than efficiency losses. The reasonable assumption is that the two variables will balance each other out, and on average, a $1 an hour increase in the cost of accomplishing a task will mean $1 less resources going into other productive tasks. >>A lot of these things are actually good -- if people sell real estate to buy automation equipment then housing prices come down. That's an overly optimistic and unsupported assumption. The profitability of holding real estate will not go down relative to investing in manufacturing as a result of manufacturing costs increasing.
rb808 7y ago
Source? I dont believe they ever said that.
- theturtletalks 7y ago
  I saw an in depth video about it and how an organization that is fighting for higher wages went to a FED event and was asking people high up why wages have not increased. I cannot find the video, but I'll keep trying.
tdfx 7y ago
Could you elaborate how the timing of a minimum wage hike now could help with the adjustment to the arrival of automation related job loss? Note: No snark on my part, it seems plausible and I'm generally looking to be able to debate the topic more intelligently.
- theturtletalks 7y ago
  Many service workers work 2 jobs to make ends meet. If they start earning enough from one job, that's extra time and money that can go towards a certification. I know Amazon has offered many of it's workers $10,000 to quit and start a delivery company. They are trying to help them transition as bots are taking warehouse jobs.
repsilat 7y ago
> above the allowed 2% per year. The US Fed's inflation target is symmetric about 2%, though it has almost consistently undershot it in recent years. Some argue that higher inflation is less scary than deflation because "interest rates can always go higher", but I would agree the Fed does seem to be more worried about upside inflation risks. Possibly because monetary policy has been "accommodative" (in their view) for so long, and "normalisation" has been a clear long-run goal. There are signs those tendencies have changed, though -- they've been talking about being "data driven" since last year, and recent messaging has smoothed the road to possible rate cuts too.
nickbecker 7y ago
To the best of my knowledge, the Federal Reserve has no official position in favor of or against raising the minimum wage. Claiming otherwise is speculation and likely misinforming people. Disclosure: Former researcher at the Federal Reserve Board
- theturtletalks 7y ago
  They may not take an official position, but their actions do lead to wages not increasing. Here's one example: https://www.axios.com/economists-federal-reserve-wages-708b9532-537c-4738-a4e6-9fe777646ac1.html https://www.axios.com/economists-federal-reserve-wages-708b9...
- internet_user 7y ago
  So whats the unofficial/off-the record/etc position then?

deleted 7y ago

[deleted]

AnthonyMouse 7y ago

Wouldn't it just make the automation viable more quickly?

theturtletalks 7y ago
I feel like companies are already racing for it. Just look at how fast outsourcing has taken place across SMBs and public companies.
- AnthonyMouse 7y ago
  They do it when the cost of automation is less than the cost of labor. In some areas that has already happened, sure. But what's the result when you cause it to happen more?
CryptoPunk 7y ago
It could boost per worker automation, but there will be fewer workers, and less economic output to reinvest into capital (which is essentially automation), so there will be less automation in general. So higher automation per worker but lower automation per capita.
- AnthonyMouse 7y ago
  Capital isn't "essentially automation" in general. It includes a lot of other things like land and art and government bonds. If you have a job which can be automated at a cost equivalent to a $10/hour wage, it doesn't get automated when the wage is $9 and does when it's $11. The money doesn't inherently come at the cost of some other automation, it may (and if the other automation is profitable, more likely does) come from selling some bonds or other assets you own, or by borrowing it from a bank which just creates the new money from nothing as banks do. You're also ignoring a number of other effects like the higher demand for automation allowing fixed costs to be spread over more units and lowering the purchase price of the automation equipment. A lot of these things are actually good -- if people sell real estate to buy automation equipment then housing prices come down. If four people get replaced by four machines and one person to look after them, the person who knows how to look after the machines may get paid more than any of them would have before the automation. But the other three are still out of a job, and are then in a wasteful competitive signaling game with all the other newly unemployed to overpay for degrees and credentials because none of them are allowed to compete by accepting lower compensation anymore.
  - CryptoPunk 7y ago
    I'm referring to 'capital' in the economic sense, not financial sense. Here's the Wikipedia definition: >>In economics, capital consists of an asset that can enhance one's power to perform economically useful work. For example, in a fundamental sense a stone or an arrow is capital for a caveman who can use it as a hunting instrument, while roads are capital for inhabitants of a city. and >>Capital is distinct from land (or non-renewable resources) in that capital can be increased by human labor. At any given moment in time, total physical capital may be referred to as the capital stock (which is not to be confused with the capital stock of a business entity). Increases in capital essentially mean increases in automation. >>If you have a job which can be automated at a cost equivalent to a $10/hour wage, it doesn't get automated when the wage is $9 and does when it's $11. The money doesn't inherently come at the cost of some other automation, it may (and if the other automation is profitable, more likely does) come from selling some bonds or other assets you own, or by borrowing it from a bank which just creates the new money from nothing as banks do. Not inherently, but generally. There's generally an opportunity cost. If the business has to pay $11 instead of $10, that extra $1 represents more resources being expended on accomplishing that task, which leaves less resources for other things. Yes there are always situations where some extra cost leads to a business or a combination of businesses unlocking productivity that was otherwise dormant, but there will be cases of the opposite, of an extra cost exacerbating wastage, beyond the value of the extra cost. You can't assume that an extra cost will lead to more efficiency gains than efficiency losses. The reasonable assumption is that the two variables will balance each other out, and on average, a $1 an hour increase in the cost of accomplishing a task will mean $1 less resources going into other productive tasks. >>A lot of these things are actually good -- if people sell real estate to buy automation equipment then housing prices come down. That's an overly optimistic and unsupported assumption. The profitability of holding real estate will not go down relative to investing in manufacturing as a result of manufacturing costs increasing.

rb808 7y ago

Source? I dont believe they ever said that.

theturtletalks 7y ago
I saw an in depth video about it and how an organization that is fighting for higher wages went to a FED event and was asking people high up why wages have not increased. I cannot find the video, but I'll keep trying.

tdfx 7y ago

Could you elaborate how the timing of a minimum wage hike now could help with the adjustment to the arrival of automation related job loss? Note: No snark on my part, it seems plausible and I'm generally looking to be able to debate the topic more intelligently.

theturtletalks 7y ago
Many service workers work 2 jobs to make ends meet. If they start earning enough from one job, that's extra time and money that can go towards a certification. I know Amazon has offered many of it's workers $10,000 to quit and start a delivery company. They are trying to help them transition as bots are taking warehouse jobs.

repsilat 7y ago

> above the allowed 2% per year. The US Fed's inflation target is symmetric about 2%, though it has almost consistently undershot it in recent years. Some argue that higher inflation is less scary than deflation because "interest rates can always go higher", but I would agree the Fed does seem to be more worried about upside inflation risks. Possibly because monetary policy has been "accommodative" (in their view) for so long, and "normalisation" has been a clear long-run goal. There are signs those tendencies have changed, though -- they've been talking about being "data driven" since last year, and recent messaging has smoothed the road to possible rate cuts too.

nickbecker 7y ago

To the best of my knowledge, the Federal Reserve has no official position in favor of or against raising the minimum wage. Claiming otherwise is speculation and likely misinforming people. Disclosure: Former researcher at the Federal Reserve Board

theturtletalks 7y ago
They may not take an official position, but their actions do lead to wages not increasing. Here's one example: https://www.axios.com/economists-federal-reserve-wages-708b9532-537c-4738-a4e6-9fe777646ac1.html https://www.axios.com/economists-federal-reserve-wages-708b9...
internet_user 7y ago
So whats the unofficial/off-the record/etc position then?