7 ms·

It weirds me out that this is a considered a controversial opinion instead of common sense. Give people money during pandemic, people feel less pressure to wor

It weirds me out that this is a considered a controversial opinion instead of common sense. Give people money during pandemic, people feel less pressure to work. Less people who want/need to work, wages rise to attract more people. Companies have higher wage bills, they raise prices to compensate. Hey presto, inflation. There's also a secondary feedback loop of people buying more stuff with their payouts and the increased demand translating into higher prices, but this hit various sectors of the economy really unevenly, where wage inflation seems to be very widespread.

gitfan86 5y ago
Thank God for the meme stocks and crypto. Otherwise we could have seen all the money jump into commodities or trying to corner markets or other goods.
bumby 5y ago
Even common sense needs to be validated though. There are always "common sense" solutions that end up being wrong, often because they are an overly simplistic model. There was an interesting outcome of some states stopping benefits because common sense said that would make people more pressured to go back to work. This was essentially a large-scale economics experiment. "25% of the workers who lost their benefits in June had gone back to work by August. Now, in states that left the benefits in place, 21% of unemployed people found jobs. So there was only a four percentage point difference when these benefits went away...And what this means is those states that ended benefits early, they turned down billions of dollars in federal unemployment aid, and it ended up backfiring for their local economies."[1] The "common sense" solution to helping their economy may have actually hurt their economy. [1] https://www.npr.org/transcripts/1034965231 https://www.npr.org/transcripts/1034965231
- silexia 5y ago
  That 4% difference is absolutely massive. Further, these benefits have to be paid by someone somewhere. These benefits are being paid by all the rest of us in the form of inflation eating way our income.
  - brandmeyer 5y ago
    > That 4% difference is absolutely massive. 4% of the entire workforce is massive. 4% of unemployed workers who were previously receiving unemployment benefits is irrelevant. If you zoom out, you'll see that the biggest drops in unemployment benefits weren't in the 2021Q2, they were in 2020Q4. https://www.statista.com/statistics/284857/total-unemployment-benefits-paid-in-the-us/ https://www.statista.com/statistics/284857/total-unemploymen...
  - bumby 5y ago
    We could probably debate whether 4% is "massive" in the context of COVID unemployment levels, but I'll sidestep that because I don't think it will actually resolve anything. What I think is the better question is whether that 4% dip was better for the respective economies in the context of the aid they had to give up. It seems to me it probably wasn't a good tradeoff if the goal was to improve the economy. I also understand it may be a moral argument rather than an economic one, but that's another one that could probably be debated without resolution. >These benefits are being paid by all the rest of us in the form of inflation eating way our income. I agree, but that's also the price to be paid by living in a society. We could just remove all safety nets whatsoever and deal with whatever instability results, but I don't think that's in most people's best interest. The point of the discussion is finding the right balance that provides a moral yet stable economy.
    - murgindrag 5y ago
      I expect inflation to remain high for a while, and I think concerns about it (if not for self-fulfilling psychological, which are very real and significant) are overblown. I think this stimulus, and the resulting inflation, DID help the economy, relative to the alternatives. The critical thing was to avoid structural damage: - Businesses going under - People losing jobs - Mortgages going under ... and so on. All of this DOES directly impact the productive output of the economy. Inflation does distort the economy a little bit. It makes some of us poorer (those with cash), some of us richer (those with debt), and leaves some neutral (this with hard assets). But I think this distortion pales relative to the alternative.
tootie 5y ago
Given that pandemic relief has ended and in fact ended a while ago in a lot of the country while inflation has kept up would imply this isn't true.
- QuarterReptile 5y ago
  The fact that people "bought" stuff that is nonetheless still stuck off the coast waiting to be unloaded suggests that the listed price paid is not the actual market price (if you had any expectations of receiving things quickly like you would have in 2019.) Likewise for anyone who had a plumber come to their house do work, paying 30% more and waiting a week for service. Prices seem to be sticky, so it's not that surprising that it takes some time for higher prices to work their way into all facets of economic life.
whimsicalism 5y ago
Sure, total common sense if you forget about velocity effects and changes in consumer behavior. Good thing we have economists whose job is to not forget about those things.
- frankfrankfrank 5y ago
  I can't quite tell if you are being sarcastic. I also can't quite settle on what is more concerning, if you are serious it implies that you think economists are just ranchers that herd their cattle at a whim, or that you think they will be able to exert those powers flawlessly and in self-less ways without screwing it up like all other instances of command/planned economies in human history.
  - whimsicalism 5y ago
    Neither, I certainly don't think they execute flawlessly/without screwing up. I'm making the much more defensible claim that if we took you and the GP commentator and put you in charge of the Fed, the economy would go into a recession.
- thepasswordis 5y ago
  You’re pretty smug about “velocity of money” there. Also you appear to not understand that economics isn’t a hard science where there is some rigid consensus. Some (many? Most?) economists think that this “modern monetary theory” stuff is suicidal. It looks to me like they’re being proven right.
  - wbsss4412 5y ago
    Your comment seems to imply that the MMT set is actually directing policy, rather than being in favor for a smaller subset of progressive politicians. The fed isn’t run by Stephanie Kelton. We are still living through one of the most disruptive periods in modern economic history, seeing moderately elevated inflation in this context doesn’t mean the sky is falling.
  - whimsicalism 5y ago
hogFeast 5y ago
The reason why it is "controversial" is because people believe we did the same thing in 2010, and no inflation occurred. Very broadly this is true, M2 peaked at 10% in 2008 and was 6% for most of the decade but the actual transmission of this into the real economy was impaired. So you have to actually understand how monetary policy is being transmitted. But what has just happened is evidence that this lesson wasn't learned because the view seemed to be that inflation is impossible...not that we need to look at transmission more carefully. M2 growth YoY is running at 25%, federal spending is clearly leaking into the money supply, on top of supply issues...it is going to be tricky to resolve fast (even if you don't consider the political pressure the Fed is clearly under, the willingness to trade inflation for lower unemployment...that is what this comes down to, can your politicians take the pain? It is very clear there is no capacity for pain in the US).
- dustintrex 5y ago
  In 2010, "quantitative easing" meant plowing a whole lot of money into various financial assets, which is a very different kettle of fish from giving people cash handouts.
  - hogFeast 5y ago
    Yes, that is what I meant by the transmission (indeed, there was a huge difference between QE in 2010 and QE in 2014). There is also a huge difference in QE now, and 2010. Each time the structure changes and the impact on transmission changes (because the Fed had no idea how QE was supposed to work, and apparently still doesn't appear to know precisely). A key point is that QE in 2010 primarily worked through portfolio composition, not directly on money supply. Similarly, giving people cash handouts is not necessarily inflationary either (it happens all the time anyway, food stamps, unemployment benefits) because cash handouts don't necessarily increase the money supply. The issue is that transmission appears to have changed in a very subtle way (this isn't just occurring in the US either) where you have fiscal policy seeming to leak through to the money supply (something that a significant proportion of politicians think is impossible atm).
nuerow 5y ago
> Give people money during pandemic, people feel less pressure to work. Less people who want to work, wages rise to attract more people. I feel that depicting the current scenario as a sudden global reluctance to work because people are getting benefits is a gross misrepresentation of the facts, and one which is rooted in the old moralist notion that poverty is tied to laziness. The truth of the matter is that the year-long lockdown enabled workers to reconsider their life priorities and their professional choices, and those stuck in awful jobs with awful working conditions decided to reconsider their options. To illustrate the fact that "giving people money" is not the key factor here, keep in mind that priviledges workers, such as handsomely paid software engineers working for FAANGs, started quitting in droves due to working conditions, and right now we are seeing these same FAANGs scrambling to contain this hemorrhaging. FAANG-caliber engineers don't just quit their job because the government started passing on handouts. The service sector imposes exceptionally abusive and poorly-paid working conditions, thus no wonder they are having problems attracting workers without doing any soul-searching and addressing their problems.
- Unklejoe 5y ago
  > reconsider their options. What are the options for minimum/lower wage workers? They still need money for food and shelter. The ability for low wage workers to decide "this job is not worth it" was only made possible by the increased government unemployment benefit and stimulus. I absolutely believe that if given the choice of getting over $1200/month on unemployment versus making the same but working, most people would choose not working. That seems so intuitive to me.
  - gtaylor 5y ago
    One of the software engineers that I respect the most was bussing tables a few years ago.
  - bumby 5y ago
    >I absolutely believe that if given the choice of getting over $1200/month on unemployment versus making the same but working, most people would choose not working. That seems so intuitive to me. This seems to be a rational choice to me as well if you define work as "shit I don't want to be doing". If you were paid $1200 a week for playing with puppies, you probably wouldn't mind going back. I think what the OP was alluding to was that it caused people to evaluate the nature of work. I'm not saying it's a purely rational decision, but probably a largely emotional one. When your norm is working a miserable job and you are given a reprieve from it, emotionally it may be that much harder to return.
sjg007 5y ago
>Give people money during pandemic, people feel less pressure to work. It lets people stay home more to prevent the contagion from spreading... but it is not the good life. It might help buy groceries or pay a bill or two, not much more than that.
frankfrankfrank 5y ago
I probably need to add this to the start for context; I say the following not because I don't think people should earn more, but rather that it's bad, rather than good increases in wages, which will be eaten up by inflation almost immediately at this pace. I just saw a notice on a fast-ish food place saying they will pay $3 more per hour than the last wage. So not only is poaching happening, this inflation is being baked in. For context that is ~$6,240 more annualized or $520 per month. On the contrary, good wage increases would come from a restriction of the labor supply through things like a decrease in immigration. What is happening though is that the labor pool is now being flooded with quite literally millions of unskilled laborers on the southern border and soon enough even high skill sectors like tech will be flooded with foreign tech workers if the ruling class is able to pull it off and places like India and China, etc. don't put a stop to it in order to retain their talent rather than letting the US ruling class profit from their people.
- BuyMyBitcoins 5y ago
  Unfortunately, any proposal to reduce immigration is seen as morally evil.
- lupire 5y ago
  Why do people currently south of the border deserve good wage increases less than you do? I see no reason.
raydev 5y ago
> wages rise to attract more people Has this actually happened in the last year?
throw0101a 5y ago
> It weirds me out that this is a considered a controversial opinion instead of common sense. A lot of people think it is "common sense" that raising the minimum wage will decrease employment because of higher labour costs, but that link is… tenuous… at best: > In pioneering work from the early 1990s, David Card analysed some central questions in labour economics – such as the effects of a minimum wage, immigration and education – using this approach. The results of these studies challenged conventional wisdom and led to new research, to which Card has continued to make important contributions. Overall, we now have a considerably better understanding of how the labour market operates than we did 30 years ago. * https://www.nobelprize.org/prizes/economic-sciences/2021/popular-information/ https://www.nobelprize.org/prizes/economic-sciences/2021/pop...

gitfan86 5y ago

Thank God for the meme stocks and crypto. Otherwise we could have seen all the money jump into commodities or trying to corner markets or other goods.

bumby 5y ago

Even common sense needs to be validated though. There are always "common sense" solutions that end up being wrong, often because they are an overly simplistic model. There was an interesting outcome of some states stopping benefits because common sense said that would make people more pressured to go back to work. This was essentially a large-scale economics experiment. "25% of the workers who lost their benefits in June had gone back to work by August. Now, in states that left the benefits in place, 21% of unemployed people found jobs. So there was only a four percentage point difference when these benefits went away...And what this means is those states that ended benefits early, they turned down billions of dollars in federal unemployment aid, and it ended up backfiring for their local economies."[1] The "common sense" solution to helping their economy may have actually hurt their economy. [1] https://www.npr.org/transcripts/1034965231 https://www.npr.org/transcripts/1034965231

silexia 5y ago
That 4% difference is absolutely massive. Further, these benefits have to be paid by someone somewhere. These benefits are being paid by all the rest of us in the form of inflation eating way our income.
- brandmeyer 5y ago
  > That 4% difference is absolutely massive. 4% of the entire workforce is massive. 4% of unemployed workers who were previously receiving unemployment benefits is irrelevant. If you zoom out, you'll see that the biggest drops in unemployment benefits weren't in the 2021Q2, they were in 2020Q4. https://www.statista.com/statistics/284857/total-unemployment-benefits-paid-in-the-us/ https://www.statista.com/statistics/284857/total-unemploymen...
- bumby 5y ago
  We could probably debate whether 4% is "massive" in the context of COVID unemployment levels, but I'll sidestep that because I don't think it will actually resolve anything. What I think is the better question is whether that 4% dip was better for the respective economies in the context of the aid they had to give up. It seems to me it probably wasn't a good tradeoff if the goal was to improve the economy. I also understand it may be a moral argument rather than an economic one, but that's another one that could probably be debated without resolution. >These benefits are being paid by all the rest of us in the form of inflation eating way our income. I agree, but that's also the price to be paid by living in a society. We could just remove all safety nets whatsoever and deal with whatever instability results, but I don't think that's in most people's best interest. The point of the discussion is finding the right balance that provides a moral yet stable economy.
  - murgindrag 5y ago
    I expect inflation to remain high for a while, and I think concerns about it (if not for self-fulfilling psychological, which are very real and significant) are overblown. I think this stimulus, and the resulting inflation, DID help the economy, relative to the alternatives. The critical thing was to avoid structural damage: - Businesses going under - People losing jobs - Mortgages going under ... and so on. All of this DOES directly impact the productive output of the economy. Inflation does distort the economy a little bit. It makes some of us poorer (those with cash), some of us richer (those with debt), and leaves some neutral (this with hard assets). But I think this distortion pales relative to the alternative.

tootie 5y ago

Given that pandemic relief has ended and in fact ended a while ago in a lot of the country while inflation has kept up would imply this isn't true.

QuarterReptile 5y ago
The fact that people "bought" stuff that is nonetheless still stuck off the coast waiting to be unloaded suggests that the listed price paid is not the actual market price (if you had any expectations of receiving things quickly like you would have in 2019.) Likewise for anyone who had a plumber come to their house do work, paying 30% more and waiting a week for service. Prices seem to be sticky, so it's not that surprising that it takes some time for higher prices to work their way into all facets of economic life.

whimsicalism 5y ago

Sure, total common sense if you forget about velocity effects and changes in consumer behavior. Good thing we have economists whose job is to not forget about those things.

frankfrankfrank 5y ago
I can't quite tell if you are being sarcastic. I also can't quite settle on what is more concerning, if you are serious it implies that you think economists are just ranchers that herd their cattle at a whim, or that you think they will be able to exert those powers flawlessly and in self-less ways without screwing it up like all other instances of command/planned economies in human history.
- whimsicalism 5y ago
  Neither, I certainly don't think they execute flawlessly/without screwing up. I'm making the much more defensible claim that if we took you and the GP commentator and put you in charge of the Fed, the economy would go into a recession.
thepasswordis 5y ago
You’re pretty smug about “velocity of money” there. Also you appear to not understand that economics isn’t a hard science where there is some rigid consensus. Some (many? Most?) economists think that this “modern monetary theory” stuff is suicidal. It looks to me like they’re being proven right.
- wbsss4412 5y ago
  Your comment seems to imply that the MMT set is actually directing policy, rather than being in favor for a smaller subset of progressive politicians. The fed isn’t run by Stephanie Kelton. We are still living through one of the most disruptive periods in modern economic history, seeing moderately elevated inflation in this context doesn’t mean the sky is falling.
- whimsicalism 5y ago

hogFeast 5y ago

The reason why it is "controversial" is because people believe we did the same thing in 2010, and no inflation occurred. Very broadly this is true, M2 peaked at 10% in 2008 and was 6% for most of the decade but the actual transmission of this into the real economy was impaired. So you have to actually understand how monetary policy is being transmitted. But what has just happened is evidence that this lesson wasn't learned because the view seemed to be that inflation is impossible...not that we need to look at transmission more carefully. M2 growth YoY is running at 25%, federal spending is clearly leaking into the money supply, on top of supply issues...it is going to be tricky to resolve fast (even if you don't consider the political pressure the Fed is clearly under, the willingness to trade inflation for lower unemployment...that is what this comes down to, can your politicians take the pain? It is very clear there is no capacity for pain in the US).

dustintrex 5y ago
In 2010, "quantitative easing" meant plowing a whole lot of money into various financial assets, which is a very different kettle of fish from giving people cash handouts.
- hogFeast 5y ago
  Yes, that is what I meant by the transmission (indeed, there was a huge difference between QE in 2010 and QE in 2014). There is also a huge difference in QE now, and 2010. Each time the structure changes and the impact on transmission changes (because the Fed had no idea how QE was supposed to work, and apparently still doesn't appear to know precisely). A key point is that QE in 2010 primarily worked through portfolio composition, not directly on money supply. Similarly, giving people cash handouts is not necessarily inflationary either (it happens all the time anyway, food stamps, unemployment benefits) because cash handouts don't necessarily increase the money supply. The issue is that transmission appears to have changed in a very subtle way (this isn't just occurring in the US either) where you have fiscal policy seeming to leak through to the money supply (something that a significant proportion of politicians think is impossible atm).

nuerow 5y ago

> Give people money during pandemic, people feel less pressure to work. Less people who want to work, wages rise to attract more people. I feel that depicting the current scenario as a sudden global reluctance to work because people are getting benefits is a gross misrepresentation of the facts, and one which is rooted in the old moralist notion that poverty is tied to laziness. The truth of the matter is that the year-long lockdown enabled workers to reconsider their life priorities and their professional choices, and those stuck in awful jobs with awful working conditions decided to reconsider their options. To illustrate the fact that "giving people money" is not the key factor here, keep in mind that priviledges workers, such as handsomely paid software engineers working for FAANGs, started quitting in droves due to working conditions, and right now we are seeing these same FAANGs scrambling to contain this hemorrhaging. FAANG-caliber engineers don't just quit their job because the government started passing on handouts. The service sector imposes exceptionally abusive and poorly-paid working conditions, thus no wonder they are having problems attracting workers without doing any soul-searching and addressing their problems.

Unklejoe 5y ago
> reconsider their options. What are the options for minimum/lower wage workers? They still need money for food and shelter. The ability for low wage workers to decide "this job is not worth it" was only made possible by the increased government unemployment benefit and stimulus. I absolutely believe that if given the choice of getting over $1200/month on unemployment versus making the same but working, most people would choose not working. That seems so intuitive to me.
- gtaylor 5y ago
  One of the software engineers that I respect the most was bussing tables a few years ago.
- bumby 5y ago
  >I absolutely believe that if given the choice of getting over $1200/month on unemployment versus making the same but working, most people would choose not working. That seems so intuitive to me. This seems to be a rational choice to me as well if you define work as "shit I don't want to be doing". If you were paid $1200 a week for playing with puppies, you probably wouldn't mind going back. I think what the OP was alluding to was that it caused people to evaluate the nature of work. I'm not saying it's a purely rational decision, but probably a largely emotional one. When your norm is working a miserable job and you are given a reprieve from it, emotionally it may be that much harder to return.

sjg007 5y ago

>Give people money during pandemic, people feel less pressure to work. It lets people stay home more to prevent the contagion from spreading... but it is not the good life. It might help buy groceries or pay a bill or two, not much more than that.

frankfrankfrank 5y ago

I probably need to add this to the start for context; I say the following not because I don't think people should earn more, but rather that it's bad, rather than good increases in wages, which will be eaten up by inflation almost immediately at this pace. I just saw a notice on a fast-ish food place saying they will pay $3 more per hour than the last wage. So not only is poaching happening, this inflation is being baked in. For context that is ~$6,240 more annualized or $520 per month. On the contrary, good wage increases would come from a restriction of the labor supply through things like a decrease in immigration. What is happening though is that the labor pool is now being flooded with quite literally millions of unskilled laborers on the southern border and soon enough even high skill sectors like tech will be flooded with foreign tech workers if the ruling class is able to pull it off and places like India and China, etc. don't put a stop to it in order to retain their talent rather than letting the US ruling class profit from their people.

BuyMyBitcoins 5y ago
Unfortunately, any proposal to reduce immigration is seen as morally evil.
lupire 5y ago
Why do people currently south of the border deserve good wage increases less than you do? I see no reason.

raydev 5y ago

> wages rise to attract more people Has this actually happened in the last year?

throw0101a 5y ago

> It weirds me out that this is a considered a controversial opinion instead of common sense. A lot of people think it is "common sense" that raising the minimum wage will decrease employment because of higher labour costs, but that link is… tenuous… at best: > In pioneering work from the early 1990s, David Card analysed some central questions in labour economics – such as the effects of a minimum wage, immigration and education – using this approach. The results of these studies challenged conventional wisdom and led to new research, to which Card has continued to make important contributions. Overall, we now have a considerably better understanding of how the labour market operates than we did 30 years ago. * https://www.nobelprize.org/prizes/economic-sciences/2021/popular-information/ https://www.nobelprize.org/prizes/economic-sciences/2021/pop...