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People often assume that the role of economists is to answer the question "will raising the minimum wage increase unemployment" or even "will raising the minimu

People often assume that the role of economists is to answer the question "will raising the minimum wage increase unemployment" or even "will raising the minimum wage increase inflation". In fact most economists would rather answer the questions "why should we increase the minimum wage" or "should we increase the minimum wage". Most economists would say that interfering with the market is bad in general. If we wanted to help people with low incomes, it would make more sense to decrease taxes for people on low incomes.

thecage411 13y ago
Most economists wouldn't say that because it is wrong. At least in the US, people with low incomes pay little to nothing in (income) taxes. They may face high "effective" tax rates due to losing low-income benefits, but that's a separate discussion.
- yetanotherphd 13y ago
  If a person pays any income tax, it can still be lowered. And low income benefits are not a separate discussion. It is more fair and efficient to redistribute money to people on low incomes through taxes and other benefits than through raising the minimum wage.
  - thecage411 13y ago
    As another poster pointed out, some people with low income pay a negative income tax. I guess it could be "lowered" but I don't think that's what you meant, or at least you didn't make it clear. Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage?
    - yetanotherphd 13y ago
      Either income tax means the actual income tax you pay to the IRS, in which case it can be lowered if it isn't already zero, or it means income tax minus various benefits, in which case it can be "lowered" by increasing benefits. It's not my fault that people are using different meanings for the term and somehow my writing is expected to be consistent with all of them :) >Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage? No, I think theory is enough for this point.
      - thecage411 13y ago
        Nope, you are pretty much the only person I've seen that uses the term income tax to mean income tax and benefits.
        yetanotherphd 13y ago
        I'm very confused. You said >As another poster pointed out, some people with low income pay a negative income tax. The only way income tax can be negative, is if it includes low income benefits. In any case, no matter how one chooses to define things, isn't my argument clear at this point: Increasing benefits or decreasing taxes are more efficient than increasing the minimum wage.
        thecage411 13y ago
        Yes, your point is clear, though I'm not sure if I agree or not :). I think the confusion is over the term "benefits". In the usage I've seen, benefits includes things not directly associated with the income tax code, like say, food stamps. If you increase your income, you may lose access to food stamps, but the food stamps don't come with your income tax returns and receiving them is part of a separate application process in most (all?) states. So when you said income tax, I thought you were including those kinds of programs. But it sounds like you mean something closer to "benefits and deductions" directly in the tax code, like the earned income tax credit.
adventured 13y ago
If you wanted to help people with low incomes, you'd do two things: 1) More skill based education, enabling them to upgrade out of their low paying, low skill jobs 2) Make it dramatically less expensive and easier to employ people, lower regulations (rather than adding thousands of new regulations per year), simplify compliance, simplify healthcare dramatically, and overall stop providing huge disincentives to hiring The only tax that poor pay is sales tax. The bottom 40% pay a negative income tax rate. We could attempt to kick the sales tax back to them, but it wouldn't make even remotely as big a dent as improving the macro economic environment. We should also become fiscally responsible and stop destroying the poor's standard of living through inflation. Inflation harms the poorest the most, by far. And I don't mean the bogus CPI, which was substantially adjusted to mask inflation under Clinton's presidency. I'm talking about the massive inflation in: energy, housing & rent, food, education, health care. The cost of a new car has gone up by 50% in 20 years, while we're selling less of them (relative slack demand). The cost of milk & eggs has doubled in 15 years. The cost of a house has doubled in 15 years. Meanwhile, we have 14% real unemployment, with no justification for the massive increases in prices on the demand side (ie it's primarily driven by the Fed's massive devaluation of the dollar, with QE being used to avoid bankruptcy at the federal level; aka the poor are being papered to death in the process of masking our nation's fiscal irresponsibility).
- yetanotherphd 13y ago
  I'm talking about policies that might be thought of as tradeoffs: raising the minimum wage vs lowering taxes (for people on low incomes) or raising benefits. What you are talking about is policies that (you claim) would benefit the economy in general and should be done regardless of how we deal with people who are currently on low incomes. And inflation does not harm people's standard of living because real wages will rise or fall depending on the market. Inflation has some short term effects, but if nominal wages remained stagnant (which they haven't), that would be because the value of labor went down, not because of inflation.
- drabiega 13y ago
  >Inflation harms the poorest the most, by far. I don't think that word means what you think it means. When prices go up, so does income. It has to because there are two sides to every economic transaction. Inflation often seems to coincide with declines in the real median wage because it's easier for your employer to not give you a raise instead than it is to reduce your salary. But over time it doesn't matter because even with no inflation if there's real wage decline you still have the same problem.
drabiega 13y ago
If you answer the second kind of question over the first, you're not an economist, you're a pundit. In all of my economics training they have repeatedly focused on asking positive questions (the first kind) over normative, the second.
- yetanotherphd 13y ago
  I disagree, economics is well suited to addressing normative questions. For example, what positive questions do the the first and second welfare theorems address? The most fundamental values (how much do we value individual liberty? total wellbeing? the wellbeing of the least-well off?) are not necessarily for economists to define. But by describing the tradeoff between, for example, equality and efficiency, economists are able to practically answer normative questions, because almost everyone values equality and efficiency.

thecage411 13y ago

Most economists wouldn't say that because it is wrong. At least in the US, people with low incomes pay little to nothing in (income) taxes. They may face high "effective" tax rates due to losing low-income benefits, but that's a separate discussion.

yetanotherphd 13y ago
If a person pays any income tax, it can still be lowered. And low income benefits are not a separate discussion. It is more fair and efficient to redistribute money to people on low incomes through taxes and other benefits than through raising the minimum wage.
- thecage411 13y ago
  As another poster pointed out, some people with low income pay a negative income tax. I guess it could be "lowered" but I don't think that's what you meant, or at least you didn't make it clear. Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage?
  - yetanotherphd 13y ago
    Either income tax means the actual income tax you pay to the IRS, in which case it can be lowered if it isn't already zero, or it means income tax minus various benefits, in which case it can be "lowered" by increasing benefits. It's not my fault that people are using different meanings for the term and somehow my writing is expected to be consistent with all of them :) >Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage? No, I think theory is enough for this point.
    - thecage411 13y ago
      Nope, you are pretty much the only person I've seen that uses the term income tax to mean income tax and benefits.
      - yetanotherphd 13y ago
        I'm very confused. You said >As another poster pointed out, some people with low income pay a negative income tax. The only way income tax can be negative, is if it includes low income benefits. In any case, no matter how one chooses to define things, isn't my argument clear at this point: Increasing benefits or decreasing taxes are more efficient than increasing the minimum wage.
        thecage411 13y ago
        Yes, your point is clear, though I'm not sure if I agree or not :). I think the confusion is over the term "benefits". In the usage I've seen, benefits includes things not directly associated with the income tax code, like say, food stamps. If you increase your income, you may lose access to food stamps, but the food stamps don't come with your income tax returns and receiving them is part of a separate application process in most (all?) states. So when you said income tax, I thought you were including those kinds of programs. But it sounds like you mean something closer to "benefits and deductions" directly in the tax code, like the earned income tax credit.

adventured 13y ago

If you wanted to help people with low incomes, you'd do two things: 1) More skill based education, enabling them to upgrade out of their low paying, low skill jobs 2) Make it dramatically less expensive and easier to employ people, lower regulations (rather than adding thousands of new regulations per year), simplify compliance, simplify healthcare dramatically, and overall stop providing huge disincentives to hiring The only tax that poor pay is sales tax. The bottom 40% pay a negative income tax rate. We could attempt to kick the sales tax back to them, but it wouldn't make even remotely as big a dent as improving the macro economic environment. We should also become fiscally responsible and stop destroying the poor's standard of living through inflation. Inflation harms the poorest the most, by far. And I don't mean the bogus CPI, which was substantially adjusted to mask inflation under Clinton's presidency. I'm talking about the massive inflation in: energy, housing & rent, food, education, health care. The cost of a new car has gone up by 50% in 20 years, while we're selling less of them (relative slack demand). The cost of milk & eggs has doubled in 15 years. The cost of a house has doubled in 15 years. Meanwhile, we have 14% real unemployment, with no justification for the massive increases in prices on the demand side (ie it's primarily driven by the Fed's massive devaluation of the dollar, with QE being used to avoid bankruptcy at the federal level; aka the poor are being papered to death in the process of masking our nation's fiscal irresponsibility).

yetanotherphd 13y ago
I'm talking about policies that might be thought of as tradeoffs: raising the minimum wage vs lowering taxes (for people on low incomes) or raising benefits. What you are talking about is policies that (you claim) would benefit the economy in general and should be done regardless of how we deal with people who are currently on low incomes. And inflation does not harm people's standard of living because real wages will rise or fall depending on the market. Inflation has some short term effects, but if nominal wages remained stagnant (which they haven't), that would be because the value of labor went down, not because of inflation.
drabiega 13y ago
>Inflation harms the poorest the most, by far. I don't think that word means what you think it means. When prices go up, so does income. It has to because there are two sides to every economic transaction. Inflation often seems to coincide with declines in the real median wage because it's easier for your employer to not give you a raise instead than it is to reduce your salary. But over time it doesn't matter because even with no inflation if there's real wage decline you still have the same problem.

drabiega 13y ago

If you answer the second kind of question over the first, you're not an economist, you're a pundit. In all of my economics training they have repeatedly focused on asking positive questions (the first kind) over normative, the second.

yetanotherphd 13y ago
I disagree, economics is well suited to addressing normative questions. For example, what positive questions do the the first and second welfare theorems address? The most fundamental values (how much do we value individual liberty? total wellbeing? the wellbeing of the least-well off?) are not necessarily for economists to define. But by describing the tradeoff between, for example, equality and efficiency, economists are able to practically answer normative questions, because almost everyone values equality and efficiency.