The Pitchforks Are Coming For Us Plutocrats

[Pointedstick]

Fascinating article by a 0.01%-er who's worried that it just won't last. It's hard to excerpt bits so just read the whole thing!

http://www.politico.com/magazine/story/ ... Page3.html

[Pointedstick]

I don't really know what I believe on a lot of subjects anymore. Everything seems so much more complex than I used to think.

I do think employers will automate away the jobs if labor gets more expensive, but that's sort of orthogonal to the point that the author is making. Fighting the minimum wage hike is sort of in the same boat as automating away the jobs if it gets passed; they're both attempts to fight having to pay real employed human beings more money. He seems to trying to convince people that this is the wrong attitude in the first place.

More so than a minimum wage hike, what I think the author wants to convince business owners of is that they should pay their employees more even if they aren't forced to, if not because they think that it will increase the wealth of their customers, but because if they don't, things may get ugly.

[barrett]

PS,

First off, I applaud the way you are often trying to see things from more than one angel.

I wonder about the math on the Walmart employees. According to the book The Wal-Mart Effect, if Wal-mart raised their minimum wage even by three bucks an hour, there would be no profit left. To do so would mean that they would have to raise their prices. Not a bad thing in my opinion anyway because of the way they beat down their suppliers. Sorry, getting off on a tangent there.

I wish this book were more recent (it's from 2006 and don't believe there's been an update) because it's got a lot of insightful data.

I have always felt that anyone working for eight hours a day should be able to put a humble roof over their heads, fill their bellies and have access to healthcare.

[Mountaineer]

I could support a higher minimum wage IF somehow taxes that go to welfare subsidies were reduced accordingly.  Get the government out of the middle with all the corresponding bureacracy waste.  It seems somewhat silly and really wrong to see a person in line at the supermarket checkout be short $2 on their "food card" and open their wallet, pull out a Ben Franklin from their wad of cash to pay the difference, then go out and get in their Lexus and drive off while smoking a fat one.  True story personally observed by a friend of mine in the last couple of weeks!

... Mountaineer

[Pointedstick]

I wonder about the math on the Walmart employees. According to the book The Wal-Mart Effect, if Wal-mart raised their minimum wage even by three bucks an hour, there would be no profit left.

Perhaps that helps to explain why there aren't any Wal-Marts in Seattle.

I think it would be illustrative to find out the effect of this policy. Have low-wage businesses in Seattle gone of of business? Have they turned to automation? Or have they stuck around and taken the hit to profits?

[hljockey]

On Drudge I saw that this was also a day of fast food workers protesting for a minimum wage of $15/hour.

Had to think about that for a moment.

This would mean that a two-parent family could make a very decent life for themselves even though neither one of them possessed any marketable skills just by both of them getting jobs at McDonald's.

This would surely mean that we had finally achieved the goals of "The Great Society", i.e., the end to poverty in our generation, would it not?

But right below that article on Drudge was another article about robots being taught to make hamburgers faster than humans.

Whoops!

Isn't reality a bitch?

[Kshartle]

I could support a higher minimum wage IF somehow taxes that go to welfare subsidies were reduced accordingly.  Get the government out of the middle with all the corresponding bureacracy waste.  It seems somewhat silly and really wrong to see a person in line at the supermarket checkout be short $2 on their "food card" and open their wallet, pull out a Ben Franklin from their wad of cash to pay the difference, then go out and get in their Lexus and drive off while smoking a fat one.  True story personally observed by a friend of mine in the last couple of weeks!

... Mountaineer

I have personally watched my sister buy snow crab legs and $12 jars of fancy olives with her food stamps.

When she saw the utter disgust on my face she informed me that everyone has a right to food. That is the gospel 

That was the last time I drove her to the grocery store. I took pictures of the cart because it was spilling over with soda and frozen meals.

I did try the olives, delicious. I didn't stick around for the crab legs. I couldn't take her babbling about Obama being the antichrist. Shit I can't stand the guy but he did just pay for your meal! You'd think you wouldn't declare he's the servant of Lucifer while dipping snow crab into garlic butter.

[Kshartle]

On Drudge I saw that this was also a day of fast food workers protesting for a minimum wage of $15/hour.

Had to think about that for a moment.

This would mean that a two-parent family could make a very decent life for themselves even though neither one of them possessed any marketable skills just by both of them getting jobs at McDonald's.

This would surely mean that we had finally achieved the goals of "The Great Society", i.e., the end to poverty in our generation, would it not?

But right below that article on Drudge was another article about robots being taught to make hamburgers faster than humans.

Whoops!

Isn't reality a bitch?

Hahaha.

Yeah I heard McDizzle is supporting a higher min wage. The CEO was an engineer at Raytheon (I think) and was hired by McDizzle years ago to help automate the process.

If they succeed in getting the government to raise the price floor on unskilled labor, the golden arches will be able to shed their workforce a lot faster then the competition and get more market share by only raising prices a fraction of what everyone else is forced to.

All the people who lose their jobs can just go on welfare, totally locking them in as good democrat voter.

All the young people who never get a starter job can just get student loans and go to school until they are old enough to get SS.

Wait what do you get if you're old and you never worked?

[Kshartle]

The guy who wrote this article should buy a McDonalds franchise and up the wages to $15, along with full benefits and sick time, holidays, day care, college tuition etc. He should prove how it will work.

He could call it the "Liberal Café". Now a Quarter Pounder with Cheese, fries and drink will be $20 but I'm sure all the good liberals will eat there right?

The "Liberal Café" would go under in a month. Not one of these liberals would eat there.

Maybe Obama would go there as a photo op. Maybe he would mandate some government agency buy breakfast and lunch there everyday so the taxpayers could foot the bill. Then he could point to the centrally planned success amidst the sea of free market failure.

[Kshartle]

Started reading the article, can't finish, so bad.

This guy says that rich people can't create as many jobs as poor people because and I quote "We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.”? I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good."

So this guy thinks jobs are created by spending money and that saving your money costs the economy. Holy Christ this is the level of economic nonsense I'd expect from Obama.

Did he not produce anything of value to earn all that money? The economy is better because of what he did to produce his income, not his enjoyment of the money he earned.

He thinks if he bought more pants and cars the economy would grow. In reality, if he and other rich people pissed all their money away on stuff they didn't want, all they would do is stimulate a boom in industries that couldn't be sustained once they were out of money. He would create a misallocation of resources, pushing people to leave more sustainable jobs and the result would be an eventual contraction and unemployment.

On the other hand if he has savings he can put it to good use by seeking out profitable investments. Profitable investments create more capital that stimulates productivity, making workers more valuable and lowering prices. It makes the economy better. Even if just puts the money in the bank it is now available to loan out to entrepreneurs.

He is either economically illiterate or just pandering to his audience. I don't know who his audience is so I can't say. Clearly they are economically illiterate though.

[Pointedstick]

The central question of our economic age almost seems to be, "what happens when labor isn't actually very important anymore?"

I actually agree with Kshartle and the Austrians on the subject of capital goods and automation. Clearly these are things that boost per-worker productivity and can have a price-lowering effect. It may be very economically efficient to replace ten workers with one machine and obsolete those ten jobs. But what happens to those workers?

A lot of people don't bother to even think about this. Others do, but tell themselves that these people will simply adjust, as they always have. They will find other jobs in industries that haven't been so automated yet. They will go to night schools and become robot repairmen. They will become artists selling custom iPhone cases to rich engineers. And so on.

But what if they don't? What if some of them can't? What if the fraction who can't rises over time as more and more sophisticated labor is rendered economically inefficient to perform by hand?

Intelligence, drive, creativity, motivation, and other generally beneficial traits are distributed along a bell curve. Some people are going to fall in the left-most quadrant of that curve for some of these traits. Some especially unfortunate people will fall in the left-most quadrant for many. What about them?

Now, one answer is, "who cares? This will all sort itself out naturally." And of course, that's true, because it always does. However, I wonder, along with the author, whether that natural solution doesn't involve extreme violence against the perceived bourgeois, or the CEOs, or the tech millionaires, or the engineers, or whoever else becomes a symbol of "the problem."

At a certain point, I wonder if this doesn't leave the realm of economic efficiency and enter the realm of self-preservation.

[Kshartle]

The central question of our economic age almost seems to be, "what happens when labor isn't actually very important anymore?"

Then we'll have wonderful lives. We'll have all the stuff we want and barely have to work for it.

Obviously this is a bit silly. We will always have unfulfilled desires. The idea that humans will cease being economically valuable to each only makes sense if you assume they'll all be educated in government schools 

In order for automation to render humans useless to each other humans would have to all be able to afford everything we want also. If I can't afford the stuff made by machines and there are lots of unemployed people then obviously they can go to work producing it cheaper than the machine and I'll buy it from them.

We have nothing whatsoever to fear from technological improvement. People calling for violence to prevent innovation are trying to hurt the poor, regardless of their good intentions.

Automation of farming has made food incredibly cheap. Machines have made nice homes cheap. Automated factories have made it possible for even very poor people to have automobiles, and phones and on and on and on.

Technological leaps improve the lives of the poor much more than the lives of the ultra wealthy.

Consider the driverless car. I know the screams are coming from the cab drivers when this replaces them. Ohhhh the humanity! The reality is now cab rides will be cheaper. Also, even middle class people will now effectively have a personal driver whereas before only the wealthy could. Think of all the valuable time saved!

Consider the robot maid. I know the screams will come from the maids when this replaces them. Ohhhh the humanity! The reality is now maid service will be cheaper. Also, even middle class people will now effectively have a personal maid whereas before only the wealthy could. Think of all the valuable time saved!

[Pointedstick]

While I generally agree with your post, Kshartle, I don't think you quite understood my point. You're talking about productivity and production. I'm talking about jobs and income.

Let's say 10% of the able-bodied adults are revealed to basically be slow-witted, ignorant dullards who really are not suited to much beyond flipping burgers or stocking shelves at Wal-Mart, such that when they are unemployed by machines, they stay unemployed because they are unable to adapt and find new employment.

How are these people going to earn the income necessary to enjoy the fruits of the labors of the machines that rendered their jobs obsolete? Where are they going to get the money to afford those cheap cab rides and robot maid services?



Do you accept the concept of the person who is unable to adapt to technological change and therefore becomes permanently unemployed? Or does this seem impossible to you? Because if these people don't exist, then we have nothing to fear from technological change, but if they do, then my worry isn't all just statist ludditism.

[Libertarian666]

While I generally agree with your post, Kshartle, I don't think you quite understood my point. You're talking about productivity and production. I'm talking about jobs and income.

Let's say 10% of the able-bodied adults are revealed to be basically be slow-witted, ignorant dullards who really are not suited to much beyond flipping burgers or stocking shelves at Wal-Mart, such that when they are unemployed by machines, they stay unemployed because they are unable to adapt and find new employment.

How are these people going to earn the income necessary to enjoy the fruits of the labors of the machines that rendered their jobs obsolete? Where are they going to get the money to afford those cheap cab rides and robot maid services?



Do you accept the concept of the person who is unable to adapt to technological change and therefore becomes permanently unemployed? Or does this seem impossible to you? Because if these people don't exist, then we have nothing to fear from technological change, but if they do, then my worry isn't all just statist ludditism.

I would be a lot more concerned about this if I knew of any time in history when this has been a problem. For example, farmers are now only about 1% of the population as compared with a majority just 150 years ago, and yet I don't see 50% unemployment. And the population is a lot higher as well. What did all those people do when there weren't millions of farming jobs?

Answer: they got other jobs that were now possible because of the decreasing cost and difficulty of obtaining food.

[moda0306]

I don't really know what I believe on a lot of subjects anymore. Everything seems so much more complex than I used to think.

+100

More so than a minimum wage hike, what I think the author wants to convince business owners of is that they should pay their employees more even if they aren't forced to, if not because they think that it will increase the wealth of their customers, but because if they don't, things may get ugly.

Exactly.  In today's climate, I suspect a minimum wage hike will be counter-productive, because it will engender even more ill-will toward the beneficiaries.

It was only a 1.5 to 2 generations ago that executives were paid single digit multiples of what a median worker is paid.  Now it is in the hundreds or thousands.  Why?  IMO, it is because greed became culturally acceptable.  And it is very easy for such a thing to spiral out of control (which it has).

Economies of scale and information abundance would also explain a lot of that.

[Pointedstick]

I would be a lot more concerned about this if I knew of any time in history when this has been a problem. For example, farmers are now only about 1% of the population as compared with a majority just 150 years ago, and yet I don't see 50% unemployment. And the population is a lot higher as well. What did all those people do when there weren't millions of farming jobs?

Answer: they got other jobs that were now possible because of the decreasing cost and difficulty of obtaining food.

Sure, a lot of those out-of-work farmers or potential farmers instead became machinists or auto workers or gas station night managers. But I'm willing to that some of them were not even suited for machining or auto-working or gas station night management, and instead went on some sort of welfare and checked out of the workforce entirely.

Maybe technological unemployment has actually been slowly becoming a problem over the past 100 years, but the growth of the welfare state has masked it, causing people to focus on welfare itself rather than the underlying socio-economic trend that drove its cultural acceptability.

If you include the people on welfare who are either able-bodied (or who have wrecked their own bodies through terrible decision-making, for that matter), the unemployment rate would look a lot higher. The payroll-to-population ratio captures this a bit better, and breaking it out by gender further refines it to remove the distorting impact of women joining the workforce:



The trend is pretty clear. More men not working. While this would be great if all of those non-working men are guys who have achieved ERE and are reaping the benefits of automation-induced low prices, something tells me the answer involves a lot more monthly checks from Uncle Sam and a lot less investment planning.

I mean, if you think about it, what we we have today is a system in which almost anybody can opt out of the workforce as long as they are willing to accept a low standard of living and a certain amount of humiliation and degradation if they venture outside of the social circles where welfare is appropriate.

[Kshartle]

While I generally agree with your post, Kshartle, I don't think you quite understood my point. You're talking about productivity and production. I'm talking about jobs and income.

Let's say 10% of the able-bodied adults are revealed to be basically be slow-witted, ignorant dullards who really are not suited to much beyond flipping burgers or stocking shelves at Wal-Mart, such that when they are unemployed by machines, they stay unemployed because they are unable to adapt and find new employment.

How are these people going to earn the income necessary to enjoy the fruits of the labors of the machines that rendered their jobs obsolete? Where are they going to get the money to afford those cheap cab rides and robot maid services?



Do you accept the concept of the person who is unable to adapt to technological change and therefore becomes permanently unemployed? Or does this seem impossible to you? Because if these people don't exist, then we have nothing to fear from technological change, but if they do, then my worry isn't all just statist ludditism.

I would be a lot more concerned about this if I knew of any time in history when this has been a problem. For example, farmers are now only about 1% of the population as compared with a majority just 150 years ago, and yet I don't see 50% unemployment. And the population is a lot higher as well. What did all those people do when there weren't millions of farming jobs?

Answer: they got other jobs that were now possible because of the decreasing cost and difficulty of obtaining food.

Precisely.

Don't worry guys. Smart people will figure out what to do with the dum dums to make them valuable, provided the government doesn't interfere to "help" the poor and mandate higher costs for unskilled labor.

New crappy jobs will be created to replace the burger flipping and shelf stocking. And people will whine on their drive to the crappy job while they pick up their cheaper automated burger from their self driving car after they leave their robotically cleaned house.

[Kshartle]

The trend is pretty clear. More men not working. While this would be great if all of those non-working men are guys who have achieved ERE and are reaping the benefits of automation-induced low prices, something tells me the answer involves a lot more monthly checks from Uncle Sam and a lot less investment planning.

Since the monthly checks are all just stolen money from the producers, it's clear that productivity increases have enabled the creation of the leisure class, as I like to refer to them.

[Libertarian666]

PS, I think you have the causation backwards. The rise of the welfare state has allowed people to check out of the workforce who would otherwise have done something productive. SSDI in particular has risen enormously in the past few years as people used it as a substitute welfare program in a sluggish economy produced by the various types of stimulus programs, which stimulate consumption but not production.

[WildAboutHarry]

[quote=Pointedstick]Sure, a lot of those out-of-work farmers or potential farmers instead became machinists or auto workers or gas station night managers. But I'm willing to that some of them were not even suited for machining or auto-working or gas station night management, and instead went on some sort of welfare and checked out of the workforce entirely.[/quote]

I suspect that this has been a general phenomenon for quite some time.  One learns to do some productive thing, and "progress" gradually renders those skills obsolete.  The typewriter repairman becomes the dot matrix printer repairmen who then becomes the laser printer repair person.  The younger you are the more likely it is that you will retrain (or, God forbid, get a real estate license!). 

So technological dislocations disproportionately dislodge doty workers.  This is probably good, since the cost of learning a new skill is likely not amortized in the aged.

Multi-generational households used to be the norm.  Think of the Joads.  Three generations, at least, plus cousins, extended family, hangers on, etc.  We have simply replaced the biological/social extended family with a state-sponsored extended family equivalent.

A fun thing for a weekend afternoon: use Google books and peruse the old issues of Popular Mechanics.  See how many Radio and TV repair training courses you can find in the magazine ads over the course of the 20th century.  What happened to all those repairmen?

[Kshartle]

the various types of stimulus programs, which stimulate consumption but not production.

Geeeeze Tech, Everyday I have to explain how this works to you.

Look, take all of your useless investments and sell them, they aren't doing anyone any good there. Take all that money and buy a bunch of T-shirts, fancy dinners, cars, make it rain at the Gentlemen's club etc. THAT will really get the economy going and stimulate production. Get that money in the hands of a lot of people so they can start passing it around, rather than just hoarding it!

Just read the article, he explains it all clearly. Ohhh and don't buy an egg McMuffin with it, McDonalds (whatever that means) is naughty. Go to the Liberal Café instead.

[Libertarian666]

the various types of stimulus programs, which stimulate consumption but not production.

Geeeeze Tech, Everyday I have to explain how this works to you.

Look, take all of your useless investments and sell them, they aren't doing anyone any good there. Take all that money and buy a bunch of T-shirts, fancy dinners, cars, make it rain at the Gentlemen's club etc. THAT will really get the economy going and stimulate production. Get that money in the hands of a lot of people so they can start passing it around, rather than just hoarding it!

Just read the article, he explains it all clearly. Ohhh and don't buy an egg McMuffin with it, McDonalds (whatever that means) is naughty. Go to the Liberal Café instead.

Yeah, I seem to have such trouble with a simple concept! I wonder if I'm coming down with something?

[Pointedstick]

the various types of stimulus programs, which stimulate consumption but not production.

Doesn't it go both ways? People can only consume what has been produced, but greater consumption spurs greater production to meet the demand. Right? Aren't they symbiotic?

[Kshartle]

the various types of stimulus programs, which stimulate consumption but not production.

Doesn't it go both ways? People can only consume what has been produced, but greater consumption spurs greater production to meet the demand. Right? Aren't they symbiotic?

It doesn't go both ways. Production creates demand. Nothing is demanded until it's produced. Prior to production it's just a desire. You can't trade for anything with your desires. You must do that with an exchange of value, something you produced or something someone else produced that you stole (this is how the government "stimulates" demand).

Purchasing power is created by production, not a printing press as a lot of people (Keynesians, maybe MR/MMT folks) foolishly think.

Everyone can look at their own industry and say "wow, if people are buying more of what we make then we'll make more". That's great. Unfortunately, if the buyers aren't producing more to pay for their extra purchases themselves then they have to cut back demand of something else. Real demand can't be stimulated over an entire economy by anything other than greater production. There is no way to short circuit the market by printing money or borrowing money to consume. All that will happen is FALSE demand will be stimulated. Once the money printing or borrowing to spend reaches it's limit, all that misallocation of resources will be exposed. Then the recession hits. Screwing with the economy has now resulted in us being poorer and having less of what we really wanted.

Browne explains this in his books from the 70s. I suggest everyone picking them up. They are actually a lot more interesting than "How the best laid plans...", in my opinion.

Trying to stimulate demand results in a weaker economy than you would otherwise get. Observe the US, Europe, Japan, etc. etc. etc.

Instead stimulate production. That means low taxes and low regulations. That would make the economy explode with growth. It's very difficult in a Democracy because everyone wants to vote for a living. Everyone thinks they can vote for someone else's stuff. It's a huge disincentive to produce anything of value when your neighbors can vote to take it from you.

***Bonus - Savings stimulate greater future production, again this is contrast to the widely accepted economic nonsense we hear and read (in this very article). When everything that's produced is consumed there is nothing left over for capitial increase. Capital is what makes labor more valuable (a shovel, a factory, etc). Capital growth can only come from underconsumption and savings, again it can't come from money printing.

[Libertarian666]

the various types of stimulus programs, which stimulate consumption but not production.

Doesn't it go both ways? People can only consume what has been produced, but greater consumption spurs greater production to meet the demand. Right? Aren't they symbiotic?

It doesn't go both ways. Production creates demand. Nothing is demanded until it's produced. Prior to production it's just a desire. You can't trade for anything with your desires. You must do that with an exchange of value, something you produced or something someone else produced that you stole (this is how the government "stimulates" demand).

Purchasing power is created by production, not a printing press as a lot of people (Keynesians, maybe MR/MMT folks) foolishly think.

Everyone can look at their own industry and say "wow, if people are buying more of what we make then we'll make more". That's great. Unfortunately, if the buyers aren't producing more to pay for their extra purchases themselves then they have to cut back demand of something else. Real demand can't be stimulated over an entire economy by anything other than greater production. There is no way to short circuit the market by printing money or borrowing money to consume. All that will happen is FALSE demand will be stimulated. Once the money printing or borrowing to spend reaches it's limit, all that misallocation of resources will be exposed. Then the recession hits. Screwing with the economy has now resulted in us being poorer and having less of what we really wanted.

Browne explains this in his books from the 70s. I suggest everyone picking them up. They are actually a lot more interesting than "How the best laid plans...", in my opinion.

Trying to stimulate demand results in a weaker economy than you would otherwise get. Observe the US, Europe, Japan, etc. etc. etc.

Instead stimulate production. That means low taxes and low regulations. That would make the economy explode with growth. It's very difficult in a Democracy because everyone wants to vote for a living. Everyone thinks they can vote for someone else's stuff. It's a huge disincentive to produce anything of value when your neighbors can vote to take it from you.

***Bonus - Savings stimulate greater future production, again this is contrast to the widely accepted economic nonsense we hear and read (in this very article). When everything that's produced is consumed there is nothing left over for capitial increase. Capital is what makes labor more valuable (a shovel, a factory, etc). Capital growth can only come from underconsumption and savings, again it can't come from money printing.

Right on all counts. Excellent exposition!