Thread: How the minimum wage works

Originally Posted by Shek

Thanks! I'll post more later - work is staring me in the face (plus it's a good idea to do taxes by tomorrow ).

Chances are you're not expecting much of a refund.)

Originally Posted by JAD_333

Chances are you're not expecting much of a refund.)

My wife does the federal taxes. I do my state taxes and since Illinois doesn't tax military income, I generally pay $0 in state taxes.

Originally Posted by ba1025

Now on to another matter
{}In terms of numbers/stats, the study that you don't like comes directly from the Current Population Survey, which is the survey from which the poverty rates are calculated. In other words, if you wish to invalidate the study on grounds of the statistical base, then you invalidate your source for poverty numbers. Now, the 17% predicted poverty rate based on the demographical changes over the course of decades is just that - a prediction. Stated another way, if family structures hadn't changed, then the poverty rate would be up to 1/3 less today. There's room to quibble on the magnitude, but the direction is clear. Thus, the rising tide (the growing economy) has lifted all boats, and taking stats completely at face value without looking deeper can mislead conclusions at times. ({} the stats were collected and looked at 'family" unit earnings. it didn't differentiate between one and two headed households. your study IMPORTS one figure the divorce rate but fails to factor in the growth of two income families which had a countering effect. So yeah I do think your source is biased. I also think your logic is suspect. You point to average net wealth increase to counter the claim of the middle class slipping. If you add up the total wealth in the nation and divide it by the population then yeah the average looks good in a normalized distribution. It completely fails to account for wealth concentration at the upper levels. I agreed total wealth increased but my whole point was that it is more concentrated and the middle class has lagged behind.

Since you had such a marathon post, I'm just going to knock down targets in bite sized chunks.

First, you state that the study based on the CPS statistics doesn't account for the growth of two income families. This is false. It does, as it explicitly examines women's labor force participation rates throughout the paper (increasing women's labor force participation would account for dual income families). For example, in one of their regressions, they found that it wasn't of practical significance across the entire data set (1968-2004).

Originally Posted by page 21

Poverty rates may have been held down by increasing numbers of women entering the workforce. To examine this issue, we added to the basic regressions an indicator for the fraction of women between the ages of 25 and 64 who are working in each division-year cell. This did not, however, substantially change the regression coefficients shown in Table 4, or the predictions summarized in Figure 7.

When examined during a more restricted time period (look at fig 8), you'll find that the predicted decrease due to women's labor force participation is 2%. This is versus a predicted increase due to changing family structure of 4% over the same time period (look at fig 9). Thus, the impact of changing family structure is greater than the impact of the increase of dual income families.

Next, you beat up another strawman by claiming that I equate average with median vis a vis net wealth in the US. You are clearly referring to this post, How the minimum wage works, and if you read my post, you'll see that I first refer to the median family (which by definition, as the middle family in the US is middle class):

Originally Posted by Shek

Over the past two decades, net worth (assets minus liabilities) for the median family is up

The quote above is followed by a graphic which refers to specifically to net worth. Then, to seal the deal that the standard of living is not bought through simply increasing our debt (which implies a falling net worth), I refer to another graphic that looks at total net wealth of households. You will notice that I explicitly state that this isn't a measure of the median:

Originally Posted by Shek

Here's another depiction of net worth in the aggregate (i.e., not at the median level, or 50th percentile).

So, I do look at the median net worth. If you don't like the 1989-2004 look, then we can provide some dates in the interim. You'll see that median net worth has increased. In other words, middle class families are better off.

http://www.census.gov/compendia/stat...es/08s0699.pdf

Lastly, one should be careful not to confuse income statistics with wealth statistics or confuse wealth statistics with income mobility (i.e., inequality is not the same as inmobility) for the United States. Why? Because income mobility is alive and kicking. For every Paris Hilton out there, there are four others who earned their right to be called a millionaire. I'm sure that everyone could come up with examples: Bill Gates, LeBron James, Larry Page, Sergey Brin, etc., etc. etc.

Here are two opeds on income mobility that cite a Treasury report that is the third link.

The Wall Street Journal Online - Featured Article
Income Mobility
http://www.treas.gov/offices/tax-pol...3-08revise.pdf

The Wall Street Journal Online - Featured Article
How do you account for the concentration of wealth if income mobility is this fluid?
http://www.census.gov/compendia/stat...es/08s0699.pdf
I would agree there was an increse in net wealth in the 90s. I believe this graphic shows how it began to flatten out. I can't imagine in a time of rampant forclosures 4 years later this number will of risen. Do you think it has risen since then? Based on what economic indicater? It cant be homevalues with the record forclosures can it? Wouldnt record forclosures indicate a loss of wealth in record numbers? The only one I ever saw go bankrupt and come out a millionaire was Ken Lay...

in 1995 the median was 26% of the mean in 2004 it was 20%...doesnt your Census graphic make my point? The creation of new wealth has been highly skewed toward the wealthy hence we have the highest concentration of wealth since the Great Depression. I dont care what the wall street Journal says your earlier graphic showed total compensation was flat.

Image:Households vs Individuals Income.png - Wikipedia, the free encyclopedia
I'd prefer that be a bell curve

Anecdotally, a nice story but it doesn't reflect the results of an increase statistically. The amount of labor needed to perform a task is unaffected by wages. I would argue her hours were cut by the negative economic consequences of our massive exportation of wealth through both trade and budget deficits as well as the home financing debacle which had nothing to do with Minimum wage workers. I think they were the only ones not qualifing for hi rate mortgages in 2006 In point of fact our minimum wage has effectively been cut dramatically the last 25 years to pre 1948 levels. It is 30% lower when inflation adjusted than it was at it's height.
U.S. Minimum Wage History

Also the states that still cling to the federal level ares some of the states with the highest percentage of people collecting food stamps / federal assistance. They are also the states recieving much more in federal tax dollars than they pay in taxes. Is that all anecdotal or is it statistically significant? That hardly makes for a real world example of the success of maintaining it. The fact the Federal government has lagged so far behind in this area that much of the country took it upon itself makes any economic analysis of the effects on jobs on a national level kind of thin since the economic engines of the nation stepped forward long before the feds did. It really is about raising the wages of the poorest in the poorest states at this point.

Originally Posted by Shek

I don't know enough about how the Fed puts together its flow of funds numbers to be able to comment on the methodologies and which number may be closer to the truth, but the sheer difference between the two numbers is quite stark.

I can't buy it. Financing $200k the amortization schedule shows payments for 25 years to reach 70% ownership. Shall we conclude that the vast majority of homeowners purchased their homes more than 20 years ago, or that the vast majority of homeowners have doubled-down on payments?

I think their methodology was flawed, as you wouldn't just randomly select homes, you'd randomly select homes from certain zip codes so that you have a mix of older and newer homes.

I think I'll go with the Federal Reserve's data.

Originally Posted by Zemco

I can't buy it. Financing $200k the amortization schedule shows payments for 25 years to reach 70% ownership. Shall we conclude that the vast majority of homeowners purchased their homes more than 20 years ago, or that the vast majority of homeowners have doubled-down on payments?

I think their methodology was flawed, as you wouldn't just randomly select homes, you'd randomly select homes from certain zip codes so that you have a mix of older and newer homes.

I think I'll go with the Federal Reserve's data.

Having read a different article, National Survey Finds Homeowner Situation Not As Bleak As Reports Indicate, I can now state that the Fed numbers and these numbers are apples and oranges. The quoted Fed numbers only includes homeowners with outstanding mortgages. In other words, it understates the equity share that homeowners have because it doesn't account for homeowners that own their homes outright.

Next, your assumption in your example is that no one ever puts money down. Wrong prima facie.

Lastly, their methodology isn't wrong. You're trying to refer to a two stage-design where you first stratify your sample frame and then conduct random sampling within each stratum. This is more efficient than simple random sampling (SRS), meaning that you can use fewer observations to get at the same precision as a larger SRS, or you can use the same number of observations and get a more precise estimate. The key is that your strata are homogeneous. However, you propose using zip codes as your means of stratification. You don't have good homogeneity within zip codes such that you are really gaining efficiency. Instead, this proposal is more along the lines of a two stage-design where you identify clusters and then random sample within those clusters. This is less efficient than SRS, meaning that you require more observations to get at the same precision, or with the same number of observations, you have less precision.

In the end, with 3500 observations, there results should be fairly precision (not to mention that it benchmarks decently against the 2004 Survey of Consumer Finance conducted by the Fed (the 2007 survey has passed, but it takes about 18 months or so for the Fed to pull the data all together and publish it and the report that goes with it).

Originally Posted by Shek

Having read a different article, National Survey Finds Homeowner Situation Not As Bleak As Reports Indicate, I can now state that the Fed numbers and these numbers are apples and oranges. The quoted Fed numbers only includes homeowners with outstanding mortgages. In other words, it understates the equity share that homeowners have because it doesn't account for homeowners that own their homes outright.

Next, your assumption in your example is that no one ever puts money down. Wrong prima facie.

Lastly, their methodology isn't wrong. You're trying to refer to a two stage-design where you first stratify your sample frame and then conduct random sampling within each stratum. This is more efficient than simple random sampling (SRS), meaning that you can use fewer observations to get at the same precision as a larger SRS, or you can use the same number of observations and get a more precise estimate. The key is that your strata are homogeneous. However, you propose using zip codes as your means of stratification. You don't have good homogeneity within zip codes such that you are really gaining efficiency. Instead, this proposal is more along the lines of a two stage-design where you identify clusters and then random sample within those clusters. This is less efficient than SRS, meaning that you require more observations to get at the same precision, or with the same number of observations, you have less precision.

In the end, with 3500 observations, there results should be fairly precision (not to mention that it benchmarks decently against the 2004 Survey of Consumer Finance conducted by the Fed (the 2007 survey has passed, but it takes about 18 months or so for the Fed to pull the data all together and publish it and the report that goes with it).

The previous Fed numbers used the same criteria as the current. No matter how you look at it the rates of equity of those with mortgages is falling. I will grant you your point though because otherwise you will rationalize away any statistics I put up that disagree with your world view. I have not once posted a statistic you couldn't explain away. If i was using MOVE.com as a source I could understand but the census, the fed, WHO, OECD come on man you wonder why your relatives wont talk to you about unions??? it's because your belief system is as rigid as any religious dogma I have ever encountered and equally capable of explaining away any physical evidence that contradicts it.i am not trying to insult you. Tell me something you've changed your mind in which the impetus of change came from someone you hadn't previously agreed with. when were you last wrong on this board?

I was wrong about unions not being in part to blame for bad workers keeping their jobs and in fact stated the opposite of that then switched up in this thread. you have thousands of posts. if you haven't been wrong have you been closed minded? I thought I was a pit bull...you are the Mother of all Pitbulls

Originally Posted by ba1025

The previous Fed numbers used the same criteria as the current. No matter how you look at it the rates of equity of those with mortgages is falling. I will grant you your point though because otherwise you will rationalize away any statistics I put up that disagree with your world view. I have not once posted a statistic you couldn't explain away. If i was using MOVE.com as a source I could understand but the census, the fed, WHO, OECD

Who the statistic comes from is not the end all, be all. This is the appeal to authority fallacy. Wher it comes from is only the beginning, and in fact, I don't place as much weight on who reports it. A statistic from a published paper doesn't change whether it's reported by the NYT or NYPost or the WaPo or WaTimes, etc. As an example, you've quoted the NYT as a biased sourced. Putting on the Iraq lens, I'd say that the NYT has had some of the best reporting across all media, with Burns and Gordon having some fantastic journalism. I can also say that some of the worst reporting also turned out to be from the NYT, and specifically, from Judith Miller. Of course, that was in favor of the conservative position, and the liberal position, which is the exact opposite of what one would predict. Instead of looking at the surface, i.e., it was printed in the NYT, it's better to dig deeper. Heck, on economics, the NYT has guest columnists across the entire spectrum, from Mankiw to Cowan to Frank.

Instead, I place the emphasis on what you can and cannot glean from the statistic. For example, the Fed stat you cite started out as telling us that home equity percentages are decreasing. My questioning eventually led to finding out that the Fed stat refers only to those with mortgages. I noticed that you used very precise language in this post reflecting that. So, because it doesn't take into account all homeowners, we can't cite with certainty what is happening to the overall equity percentage, just as we couldn't use it to cite what is happening to overall wealth (remember, I can take out a mortgage to buy other assets that contribute to net wealth).

My LeBron James example looking at mean vs. median and the impact that an outlier can have is another example of where you need to look deeper than the surface of a statistic to determine what really might be going on. If you're not a basketball fan, and you want an even bigger example, then use the co-founders of Google that are worth approximately $35 billion now, but were among the poorest a little over a decade ago. The illustration is clear, i.e., strong income mobility can have a large impact on static snapshots of wealth and income inequality, and it tells a much different story than the standard rhetoric of the "rich are just getting richer", which implies little to no mobility.

This questioning stems both from my economics training, where we can't use controlled experiments and instead much use natural experiments and then determine what can and can't be inferred, and from being in a profession where you have to be careful what the metrics "tell" you. For example, Westmoreland thought we were winning Vietnam because we were attriting the NLF/PAVN at a 10:1 rate. Ooops, the computer didn't take into account that Giap stated that if he could maintain a 1:10 rate, he'd win.

Originally Posted by ba1025

come on man you wonder why your relatives wont talk to you about unions??? it's because your belief system is as rigid as any religious dogma I have ever encountered and equally capable of explaining away any physical evidence that contradicts it.i am not trying to insult you.

You should at least get people straight. Your reference to union relatives is actual directed at 7thsfsniper. I've never once posted anything about having relatives.

My belief in questioning what you can and cannot squeeze out of statistics is quite strong. This is not the same thing as explaining away evidence - it is determining what the evidence can or cannot explain.

Originally Posted by ba1025

Tell me something you've changed your mind in which the impetus of change came from someone you hadn't previously agreed with. when were you last wrong on this board?

I'm wrong on this board and try to openly acknowledge it. However, you haven't provided much of anything that has swayed me. This is because you don't source your material well, and when I ask you some pretty direct questions, you just blow on by them. I try my best to lay out my logic so that it's pretty transparent how I get from A to Z. I source my stuff and caveat it as I see it, providing links so that it can be examined and to demonstrate that I'm not trying to cherry pick stuff. I'm happy to be challenged, and happy to be corrected, but you can't talk past someone and not address points if you want to change thinking.

Originally Posted by ba1025

I was wrong about unions not being in part to blame for bad workers keeping their jobs and in fact stated the opposite of that then switched up in this thread. you have thousands of posts. if you haven't been wrong have you been closed minded? I thought I was a pit bull...you are the Mother of all Pitbulls

You infer too much from my posts most of the time, i.e., develop too many strawmen. In fact, there's one in this portion of your post.

My positions are usually pretty nuanced, and I'm careful to caveat what I am and am not getting at. If I'm talking about something that I'm not fully up to speed on (e.g., the universal health care thread), then I will only contribute on the margin.

I have a question here for Americans,

As an Aussie we have a minimum wage of $15 or so an hour (about $13US) government health care for all, a functioning education system and a generally much better standard of living.

Why do Americans not demand better, the US is a much wealthier country than Australia yet the lowest paid workers suffer unbelievably compared to ours.

I have thought many times that if they where to drop the wages and benefits in Australia to the level of the United States we would hang our leaders on lamp posts

And i dont accept the 'we cant afford it' line, if Australia can, America can

Originally Posted by chakos

Why do Americans not demand better, the US is a much wealthier country than Australia yet the lowest paid workers suffer unbelievably compared to ours.

Think about it in the other direction. The US is wealthier because we a smaller wage floor. One way to think about it is that it's easier to start up a small business. Many will fail, but some that succeed and make it big may have never been started if wage costs were double. Also, the biggest group working at the minimum wage is teenagers.

Well I doubt they would agree with you

http://www.nytimes.com/2008/04/20/bu...=1&oref=slogin

Originally Posted by chakos

I have a question here for Americans,

As an Aussie we have a minimum wage of $15 or so an hour (about $13US) government health care for all, a functioning education system and a generally much better standard of living.

Why do Americans not demand better, the US is a much wealthier country than Australia yet the lowest paid workers suffer unbelievably compared to ours.

I have thought many times that if they where to drop the wages and benefits in Australia to the level of the United States we would hang our leaders on lamp posts

And i dont accept the 'we cant afford it' line, if Australia can, America can

We simply don't think what you describe is "better".

-dale

Originally Posted by chakos

I have a question here for Americans,

As an Aussie we have a minimum wage of $15 or so an hour (about $13US) government health care for all, a functioning education system and a generally much better standard of living.

Why do Americans not demand better, the US is a much wealthier country than Australia yet the lowest paid workers suffer unbelievably compared to ours.

I have thought many times that if they where to drop the wages and benefits in Australia to the level of the United States we would hang our leaders on lamp posts

And i dont accept the 'we cant afford it' line, if Australia can, America can

What is your personal income tax rate and what is your corporate tax rate?