Labor Shortage & Unemployment Insurance

It certainly is a ridiculous claim now. It wasn’t a ridiculous claim back when they were adding $600 a week to everyone’s benefit, but it’s been long enough since they stopped the extra that there shouldn’t be any material impact from it on today’s labor market.

They probably didn’t stop it at exactly the right time, but given how government works, it wasn’t ridiculous timing either.

If the lowest decile’s wages double and nothing else changes, then they’ll be making more than the second & third & fourth lowest deciles, which consist of higher skilled workers. So in order to stay competitive, those employers will have to pay more too. So those folks would have to get raises… maybe not 100% … maybe only 90% for the second lowest decile and 80% for the next and 70% for the next. Then they’ll be making more than the people just above them so you’ve got to give them 50% raises, and so on. That’s going to lead to way more than 6.6% inflation.

You can reduce inequality by tinkering with wages, absolutely. But you cannot double the bottom and make no other changes.

Yes, although the further down you go the more generous the subsidies. If you’re trying to stay off Medicaid the sweet spot is just barely higher than the Medicaid cutoff. Then you can get a 100% subsidy for a silver plan, actually buy a silver plan for free, and use the supplemental benefits to essentially turn it into a gold plan… for free.

But your income has to be really low for that. Your assets can be high, but your income has to be really low.

Eh, the extra $600 ended at the end of 2020, the second stimulus was January 2021 and the third (most generous) was in March 2021.

There was a pretty steady uptick in labor force participation rates in 2021, especially after March. Not to pre-pandemic levels, mind you. I think a non-trivial number of families discovered that they like the advantages of having a SAH parent. But also a lot of folks decided that they needed to go back to work when they weren’t getting the rich unemployment benefits OR stimulus.

1 Like

I think it’s intuitive that if people can get money without working they won’t work. I think we devalue work because we don’t actually see how much work it takes to make everything happen. I think during the pandemic when we had an increase in spending and a decrease in working we saw how tender this equilibrium truly is. Humans produce work, they get paid for it, they buy other people’s work product. It’s one of the tenants of economics.

This is such a fundamental issue that is rarely even mentioned by our politicians. We should help poor people, yes. But benefits cliffs, especially in states that refused Medicare funding results in people not being able to afford to work and earn more. I don’t have a solution, I am not expert. It might cost way more than the benefits to try to means-test it on a graduated scale, and as a related concern, drug testing is a proven net loss.

IMO a good start would be giving basic healthcare to all.

1 Like

Wow, a reply on something I wrote 9 months ago. I had to re-read to get the context.

I was replying to a poster who said “So a lot of the gains that low-wage workers are going to have are going to be offset and then some by increased inflation.”

I wanted to put some number on “a lot”. As I said in my post, I was making some big assumptions.

Sure, if we doubled wages for everyone making less than $15 an hour, the tiers just above that would have to get higher. But, we could double the very bottom, but only do a 50% increase for those making $14.50, and then use the savings to do something for the next tier. And, it would take even more.

If you want to do better numbers (for 2019 data) go ahead. Maybe you’ll find it eventually increases costs by 15%. Okay, but the people who got the doubled wage in exchange for 15% higher prices are still way ahead. 85% of their raises were real spending power.

1 Like

Regarding ACA, the solution is that states should take the Medicaid expansion. They don’t, and the SC says the federal gov’t can’t force them, and that makes life harder in those states.

In general, design policies without benefit cliffs. Twig seems to have the numbers. I’m guessing the medical expense step from an income that is just below the Medicaid cutoff to just above is relatively small. Most people aren’t looking at $1 below vs. $1 above. It’s not a huge public policy issue if those few stay on the low side.

I added some words to your post. I think they are important words.

I’m not sure where you are going with the rest of the post.

1 Like

D’oh! Sometimes when stuff pops up in my feed I fail to notice how stale it is. This is one of those times.

Eh, I think it would be a LOT more than 15%. Especially on stuff like food and energy that people will buy no matter what.

Anecdotally, before the pandemic I would buy Barilla pasta when it was on sale for $1, which would happen both at Target and the local grocery store with some frequency. I haven’t been able to find it for less than $1.76 in a long time. It’s $1.89 at Target, $1.84 at Walmart, and $1.79 at the local grocery store, which is where I saw the $1.76 price maybe a month or two ago… possibly for the last time.

That happened in about 2.5 years without doubling wages. I think food could easily go up well over 100% if you doubled wages.

My household is in an income bracket where we can afford a 76% increase in the cost of pasta, but I think your 15% is off by orders of magnitude.

The increase in the price of your Barilla pasta has virtually nothing to do with the wages of low skilled workers. Pasta production is heavily automated from the time the farmer plows the field until the time it appears on your grocer’s shelf. (In fact, the biggest low wage worker contribution may be the stocker who puts it on the shelf, what do you suppose that works out to for one box of pasta?)

Especially on stuff like food and energy

The cost of living includes the cost of everything we buy, not just a couple categories.
And, energy costs are not subject to wages of low wage workers. Another supply chain that is extremely automated.

Doubled wages for low income workers?

I showed you how I did the math. I think it is your turn.

1 Like

I would replace the word “just” with the word “almost”. People will take a pay cut to not work. They might not be able to afford a big pay cut, but they can probably take a small one simply because their expenses are also going down.

Yes, but food and energy make up a bigger percentage of low income expenditures.

1 Like

A true statement, but why does it matter?

You said food prices would go up 100% if low income workers’ pay doubled. I pointed out the the food product you picked has virtually no dependency on low wage workers. I also pointed out that energy has virtually no dependency on low wage workers.

The CES has distributions of spending for households with various incomes. Even lower income households spend most of their money on stuff besides food.

1 Like

Barilla had record profits in 2021.

I’m guessing a lot of companies did. It’s not just pasta, that’s just an example. Everything is way up.

With all that profit it makes you wonder if they really needed to raise prices. Maybe you’re just being pasta-gouged.

1 Like

They raised prices because they could. If your product is flying off the shelf you raise prices regardless of if you need to or not.

1 Like

I was listening to NPR about this actually. It’s absolutely true that companies have been making record profits and CEOs have been caught publicly and privately discussing that they’re using COVID to raise prices higher than they need.

Apparently there are rumblings about legislation to disallow this “mini price gouging”. It’s not $500 for a case of water but even with a good job and no debt I’m feeling some squeeze. If I was paycheck to paycheck I’d be on Ramen and beans.

1 Like

Yep. The car business is normally volume driven. Dealers have lots of overhead, they need volume to cover it. They sold noticeably fewer cars in 2021 than they did in 2019, but had record profits. What happened? They have contractual arrangements that gave them access to something that is supply constrained. They can charge a premium and they did.

That has nothing to do with wages of low wage employees.

1 Like