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Old 02-09-2014, 10:35 AM   #61
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Interesting. Would this imply that countries with government supplied heath care are already "suffering" this side effect?
Not really, since in those countries how much one w@rks generally does not affect one's "universal" HC benefit. Under ACA "cliffs", if one w@rks a bit too much they can lose big $$ (HI subsidy).
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Old 02-09-2014, 10:53 AM   #62
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Those lower wages mean lower spending, which means lower revenue for businesses, which lowers demand for labor as well.
Even if we accept the demand-side economics argument (it's definitely losing favor: the old "Henry Ford paid his workers more so they could buy his cars" claptrap is dead and buried), it doesn't apply to this case because the same amount of raw dollars is being paid to workers, it's just being paid to a larger number of them when wages are lower and more people are hired to do formerly uneconomic labor. Fans of Keynes should cheer about this, because lower income workers spend a higher portion of their wages on goods and services (higher-income workers tend to invest or save their earnings to a larger degree). By their logic, if we want to drive up demand for goods, more workers earning less is better than fewer workers earning more.
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Old 02-09-2014, 11:03 AM   #63
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But employers like job lock.
Absolutely. Traditionally, they have been able to provide HI and pensions in a special, preferential market that was not open to the employees as individuals, and if employees wanted to benefit from that they were locked in to that employer. So, pay was lower than it would otherwise have been.
Reducing the disparity between these preferential markets and what the employee can buy on their own (e.g. through HI exchanges, and with IRAs and other programs to allow "personal pensions") is a good thing for the efficiency of the US labor market and for national productivity.
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Old 02-09-2014, 12:50 PM   #64
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Not really, since in those countries how much one w@rks generally does not affect one's "universal" HC benefit. Under ACA "cliffs", if one w@rks a bit too much they can lose big $$ (HI subsidy).
Thanks for 'splainin' it. I see those cliffs getting rounded off in the future.
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Old 02-09-2014, 04:16 PM   #65
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Thanks for 'splainin' it. I see those cliffs getting rounded off in the future.
Sure hope you're right. And not just the 'cliffs' of ACA either, but for all gov't assistance programs. No one should loose ALL their assistance for earning just $1 more than some arbitrary & absolute threshold.
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Old 02-09-2014, 04:29 PM   #66
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Sure hope you're right. And not just the 'cliffs' of ACA either, but for all gov't assistance programs. No one should loose ALL their assistance for earning just $1 more than some arbitrary & absolute threshold.
I agree. This might be something that a functioning legislature could remedy.
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Old 02-09-2014, 04:31 PM   #67
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I think the people that are declaring demand-side economics dead and buried are the same people telling us in 2008 that the Fed printing so much money would lead to runaway inflation, and that budget cuts in the EU countries would improve their situation.

You're making a huge assumption that the same amount of raw dollars would be paid to workers. That assumes that enough additional jobs would be created to counteract the lowered pay of the existing workforce. Will a 20% drop in overall labor costs produce 25% more jobs? I doubt it. How much more fast food can people really eat?

Look at what is going on with corporate profits versus labor costs--

Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low - Business Insider

We're seeing lower labor costs. That doesn't seem to be translating into robust job growth though. For the most part, it seems to be translating into higher profits on flat revenues, with little increased demand for labor.


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Even if we accept the demand-side economics argument (it's definitely losing favor: the old "Henry Ford paid his workers more so they could buy his cars" claptrap is dead and buried), it doesn't apply to this case because the same amount of raw dollars is being paid to workers, it's just being paid to a larger number of them when wages are lower and more people are hired to do formerly uneconomic labor. Fans of Keynes should cheer about this, because lower income workers spend a higher portion of their wages on goods and services (higher-income workers tend to invest or save their earnings to a larger degree). By their logic, if we want to drive up demand for goods, more workers earning less is better than fewer workers earning more.
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Old 02-09-2014, 05:41 PM   #68
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That assumes that enough additional jobs would be created to counteract the lowered pay of the existing workforce. Will a 20% drop in overall labor costs produce 25% more jobs? I doubt it.
I doubt it, too, obviously. All I wrote was that lower labor costs result in more jobs, and I would love to hear a reasoned argument to the contrary (or for the logical extension--that higher labor costs result in more jobs. Ain't gonna happen.)

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We're seeing lower labor costs. That doesn't seem to be translating into robust job growth though.
Lots of things affect the number of jobs in the economy, there's no reason to think lower labor costs can trump everything else. We don't know how many additional jobs we would have lost if our labor costs had been higher.
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Old 02-09-2014, 05:44 PM   #69
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I agree. This might be something that a functioning legislature could remedy.
Good one......I'm still smiling.....
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Old 02-09-2014, 07:00 PM   #70
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That's not all you wrote. You wrote "the same amount of raw dollars is being paid to workers, it's just being paid to a larger number of them when wages are lower and more people are hired to do formerly uneconomic labor".

I was trying to show that it will almost certainly be a lower number of raw dollars, which will make the aggregate demand problem worse, not better.

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I doubt it, too, obviously. All I wrote was that lower labor costs result in more jobs, and I would love to hear a reasoned argument to the contrary (or for the logical extension--that higher labor costs result in more jobs. Ain't gonna happen.)
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Old 02-09-2014, 08:56 PM   #71
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I agree. This might be something that a functioning legislature could remedy.
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Old 02-09-2014, 11:13 PM   #72
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Good one......I'm still smiling.....
Not really that far-fetched. Have some faith. They just passed a Farm Bill that was a compromise. Both sides, plus Obama, seem to agree that ACA needs some tweaks. Smoothing the cliffs might just be something all could agree on- albeit for different reasons.
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