Something you should know about pizza delivery

[timtofly]

You answered your own question. We don't make policy based on "good for the economy". We make policy based on politics. Read above for arguments, political ones, arguing that some jobs shouldn't pay a living wage even if society demands those jobs be filled.

When I took Reich's class almost 3 years ago he was the first prof I had to show the paper that a minimum wage increase can increase employment, but he wasn't the last. I've argued it a bunch of times on this site and don't feel like repeating it all. I'd rather talk about raising wages in general.

More important is that you are asserting it causes inflation. But that's only if we push past full employment, which a function dependent on many variables but you can safely assume we're so far from full employment at this point in the USA/EU demand-side inflation is basically a myth. Notice the productivity-wage divergence graph above. That's a clue that massive wage growth wouldn't push aggregate demand beyond the limits of aggregate supply.



Well, just do it now. Or do it at the start of the next recession. At the beginning of recessions when budget deficits get super wide is when private sector savings go very high. You might remember all the cash US corporations were sitting on back in 2011 was coincidentally after a couple years of large deficits. We'd need another stimulus first to do it now, but we're so far from full employment we can afford another (big) stimulus.

Another way of putting it is, have an appropriately timed government stimulus first, like when we're below full employment, then mandate wage increases. It's a super winning, depression-busting combo.

I'm not sure what you mean by saying "a government inflates an economy". Do you mean inflates prices (inflation) or do you mean increases output? Usually "economy" means "output" which isn't something the word inflation is generally for.

Also I'm not sure what your point is about local businesses. More people buy flowers from the flower shop when times are good. Likewise, a small time plastics manufacturer from Missouri will get more orders from his clients around the country when his clients are selling more of their product that he helps construct.

The government involvement will not work if corporations do not hire, but sit on the money. That is why trickle down failed. That money went to foreign interest and left the local economy high and dry. You have to keep people working at a living wage, and in doing so give them the confidence to return that money into a local thriving economy where the lower skilled jobs are held by the proper introductory personal and the skilled jobs are available for advancement. If all the government stimulus just goes to foreign or outside the local economy interest, then it is just throwing money away. Proper inflation is where the demand and labor drive the prices up equally and money is flowing to all local interest equally and the surplus trickles to foreign interest.

 

[Dralix]

Businessmen with profits love their profits and hate to see them lower. So they are just going to raise prices again and nothing will change.

That assumes that they can raise their prices. And in many cases they cannot.

Prices are constrained by the market.

JoanK's point about profits is entirely correct though. Companies exist to make money, and they aren't about to just accept a wage increase that will result in lower profits. So what they'll do is increase revenues and/or lower expenses. So if they can't raise prices, they'll cut costs. There are lots of ways to cut costs, but a pretty popular one is by reducing head count. I'm not saying it's right, I'm saying it's reality.

 

[Hygro]

I'd hope so. I mean, I know really little about economy, but there go my two cents.

They were a good pair of cents, though, so I appreciated the point you were making.

The government involvement will not work if corporations do not hire, but sit on the money. That is why trickle down failed. That money went to foreign interest and left the local economy high and dry. You have to keep people working at a living wage, and in doing so give them the confidence to return that money into a local thriving economy where the lower skilled jobs are held by the proper introductory personal and the skilled jobs are available for advancement. If all the government stimulus just goes to foreign or outside the local economy interest, then it is just throwing money away. Proper inflation is where the demand and labor drive the prices up equally and money is flowing to all local interest equally and the surplus trickles to foreign interest.

The corporations sit on the money only if there isn't a reason to invest it--i.e. insufficient aggregate demand. Once there are customers with some more dollars in their bank accounts they are going to try to get product out to those customers, which means investing in product which means paying people for that investment.

Btw dollars that leave the US borders are not a problem. The foreign dollar holders are going to use that money for a few purposes but ultimately they almost all go back towards boosting our economy, either by using those dollars to buy our exports stimulating domestic demand or by holding reserves giving us better terms of trade for their real goods. For some countries that's not helpful but it's win-win for America.

 

[Hygro]

JoanK's point about profits is entirely correct though. Companies exist to make money, and they aren't about to just accept a wage increase that will result in lower profits. So what they'll do is increase revenues and/or lower expenses. So if they can't raise prices, they'll cut costs. There are lots of ways to cut costs, but a pretty popular one is by reducing head count. I'm not saying it's right, I'm saying it's reality.

As I already wrote, a general wage increase means businesses in aggregate are selling more product as more people have more money than they are paying in higher wages. And to service the greater number of costumers, they're incentivized to hire more people.

 

[timtofly]

They were a good pair of cents, though, so I appreciated the point you were making.
The corporations sit on the money only if there isn't a reason to invest it--i.e. insufficient aggregate demand. Once there are customers with some more dollars in their bank accounts they are going to try to get product out to those customers, which means investing in product which means paying people for that investment.

Btw dollars that leave the US borders are not a problem. The foreign dollar holders are going to use that money for a few purposes but ultimately they almost all go back towards boosting our economy, either by using those dollars to buy our exports stimulating domestic demand or by holding reserves giving us better terms of trade for their real goods. For some countries that's not helpful but it's win-win for America.

If the foreign interest part is such a win-win, why is our employment rate still high? I am not ruling it out. I am saying that it went way overboard and the local economy paid the price. I do not think that the "pizza delivery" guy is to blame for the greed of all the parties involved that left his position little better than a slave. If one chooses that as life's calling then they will cut back in other areas. But if there is no other advanced job available, and one is forced to remain a slave, then we have a problem somewhere.

 

[Hygro]

If the foreign interest part is such a win-win, why is our employment rate still high? I am not ruling it out. I am saying that it went way overboard and the local economy paid the price. I do not think that the "pizza delivery" guy is to blame for the greed of all the parties involved that left his position little better than a slave. If one chooses that as life's calling then they will cut back in other areas. But if there is no other advanced job available, and one is forced to remain a slave, then we have a problem somewhere.

Are you asserting that our stimulus money went overseas or are you asserting that our current account deficit (aka trade deficit, buying more than we sell) is reflected in our budget deficit? Because those are two very different things.

 

[Cutlass]

If the foreign interest part is such a win-win, why is our employment rate still high? I am not ruling it out. I am saying that it went way overboard and the local economy paid the price. I do not think that the "pizza delivery" guy is to blame for the greed of all the parties involved that left his position little better than a slave. If one chooses that as life's calling then they will cut back in other areas. But if there is no other advanced job available, and one is forced to remain a slave, then we have a problem somewhere.

The problem is in 2 parts: 1) Most people see economics as a zero-sum-game. That is, in order for them to win, someone else has to lose. It's not true, market economics is not zero-sum. But many people can only see that far. And so they try to make themselves better off at the expense of others. Up to and including trying to get the government to enact policies which have the effect of making the economy a zero-sum-game. For example, deregulation, 'end the Fed' and supply side economics. 2) Most people are not looking at the economy, but rather only their little portion of it. And so cannot see that what benefits the whole also benefits themselves, because in the short run they either do not see any benefit themselves, or they see some cost to themselves that they cannot see the benefit on the other end of. For example, 'cut taxes cut entitlements', environmental regulations, decent wages for other people.

 

[Hygro]

The problem is in 2 parts: 1) Most people see economics as a zero-sum-game. That is, in order for them to win, someone else has to lose. It's not true, market economics is not zero-sum. But many people can only see that far. And so they try to make themselves better off at the expense of others. Up to and including trying to get the government to enact policies which have the effect of making the economy a zero-sum-game. For example, deregulation, 'end the Fed' and supply side economics. 2) Most people are not looking at the economy, but rather only their little portion of it. And so cannot see that what benefits the whole also benefits themselves, because in the short run they either do not see any benefit themselves, or they see some cost to themselves that they cannot see the benefit on the other end of. For example, 'cut taxes cut entitlements', environmental regulations, decent wages for other people.

This is a very important and very true, but I'm going to have to argue a couple points.

First, a lot of the "end the Fed/blame the poor/I'm a libertarian" people are precisely the ones who thing economics is not zero-sum to the point that money economics to them is a pure distortion to the economy. (Note that gold is a commodity and not money, even if some of those folks say gold is "real" money).


Second, if you don't increase the money supply and prices are sticky (aka wages don't fall in number amount, aka "nominally" don't fall), then while the real economy is not a zero sum game, the high-powered (aka no leverage, aka you don't owe nobody nuthin') money economy is close to zero sum game.

This is because the money supply is as artificially scarce or loose as we want it, and if we are growing the economy but not the money supply with it, and prices can't drop, we don't have enough dollars to cover all the goods.

This means people don't get paid, they don't have money to invest, to hire, etc.

Aka demand shortage.

So in a modern economy the very people you say believe that the real economy is a zero sum game don't actually believe that, however if they got their policy wishes, due to money constraints, it would actually become a zero sum game.

How crazy is that?

 

[Commodore]

Why not have a new point? Now it is something extra for people who probably can use it more than you do.

That's why I am in favor of guaranteeing them at least minimum wage. That way they won't have to completely rely on tips to survive.

 

[timtofly]

Are you asserting that our stimulus money went overseas or are you asserting that our current account deficit (aka trade deficit, buying more than we sell) is reflected in our budget deficit? Because those are two very different things.

I realize the difference between the US as a whole entity and the local economy we see each day in practice. I am saying that even as a whole, but even more so on the local level, the "foreign" interest part is lopsided. I understand that it is necessary to move money in all directions. The foreign interest is not just trade that we see on the books. It would include those factors that people do to make themselves happy, to offset the imbalance due to the bad economy. Like Cutlass pointed out. The economy is viewed as just a means to make people happy. If the economy does not provide happiness to all, people will sidestep the economy to provide themselves with that happiness. When people go outside the economy, then it will fail. Waiting for that money to trickle back in is not the way to go. The way to go is to have a healthy economy that trickles money out to foreign interest, and does leave money flowing to all entities who are forced to live in such an economy in a fair and balanced manner.

 

[Hygro]

The problem is in 2 parts: 1) Most people see economics as a zero-sum-game. That is, in order for them to win, someone else has to lose. It's not true, market economics is not zero-sum. But many people can only see that far. And so they try to make themselves better off at the expense of others. Up to and including trying to get the government to enact policies which have the effect of making the economy a zero-sum-game. For example, deregulation, 'end the Fed' and supply side economics. 2) Most people are not looking at the economy, but rather only their little portion of it. And so cannot see that what benefits the whole also benefits themselves, because in the short run they either do not see any benefit themselves, or they see some cost to themselves that they cannot see the benefit on the other end of. For example, 'cut taxes cut entitlements', environmental regulations, decent wages for other people.

I realize the difference between the US as a whole entity and the local economy we see each day in practice. I am saying that even as a whole, but even more so on the local level, the "foreign" interest part is lopsided. I understand that it is necessary to move money in all directions. The foreign interest is not just trade that we see on the books. It would include those factors that people do to make themselves happy, to offset the imbalance due to the bad economy. Like Cutlass pointed out. The economy is viewed as just a means to make people happy. If the economy does not provide happiness to all, people will sidestep the economy to provide themselves with that happiness. When people go outside the economy, then it will fail. Waiting for that money to trickle back in is not the way to go. The way to go is to have a healthy economy that trickles money out to foreign interest, and does leave money flowing to all entities who are forced to live in such an economy in a fair and balanced manner.

timtofly, I'm not sure what you're trying to say about the foreign sector because you're using really vague descriptors of something awfully specific in meaning. So the best I can do is say that a government stimulus and a wage rise can, and has, primarily acts in the domestic economy, and what has acted in the foreign sector does largely come around.

The main thing that doesn't come around in the foreign sector is lower-skilled jobs that get offshored, but that's not a consequence of rising wages (I know like 5 of you want to jump on me for this. bring it ) nor of government spending.

BTW the healthy economy you're describing could also be described as a really progressive, functioning tax and welfare code with perpetual small-but-not-that-small budget deficits.

 

[Cutlass]

This is a very important and very true, but I'm going to have to argue a couple points.

First, a lot of the "end the Fed/blame the poor/I'm a libertarian" people are precisely the ones who thing economics is not zero-sum to the point that money economics to them is a pure distortion to the economy. (Note that gold is a commodity and not money, even if some of those folks say gold is "real" money).


Second, if you don't increase the money supply and prices are sticky (aka wages don't fall in number amount, aka "nominally" don't fall), then while the real economy is not a zero sum game, the high-powered (aka no leverage, aka you don't owe nobody nuthin') money economy is close to zero sum game.

This is because the money supply is as artificially scarce or loose as we want it, and if we are growing the economy but not the money supply with it, and prices can't drop, we don't have enough dollars to cover all the goods.

This means people don't get paid, they don't have money to invest, to hire, etc.

Aka demand shortage.

So in a modern economy the very people you say believe that the real economy is a zero sum game don't actually believe that, however if they got their policy wishes, due to money constraints, it would actually become a zero sum game.

How crazy is that?

The thing is, it is not actually true that those people do not believe that the economy is a zero-sum-game. That is in fact exactly what they believe. They give lip service to the idea of a positive sum economy, but when pressed it is clear that they do not actually believe in it. I have truly never seen any indication from those people that their actual beliefs are anything other than zero-sum. Because, when it comes right down to it, every policy that they want is us against them.

Consider the many 'end the fed' arguments. It is all about "protecting capital". It is never about growth, and never concerned with the price labor and consumers will pay to do it.

It is, fundamentally, the belief that both sides cannot prosper at the same time. Zero-sum.

 

[Hygro]

The thing is, it is not actually true that those people do not believe that the economy is a zero-sum-game. That is in fact exactly what they believe. They give lip service to the idea of a positive sum economy, but when pressed it is clear that they do not actually believe in it. I have truly never seen any indication from those people that their actual beliefs are anything other than zero-sum. Because, when it comes right down to it, every policy that they want is us against them.

Consider the many 'end the fed' arguments. It is all about "protecting capital". It is never about growth, and never concerned with the price labor and consumers will pay to do it.

It is, fundamentally, the belief that both sides cannot prosper at the same time. Zero-sum.

Well, in our language they just think that all growth should come from supply-side deflation to meet demand side growth, so that the money supply stays the same but the economy is bigger and still works.

But for example, a friend of mine discovered Austrian economics just before it got huge online, and a little after I did.* This was 5 years ago. He's pro gold and believes the economy is always at full demand (sigh), and part of his argument hinges on the idea that the economy can always, always be grown if people just provide the right service. Yeaaaaaah sort of, but not realistically, and not in a way that's of use to us.



*for all you keeping score, I briefly favored the Austrian school. Then I learned more.

 

[Takhisis]

That's why I am in favor of guaranteeing them at least minimum wage. That way they won't have to completely rely on tips to survive.

Such a thing is disputed only in the United States and a few other places.

 

[illram]

In California an employer cannot supplement the minimum wage with tips. But there still a myriad of other ways that employers regularly try to screw over their employees, large and small.

 

[Askthepizzaguy]

If there are questions I'll be able to answer them in about 9 hours. Off to work...

 

[GenMarshall]

Oh, like, come on, Bugfatty, like, I'm sure he just means, like, Scandinavia is, like, a small country compared to like, Africa, or, like, Texas.

A small grouping of countries .

I've been lirking for a bit, and some of the statements have irked me quite a bit:

A company is profitable when it earns more than it has expenses.

Along with contributions from investors. Not all of the company's profits comes from sales of goods and services. They do undertake financial activities with bonds, stocks, and loans.

If the cost of labor is increased the product that is being provided now costs more. The customer will then buy less product which then drives the company out of business. If labor produces less value than it costs, the company will use less labor. Higher mandatory wages will reduce employment. The workers who keep their jobs will have more but the ones laid off will have nothing.

I'd have to disagree. The more money you give to your workers, the more purchasing power they'd have. It's what Henry Ford did a hundred years ago so his employees can afford to buy his Model Ts.

Scandinavia is a comparatively small country with a small influx of immigrants and large oil reserves that can pay for the whole party. What works there would not work in the US.

Last I checked, Scandinavia consisted of; Norway, Sweden, Finland, and Denmark.

It is a job that someone who lives in their parents basement can smoke dope, play large amounts of online MMRPG, generally avoid reality and can prosper while doing so. it is not a job for an adult who wants to provide for a family.

So people who take up minimum wage jobs just to survive ascribe to the stereotypes you laid down? I can tell you first hand, that's generally not the rule, they're the exception. I've met people who've taken minimum wage jobs, including pizza delivery, to make ends meet until a better opportunity comes along.

Look into a job in building trades or general construction, what people would term a "dirty job". Those jobs are a lot harder, they use manual labor and often you are outside in the elements all day. They also pay more than minimum wage.

Not everyone is interested nor are suited for building and construction trades.

Some people are born smarter or stronger but lazy is a choice. Everybody can choose not to be lazy.

I disagree with that statement. People can become smarter and/or stronger if they put in the efforts. Those attributes aren't edged in stone the moment your born.

Eat the pizza! Unemployment pays more.

I'd have to disagree on that. Unemployment doesn't nearly pay enough and is usually used to only sustain to bare basics and to use as esential resources to find another job. Plus unemployment benefits don't last forever and usually last up to around six months (in good economic times).

This thread makes me happy that the state I live in is one of the most labor-friendly in America and has a $9.19 (soon to be $9.32) minimum wage.

Dang it Choxorn, it's only $8.25 here.

 

[Manfred Belheim]

To the OP:

While I'm by no means condoning or supporting the majority of what you describe, I must admit that I find it an odd complaint to make when you say that your employer makes more money out of you than they pay back to you in wages, or that they are employing you at a negative cost, or however else you phrased it. Isn't this essentially true for any employee of any profit-making business anywhere in the world? Isn't the whole point of hiring an employee that they will generate revenue for your company above and beyond the cost of their remuneration? If that weren't true then they would be running at a loss... I don't understand how you have a problem with this.

Sure, I get that you have a problem that they're screwing you out of the money you used to get and making it hard for you to survive on that wage, but it also seems like you just have a general problem with the principle of a company making a profit out of its employees, when that's surely just a given?

 

[timtofly]

timtofly, I'm not sure what you're trying to say about the foreign sector because you're using really vague descriptors of something awfully specific in meaning.

I apologize, I could not find the economic term to match what I was attempting to say. What I was attempting to say with "foreign interest" would be anything that does not keep money flowing, but takes it out of the flow. The modern flow of money may be hard to track down, but it seems to me there are leaks. I suppose as long as it does not matter if the US keeps allowing new money to be printed and the debt to keep rising, then I may just be swatting at ghost.

While I'm by no means condoning or supporting the majority of what you describe, I must admit that I find it an odd complaint to make when you say that your employer makes more money out of you than they pay back to you in wages, or that they are employing you at a negative cost, or however else you phrased it. Isn't this essentially true for any employee of any profit-making business anywhere in the world? Isn't the whole point of hiring an employee that they will generate revenue for your company above and beyond the cost of their remuneration? If that weren't true then they would be running at a loss... I don't understand how you have a problem with this.

Sure, I get that you have a problem that they're screwing you out of the money you used to get and making it hard for you to survive on that wage, but it also seems like you just have a general problem with the principle of a company making a profit out of its employees, when that's surely just a given?

What the pizza guy is describing is a company that is making money on the human above what is necessary. They are taking more than the worth of the labor itself. Under normal condition an employer does make money on the labor. That is done above the agreed wages and is paid by the one purchasing the service. As a person's worth goes up, so does the amount of wage, and either the customer pays more, or the company makes less profit. So no, the company is not making money on the labor. They are making money because they hired a person to work. The person is doing labor and getting paid for his worth.

What this pizza chain is doing is making money on what the employee is actually doing, and not paying that employee what they are actually worth. They raised the cost of delivery yet did not increase his compensation. That is actually using a person to make money above what is necessary.

 

[El_Machinae]

So, firstly, to those whose instincts are the same as mine with regards to minimum wage (that it decreases employment). It's actually been a fairly big deal in right-wing economics, because the theory is astoundingly intuitive ... and the data just didn't agree. Time after time, people scratch their heads, because it just didn't work out as expected. Honestly, blew me away too. I am entirely sure I've posted on CFC regarding minimum wage causing unemployment.

To the OP:

While I'm by no means condoning or supporting the majority of what you describe, I must admit that I find it an odd complaint to make when you say that your employer makes more money out of you than they pay back to you in wages, or that they are employing you at a negative cost, or however else you phrased it. Isn't this essentially true for any employee of any profit-making business anywhere in the world? Isn't the whole point of hiring an employee that they will generate revenue for your company above and beyond the cost of their remuneration? If that weren't true then they would be running at a loss... I don't understand how you have a problem with this.

Sure, I get that you have a problem that they're screwing you out of the money you used to get and making it hard for you to survive on that wage, but it also seems like you just have a general problem with the principle of a company making a profit out of its employees, when that's surely just a given?

Well, keep in mind that the employers are also getting increased business due to having a delivery service. So, they get the profits on the pizzas they wouldn't otherwise have sold. ATPG is just pointing out how the 'boss' has changed the system ("innnovation") to just get more money while ATPG gets less. So, what used to be a mutually beneficial arrangement has been changed just to shift the take-in ratios.